The Oil Man: Pantheon Resources, Premier Oil, Echo Energy, Wood Group, Providence
22nd May 2017 13:03
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WTI $50.33 +98c, Brent $53.61 +$1.10, Diff -$3.28 +12c, NG $3.26 +7c
With the OPEC and Non-OPEC meetings due this week, culminating on Thursday with what should be a straightforward discussion about whether to extend by six or nine months, the only change appears to be around deepening the cuts. I suspect that anything of that order will be discussed but probably kept back for a rainy day, it may be that should there be less than hoped for draw of stocks a bigger cut will be needed.
Elsewhere, the rig count on Friday showed a rise of 16 units overall, oil was up 8 at 720. Finally, I'm sure that you don't need reminding that next Monday is Memorial Day in the US which signals the start of the driving season, let battle commence…
Pantheon Resources
A long-awaited operational update from on Friday, which gave some clarity about the problems that they had encountered at both the VOBM#4 well and the VOBM#2H wells, and details of a gas processing plant to be constructed.
In a conference call this morning the CEO, Jay Cheatham, answered a few pre-prepared questions about the situation. The first thing to realise is that the problems on both wells were wellbore specific and, in some cases, it appears to me that they had some pretty rank service company attention.
In the VOBM#4 well it appears that finding the Wilcox gas, which was never even on the agenda, may prove to be quite a winner. After failure of the liner hanger to seal correctly, it seems that the best thing to do is to drill a sidetrack and produce the Wilcox, leaving the opportunity to drill another well from the same position to go after the Eagleford sandstone.
The VOBM#2H caused problems after the attempt to re-enter the suspended horizontal wellbore and drill a deviated well path caused technical challenges. It seems now that that well will be best completed as an upper tier well, and that fraccing it will provide good flow rates, and that as it lies between the 1 and the 3 well, will provide 'significant potential'.
As a result of this news PANR has announced an agreement with Kinder Morgan to construct a 15 mmcf/d gas processing plant to receive the offtake from these three wells. This amount of gas would generate over $1.6 million per month of free cash flow to the company.
There is no doubt that this is not huge, but CEO Cheatham said on the call that it was "a compromise with room to grow".
Pantheon has $4.7 million of cash and total commitments until the expected cash inflow in say, October are considerably less than that, giving the company adequate scope for further operations. The recent operational problems cannot be forgotten, but they haven't changed the resource number which is substantial and the timescale is still attractive.
Finally, this company is fully intending to drill out sufficient wells to prove up its acreage and then sell on, investors have a rare opportunity to participate in this journey. I haven't changed my 200p target price through thick and thin, I will leave it like that for the time being…
Sundry
has spudded its Zama-1 well offshore Mexico which I am told its in-house team are very excited about. Indeed, my last comments about being high-risk high-reward went down badly as it is relatively low-risk, but with the potential of 100-150 million barrels!
confirmed that Pegasus A Fund is investing £10 million in the business, and will be at no discount as suggested. Echo is building up nicely now and I imagine that investments in South America are very likely to be seen before long.
has won a contract with Sakhalin Energy for engineering support services for Sakhalin-2, no amount given, but a long contract and likely pretty important.
Finally, has announced that FEL 3/04 has been extended until 2019, this is the famous Dunquin block where currently work is ongoing to try and 'square the circle'.
And finally…
A huge weekend of sport, in the end the Noisy Neighbours and the HubCap Stealers joined Chelski and Spurs in the Champions League spots. (Apologies for not mentioning Spurs 1-6 demolition of the Foxes the other night…)
Billy Vunipola is out of the Lions tour which is the worst news possible..But what incredible rugby at the weekend as both semis went down to the wire with the Chiefs scoring in the corner to beat Sarries 18-16 and Wasps doing the same to beat the Tigers 21-20…
In the most exciting finish of the year so far Yamaha team mates Maverick Vinales forced 'The Doctor', Valentino Rossi, into a rare mistake, and with two corners to go to the chequered flag, Rossi crashed out of a certain 2nd place, losing 20 points and his lead in the World Championship to Vinales.
To the delight of the partisan crowd, this put Frenchman, Johann Zarco into 2nd place after leading the first half of the race. The final podium went to Danny Pedrosa, sparing Honda's blushes after No 1 rider, Marc Marquez crashed out. Brit Cal Crutchlow maintained his strong finishes with 5th place. With the next race at Mugello, Rossi's 'home' race, the honeymoon might be over for the Yamaha pairing ….Roll on Italy !
The Moto2 race saw Franco Morbidelli win from Bagnaia and Thomas Luthi. In Moto3 leaking oil caused a huge crash on lap 2 causing a Red Flag. In the restart Joan Mir continued his domination of this class with another win. British Team Talent rider John McPhee fought through to finish 12th. Britain's Danny Kent, 2015 World Champion, who walked out of Moto2 last week, came in 10th on a KTM, probably ensuring himself a ride for the rest of the season.
I am taking a few days holiday, but technology permitting I hope to blog with any big news and will be at a sporting event to report back from at the weekend….
This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.