The Oil Man: Premier, Rockhopper, Wentworth

WTI $63.57 +61c, Brent $69.20 +38c, Diff -$5.63 -23c, NG $2.91 -2c

Not much to add, the EIA stats were better than expected, a draw of 4.9 million barrels v 3.4 guesses, but not quite as impressive as the API numbers. Nevertheless, crude is slightly better again this morning with $70 Brent within reach…

Premier Oil

A trading and operations update from Premier Oil (PMO) this morning which continues in the vein of operational excellence which has characterised the company for the last two months.

The feature today is Catcher which came onstream on Dec 23rd on time and under budget and is already doing very well.

Starting at 10,000 barrels per day it is now up to 20,000 barrels per day and, speaking to TD first thing, I get the impression that the first two wells are being tested at very good rates indeed.

This month means testing of the facilities and, of course, with flaring restrictions production is held back, but by the end of January expect a significant increase, at $69.20 (£51.28) things are very pleasing.

Elsewhere, very much as expected, Zama will be appraised this year and next and Tolmount development sanction is expected this year as well.

At Sea Lion progress with contractors is gathering pace and debt is being processed, sanction here is planned by the end of this year. (See RKH below)

Financially things are of course looking up, opex this year will be $17-18, capex of $300 million and with the healthy oil price and positive free cash flow, debt repayments are accelerating and the total is now , only, $2.7 billion.

The shares have had a great run, having doubled since the summer, and the slight dip this morning appears somewhat churlish by the market, but I’m still very happy to keep them tucked up in the bucket list.

Rockhopper Exploration

Rockhopper (RKH) has announced a corporate update, timed clearly to be in tandem with Prems as the subject is primarily Sea Lion.

Phase 1 continues to move towards sanction later this year with work in the last few months concentrating on the commercial, fiscal and financing elements required to secure the $1.5 billion capex ahead of first oil.

LOI’s are being signed with contractors for provision of well services, logistics and vendor financing which must be good news.

For both PMO and RKH the finance needs to be arranged and I understand things are progressing well on that front.

Although debt providers are unsurprisingly cautious after the last few years, the project economics of Sea Lion at around $70 must provide plenty of comfort and it should get away.

Finally, at Abu Sennan, news on production is good and a ‘full review of its prospectivity’ indicates that there is decent upside and enough to consider further drilling this year.

Wentworth Resources

I have been most impressed by Wentworth Resources (WRL) in the last few months, production is picking up nicely and guidance is being beaten on a regular basis.

Mnazi Bay has seen an increase in demand as K-2 has the first two turbines up and running and increased demand from industrial customers has gone up as well.

Accordingly, the exit rate at the end of last year was 73.4 million standard cubic feet per day, with a 4Q ave of 62.2 million standard cubic feet per day and over the year 49.1 million standard cubic feet per day which is most impressive growth.

With 2018 providing another four turbines for K-2, and demand from Dangote Cement likely, guidance for the year has risen to 65-75 million standard cubic feet per day, which looks very achievable.

Finally, it looks like things are going to plan at the Tembo Appraisal in Mozambique with farm-out discussions under way and hopes of an appraisal well 3Q this year if those discussions are successful.

No mention of filthy lucre in this report, but recent announcements have been very positive on that front. I remain increasingly happy with Wentworth at the moment.

And finally…

Chelski and the Gooners drew 0-0 last night in a totally missable game, second leg will provide a finalist one way or another.

The England cricket selectors have proved themselves to be the spineless bunch of useless oafs that we all knew they were. Given the chance to boot out those losers from the Ashes they gave them another job, which is more than I would give to them. Sack the board has never been more appropriate…

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.