The Oil Man: Savannah Petroleum, Ophir Energy, Bahamas Petroleum

WTI $67.93 +68c, Brent $73.36 +23c, Diff -$5.43 -45c, NG $2.75 -5c

A day of two halves yesterday, the EIA inventory data looked a bit grim at first glance with a crude draw of 6.2 million barrels being not only worse that the API number but worse than the scribblers guesses.

After more studied analysis, the 4 million barrels on the west coast eased the pain a bit as did the substantial draw in distillates of 3.9 million, which echoed the API number.

The fall in the oil price that occured after those numbers was reversed and a bit more by the minutes from the FOMC meeting, which calmed things down a bit.

No interest rate this month, but a general expression of confidence in the US economy suggests a hike in June. All this calmed markets and oil rallied to close up on the day.

Savannah Petroleum

Savannah Petroleum (SAVP) has announced that it has received a one-year extension to its R1/R2 PSC in Niger. The 1st phase of the Exclusive Exploration Authorisation (EEA) will now expire on 5th August 2019, the 2nd phase by 5th August 2021 and the 3rd phase by 5th August 2023.

CEO Andrew Knott says that this gives the company “greater flexibility to plan potential additional 2018 drilling activities unconstrained by PSC timing issues”.

In addition, it is surely a significant move which highlights the excellent relationship that SAVP has with the Ministry of Petroleum in Niger, which can only be good news in the future.

With the company having recently announced a discovery in the R3 section of the R3/R4 PSC area in its first well in this campaign, this news gives further long term comfort to shareholders regarding progress in Niger, whilst news from the Seven assets acquisition remains very positive as well.

Ophir Energy

Ophir (OPHR) has announced that it has agreed to acquire from Santos for $205 million, producing assets in Vietnam and Indonesia and exploration and appraisal assets in Malaysia, Vietnam and Bangladesh.

Whilst admittedly not a transformational deal it does, successfully in my view, re-balance the portfolio with significant additions to 2P reserves (up 40%+) , production (effectively doubled to 25,000 barrels per day) and cash flow (doubles to $180 million (£132 million)).

In addition, there are meaningful cost synergies as the package has some overlap and a number of the assets are familiar to Ophir.

Indeed, having been following these assets for some time there is scope to do better than at first glance, and I understand that the Ophir technical team may even have spotted some value adds at Chim Sào that the team at Premier might find of some interest!

In the Indonesian assets there is also potential upside as with the expiry in 2027, meaning that recently there has been little investment by Santos it could be that, as it is within 10 years, there is a chance of negotiating an extension.

I think that this is a production and development deal with the exploration effectively in for free and in some cases there are interesting features.

Take Bangladesh for example, whilst Ophir are not in country at present, the play there is broadly the same as in adjacent Myanmar where there are multi tcf producing fields and Ophir certainly know the rocks, as they say.

As a full cycle business Ophir needs an asset base producing decent cash flows that can not only fund an exploration programme but also returns to shareholders.

Following this deal, which to me looks like low risk with plenty of upside and done at a very reasonable price, I think that Ophir is very much in the right ballpark.

Finally, one has to note that in this announcement Ophir say that all current guidance is still in place and that work on the Fortuna financing is continuing.

Bahamas Petroleum Company

Bahamas Petroleum Company (BPC) has announced that it has entered into a confidentiality and exclusivity agreement with a major oil company to conclude a “detailed technical evaluation of the company’s licences in the Bahamas and at the same time seek to develop a commercial framework for a potential transaction”.

The process involves the two companies working together for “at least” three months, during which the major will pay $250,000 per month non-refundable fees and which can be extended by a month up to a maximum of three months.

I guess that this is like data room plus as the company have indicated that they have been working with “a number of major companies” in evaluating their licences up until now, but this suitor is serious enough to be able to start charging them.

CEO Simon Potter says that this is a “significant step in the ongoing process to secure a partner” and if the relationship with the counterparty flourishes then the patient shareholders in BPC may at long last see a return on their investments.

The shares have more than doubled this morning, which is justified should this relationship take off, but, as always, shares in BPC remain highly volatile albeit with huge upside potential should a partner, some money and a drilling rig appear on the horizon, let’s worry about finding any oil nearer the time shall we?

Solo Oil

Whilst I was out and about yesterday I noticed that Jon Fitzpatrick has joined the board of Solo Oil (SOLO). This is a most interesting move, Jon is Founder of the Gneiss Energy Advisory Practice and is also Senior Advisor to RockRose Energy. This is very much one to be watched, movers and shakers are rare animals, Jon is one of those….

And finally…

Last night, the HubCap Stealers produced another exceptional performance to beat Roma 7-6 on aggregate, and will play Real Madrid in the Champions League final on May 26th. Although it looks a bit closer than it seemed whilst watching, the gung-ho attitude was great to watch as should be the final.

For the Gooners, they head to Madrid for tonight’s second leg against Athletico with some trepidation. Only 1-1 on aggregate and having conceded an away goal when playing against 10 men for 80 minutes, I hope that they don’t feel that they missed their chance.

Malcolm Graham-Wood is an independent oil industry expert and freelance contributor, not a direct employee of Interactive Investor.

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