The Oil Man: President Energy, Frontera Resources, Zenith Energy
WTI $63.80 +23c, Brent $69.26 +6c, Diff -$5.46 -17c, NG $3.08 +18c
There is not much to add on the oil price to events of the week. Yesterday Brent printed above $70 but ended up 80 cents off the top as traders, already long, felt no need to take out the higher resistance levels. It will take something quite powerful to do it, but chartists don't worry about that, as a leading expert commentator said this morning, last time we went through $70 it was on the way down…
President (PPC) announces this morning successful completion of workovers of the third and fourth wells at the Puesto Flores field, which have ended ahead of time and below budget with payback of the entire four well programme in less than three months.
Part of the plan of the acquisition of this acreage was to test previously untested intervals, and here they came in in each well 'substantially' ahead of expectations.
When these wells stabilise the field is expected to be producing 1,700 barrels per day already significantly up since the campaign started.
Unsurprisingly, this means that cash flow and margins are substantially ahead of pre-acquisition expectations with January bringing in net sales of $4.5 million (£3.3 million).
Accordingly, plans for the rest of the year in the Neuquén Basin have been expanded to include testing of the Estancia Vieja field and workovers at Puesto Flores, as well as a new drilling campaign in the second half of the year.
All this capex is fully funded from existing cash resources and cash flow.
The oil price is already up 20% since the acquisition and PPC is likely to realise around $64 a barrel for its January sales. At today's price the CEO's promise of strong cash flow and increased margins will be delivered in spades, with two weeks until the bucket list selection PPC is making a very strong case for inclusion…
Frontera (FRR) announced on Wednesday the mobilisation of the drilling rig to its T-45 well in the Taribani field situated in Block 11 onshore Georgia.
I write about it today as I wanted to have a chat with CEO Zaza Mamulaishvili which was most illuminating.
The first spud in the three well programme will be the deepening of T-45 and is expected to start around the end of this month.
Zones 9, 14, and 15 of the Eldari reservoir will be stimulated and produced together after which the rig will move to the Dino-2 sidetrack and then the same operation at T-39.
In each case the zones 9, 14, and 15 of the Eldari reservoir will be stimulated co-mingled and produced together in a similar manner.
Netherland Sewell have estimated that zones 9,14 and 15 of the Taribani complex contain 689 million barrels of oil in place of which 103.5 million is recoverable.
Readers will know that I have looked at this company with interest for some considerable time and only last summer, after meeting properly with the company's new management, did I start to realise just how vast the potential might be.
I am planning to visit Georgia in February, as I think that getting some idea of how it works operationally will seal my confidence in what is finally becoming a story with some serious legs.
Andrea Cattaneo has never concealed his plans to size up Zenith (ZEN) with potential acquisitions, and today he has announced and exclusivity agreement for a number of production and exploration licences in an unnamed 'Central Asian Country'.
A sizeable package of 3,600²km of which 550 is production and 3,050 'highly prospective exploration' and are located in a prolific oil and gas basin with a proven petroleum system.
Expect more details after due diligence has taken place as well as the arrangement of financing, which we are told will be a combination of debt and equity all the time trying to avoid dilution.
This is a potentially significant deal for Zenith and, apparently, with 'geographical proximity' to the company's primary operational interests in Azerbaijan and with the ability to 'generate significant revenues on a monthly basis'.
The agreement runs until April 30th, or before if the deal is executed. Zenith is another exciting company in the sector which is partaking in the current shake up of the international asset base, where interesting and potentially value added acquisitions are being found…
A brief 'And finally' today, it's a mad week. In the Prem the undoubted big game is the visit of the Noisy Neighbours to play the HubCap Stealers at Fortress Anfield, the Red Devils play on Monday night, Spurs host the Toffees, Chelski host the Foxes and the Gooners are at the Cherries.
It looks like Wenger is selling Walcott to the Toffees and Sanchez to whoever can pay 20 million, was a 60 million cheque back in September…
Malcolm Graham-Wood is an independent oil industry expert and freelance contributor, not a direct employee of Interactive Investor.
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.