Oil & Gas Daily Flow
Non-Independent Research; Marketing & Sales Commentary - MiFID II exempt information – see disclaimer below
Market Update: Tuesday 23 February 2021
Rex International Holding*, (BUY), (SGX:5WH) Yumna 3 tested at 12,984bopd
Mosman Oil & Gas*, BUY, (AIM:MSMN): Updated production summary recognises uplift at Falcon
Serinus Energy (AIM:SENX): Moftinu–1008 flows at 4MMcf/d
Premier Oil (LON:PMO): Premier merger with Chrysaor to relist as Harbour Energy on 1 April 2021
Brent Oil US$65.7/bbl vs US$63.5/bbl yesterday
WTI Oil US$62.1/bbl vs US$59.7/bbl yesterday
Natural Gas US$2.93/mmbtu vs US$2.98/mmbtu yesterday
Oil Price News
- Oil prices have resumed gains, with Goldman Sachs predicting prices will advance into the US$70s in the coming months
- Futures in London rose back above US$63/bbl after the gradual resumption of some US output following frigid weather put prices under pressure on Friday
- A robust recovery in demand from the Covid-19 pandemic had pushed prices to the highest settlement in more than a year last Wednesday, and Goldman sees the rally accelerating as consumption outpaces supply from OPEC+ and shale
- Crude oil stored at sea fell to an 11-month low last week, according to Vortexa, another sign of dwindling supplies
- Saudi Arabia and Russia, meanwhile, are heading toward an OPEC+ meeting next week with differing opinions on whether to add more supply to the market in April. The kingdom wants to hold output steady, according to delegates, but Moscow is indicating that it still wants to proceed with an increase.
- Yet a substantial upside potential remains that could increase internal tensions between OPEC+ members
- For one thing, US demand for oil is recovering starting with the vaccination drive that began in December, and since then, refiners have been ramping up fuel production
- The last couple of weeks have seen gasoline stocks rise but so has production
- While demand in the world’s top consumer of oil recovers, production is stalling
- According to the EIA, US output will remain below 12MMbopd next year
- This imbalance will turn the US into a net exporter this year and next, the EIA estimated in its latest Short-Term Energy Outlook
- But more importantly for OPEC+, this would push oil prices higher still, tempting barely compliant members to become even less compliant
- Elsewhere, according to an industry consensus, global crude demand will increase by 5.5-6MMbopd, implying that a full return to pre-COVID demand levels will require several years to take place
- The underlying question whether crude output levels can actually follow this demand growth this year has been growing in importance, steep backwardation on the Brent curve might suggest has serious qualms about it
- With divergent trends abounding, Middle Eastern national oil companies have opted for nuance after the January-February price increases
- As usual, Saudi Arabia has led the way, rolling over all of its February 2021 OSPs into March completely unchanged
- Overall, the reports pointed to a still-fragile energy market that is highly susceptible to the course of Covid-19
- The robustness of Asian demand remains a key gauge for Middle Eastern NOCs
- China and India have been leading the continent with fuel consumption almost returning to pre-COVID levels in both
- On the other hand, insular economies such as the Philippines, Indonesia or Taiwan have been running their refineries below maximum capacity or temporarily halting several units amidst poor margins
- At the same time, turnaround season is just around the corner and Japan’s month-on-month import drop in February is the first of many to come
- Albeit smaller in terms of overall output, refinery maintenance in Thailand, Taiwan and Sri Lanka will also tighten the markets a bit
- February turnaround will blaze the path for next month’s large-scale works, China alone will have at least 0.9MMbopd of refinery capacity going offline in March 2021
Gas Price News
Natural gas futures prices moved lower yesterday as US and European weather points to warmer than normal temperatures
In the wake of record-low temperatures affecting most of the US, dry natural gas production fell by 21.0bcf/d, as rigs were unable to function
It might take 1-2 weeks before rigs are able to get back up and running give the current situation in Texas
Rex International Holding* (SGX:5WH) Yumna 3 tested at 12,984bopd
Share Price: SGD 0.18, Market Cap: US$174m
BUY - TP: SGD 0.36
- Rex has reported further significant success offshore Oman through its 86.37% subsidiary, Masirah Oil, announcing that production has commenced from the third development well drilled in the Yumna Field.
- The well was spudded on 20 January 2021 and production commenced on 18 February 2021.
- The well has been tested at a rate of 12,984bopd on natural flow through an 80/64” choke.
- Yumna 3 encountered hydrocarbons in 10.4m of Lower Aruma sandstone with excellent porosities of 23.4%, proving that the good quality reservoir sand is extensive to the South East of Yumna 1, with exceptional permeability of c.2,000md.
- The reservoir pressure depletion over the first year of production is c.100psi, confirming that excellent pressure support is provided by a strong aquifer.
- The Shelf Drilling Tenacious jack-up rig has been moved from the Yumna Field to the next drilling location, slated to be the Zakhera exploration well - 12km to the south of the Yumna Field.
Our take: Following the transformational success of Yumna 1 and Yumna 2, the sharp recovery in oil prices has come at an opportune time for Rex. The Company successfully completed the Yumna 2 production well earlier this month and is currently producing c.9,000bopd on the prolific Block 50 licence, offshore Oman. This could serve to transform FY21e revenues to in excess of US$160m (from only US$0.135m in FY19). The next step is to put all three production wells (Yumna 1, Yumna 2 and Yumna 3) on production simultaneously. For this reason, the processing capacity on the Yumna Mobile Offshore Production Unit (MOPU) is being upgraded to handle up to 30,000bopd, which is expected to be completed in March 2021. Attention will also turn to exploring the significant untapped potential of Block 50 over and above the Yumna field commencing with the Zakhera exploration well. Masirah’s latest (October 2020) Qualified Persons Report (QPR) for Block 50 offshore Oman only covers the Yumna Field and surrounding areas, over which a 1,500km2 seismic study, or 9% of total 16,903km2 Block area, had previously been conducted. The report includes an evaluation of prospective resources in 14 oil prospects identified within the area of the 3D seismic coverage, estimated to hold 152.3MMbbls. We also note that a QPR undertaken by Aker Geo and Pareto Asia in February 2012, had estimated a best estimate gross unrisked prospective resources in the entire Block 50 to be over 4Bnbbls, underlining the ‘world class’ resource potential of the Block. On this basis, we reiterate our BUY rating and 12-month risked SGD 0.36/share price target, and an overall Company valuation of SGD 0.75/share
*SP Angel acts as Corporate Broker to Rex International Holding
Mosman Oil & Gas*, BUY, (AIM:MSMN): Updated production summary recognises uplift at Falcon
Share price: 0.18p, Market Cap: £5m
BUY – TP: 0.42p
Mosman has announced an updated production summary for the six months ended 31 December 2020, following receipt of additional production data on its Falcon and Arkoma projects in the USA.
The original report, announced on 14 January 2021, was based on data available at that time from the operators of each project.
Net Production attributable to Mosman for the six months now stands at 9,871boe (compared to 8,650boe as previously announced).
The uplift largely stems from an additional 2,191boe at Falcon and 615boe at Arkoma – gross.
Elsewhere, as previously announced, Mosman intends to participate in the drilling of multiple wells during FY21.
The candidates for drilling include wells at the Stanley project (where four wells have already been drilled with a 100% drilling success rate) and other wells in East Texas, including wells at Greater Stanley, Cinnabar and Galaxie.
Of these projects, Mosman only has control of the timing of operations where it is the Operator, at the Cinnabar lease.
The Cinnabar lease acquisition is considered a potential cornerstone of the Challenger Project to re-develop the proven oil producing area.
Mosman has 97% working interest (reducing to 85% upon drilling of the first well) in the Cinnabar lease.
The initial review of existing data has led Mosman to commit to a full field redevelopment study that will be based on technical work.
The successful drilling of Falcon-1 means there are several prospects to be drilled in the Falcon (MSMN 50% WI) and Galaxie (MSMN 60% WI) lease area (Champion Project).
The Falcon-1 well production data will be used to estimate the size of that gas field, and to update the geological model, before a decision is made where to drill the next well in the Champion Project.
There are several potential wells in the Greater Stanley area that require further work before being ready to drill.
The work includes leasing, gaining well spacing approval and technical work to determine optimal target locations.
The zone that is producing at Stanley-1 and 2 is thought to extend into the Duff (MSMN 20% WI) lease and is a candidate for recompletion of the Duff-2 well.
Our take: The updated production report shows the significant benefit of Falcon-1 production, noting that Mosman only benefitted from production from 11 December 2020. The Company continues the implementation of its successful production led growth strategy against the backdrop of a commodity price recovery in the US. Mosman will embark on an aggressive drilling programme in 2021, with an ambitious target of drilling one well per quarter. This will include further wells on the Champion and Challenger leases in the US, with the intention to replicate the production success at Falcon-1. BUY.
*SP Angel acts as Nominated Advisor and Broker to Mosman Oil & Gas
Serinus Energy (AIM:SENX): Moftinu–1008 flows at 4MMcf/d
Share price: 3.5p, Market Cap: £40m
- Serinus has announced much anticipated flow-test results from its Moftinu-1008 well in Romania.
- The well flowed 4.0MMscf/d (c.667boepd) on test.
- As previously announced, the Moftinu-1008 well was drilled to 1,000m.
- The well has four gas-bearing sands that appeared on logs: A1, A2, A3, and B1.
- All four zones were perforated and completed.
- Out of these four zones, the Company decided to commence testing the A2 and A3 sands separately and comingled.
- Moftinu-1008 started flowing from the A2 and A3 sands on a 12/64" choke followed by incremental increases in choke size up to 44/64", and a final eight-hour build-up period.
- The total comingled flow time from the A2 and A3 sands was 12.5 hours.
- On the 44/64" choke size, the well flowed at an average rate of 4.0MMscf/d with no progressive pressure decrease throughout the test.
- The well is now awaiting tie-in as the flowline connecting in to the Moftinu Gas Plant has been completed and requires final pressure testing.
Our take: A solid outcome at Moftinu-1008 in our view. The Company has successfully managed last years’ volatile commodity prices, whilst consolidating its Romanian acreage position generating material revenues and cash flows from the Moftinu gas facility. Moftinu-1008 will now add material production to the Company’s existing 2,415boepd with a low production expense of US$8.96/boe. Without its historical debt burden and an enviable cash position, we would not be surprised to see the Company augment its asset portfolio with a string of low-cost appraisal/development acquisitions in 2021.
Premier Oil (AIM:PMO): Premier merger with Chrysaor to relist as Harbour Energy on 1 April 2021
Share price: 25p, Market Cap: £232m
- Premier has confirmed that all of the regulatory conditions relating to the Company’s merger with Chrysaor have now been satisfied and all of the requisite anti-trust approvals have been received.
- Following receipt of notice from the Oil and Gas Authority (OGA), the regulatory condition to the Transaction regarding Premier’s and Chrysaor’s licence interests in the UK has been satisfied.
- In addition, Premier has received anti-trust approval in relation to the merger from the Mexican Economic Competition Commission.
- Following the positive creditor vote on 22 February, the Transaction remains subject to sanction by the Scottish Court of the restructuring plans expected to take place on 19 March.
- Assuming the Scottish Court sanctions the restructuring plans, Premier expects the Transaction to complete on 31 March with Premier’s shares to be readmitted to trading on 1 April as Harbour Energy plc.
Our take: Premier and Chrysaor are now on the final stretch ahead of its widely publicised merger and relisting as Harbour Energy. Harbour will represent a significant constituent in the London E&P space, with a material production base and solid balance sheet to pursue an attractive portfolio of producing, development and exploration acreage.
Research – Oil & Gas
Sam Wahab - 0203 470 0473 / 0784 385 5037
Richard Parlons – 020 3470 0472
Abigail Wayne – 020 3470 0534
Rob Rees – 020 3470 0535
Grant Barker – 020 3470 0471
Prince Frederick House
35-39 Maddox Street London
+SP Angel employees may have previously held, or currently hold, shares in the companies mentioned in this note.
Sources of commodity prices
Oil Brent, WTI
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