The Oil Man: SDX Energy, Savannah Petroleum

WTI $64.30 -87c, Brent $68.91 -56c, Diff -$4.61 +31c, NG $2.62 -2c

After a fast and furious week, for me and the oil price, it looks like crude will end up testing important levels, WTI is close to $65 as I write and Brent is $69.21.

The main reason for the strength this week has been the inventory stats which showed in both API and EIA numbers a decent draw when a build was forecast. Indeed, total inventories of  minus seven million barrels this week put stocks to 1% below the crucial five year average.

The other positive note was struck by the Saudi Oil Minister who declared that the OPEC/non-OPEC agreement will likely be extended beyond 2018, suggesting that further draw on stocks was needed.

Coupled with the news that compliance was 138% in February suggested that in this, the harder part of the year, things were looking hunky dory, so to speak.

The only fly in the ointment is that the Squids [Goldman Sachs] have upped their oil price target to $82.50 for mid-year which worries me something rotten…

SDX Energy

Finals from SDX Energy (SDX) this morning which merely serve to confirm what a good year it was and how well 2018 has started.

Understandably they concentrate on reserves, as one should, their WI of 2P reserves was 13.5 million barrels of oil equivalent, up 45%, a very creditable performance with their existing business and the Circle acquisition delivering well.

With revenues up 204% to $39.2 million (£27 million), on production up to 3,237 barrels of oil per day up 171%, the 100% success with the drill bit last year came through to the bottom line.

And there is plenty of drilling excitement still to come, two more exploration wells will complete the Moroccan campaign, for the time being only, I am sure.

Then attention focuses on South Disouq, where we can expect two exploration wells and two appraisal wells with first production likely in the second half this year. At NW Gemsa there were successful workovers and at Meseda two successful exploration wells plus, of course, the recently announced success at Rabul-5.

SDX had $30.6 million of cash on the balance sheet as at 28 February this year, partly as a result of favourable receivables incoming, which is a big result and so SDX is fully funded for all operational needs and, of course, any potential acquisition opportunities that may arise.

SDX remains amongst the most solid plays within the bucket list for its low cost, high margin offering and significant upside potential.

Savannah Petroleum

Full-year results also for Savannah Petroleum (SAVP) for a period in which the landmark Seven Energy transaction occurred, with completion due in the second quarter of 2018.

The deal adds 2P reserves of c. 92 million barrels of oil equivalent and 2C resources of c. 44 million barrels of oil equivalent, in production terms it means guidance for 2018 of 20,000 barrels of oil per day.

This production, which has started the year very well, encouraged the company to indicate that a dividend should be paid and $12.5 million is indicated in today’s results.

Of course, the original business has continued to go ahead even if the drilling campaign in Niger was delayed somewhat by the Seven asset deal. The three back to back wells are expected to be under way by the end of March as operations are well underway and the drill bit at Bushiya is ready to spin.

2017 was a good year for Savannah as its perceptive and hard working management delivered a ground breaking acquisition and kept on top of the activities in Niger. With strong and senior support from politicians in both Nigeria and Niger export routes should be available upon success at the well campaign.

Sundry

Aminex (AEX) announces that Eclipse Investments, part of shareholder Zubair Group, may farm-into the Ntorya appraisal area, those who read my AEX comments in the bucket list will know that this is not unexpected…

Gulfsands (GPX) is de-listing but will remain an unlisted public company, which will come as no surprise to anyone I imagine, certainly not me.

With no capital coming into the company from outside equity, the effective owners have raised more money together and will move on more efficiently. The ultimate irony is that I suspect we are nearly at the stage when the Syrian assets may eventually come good and the investors deserve to make something back.

Frontera (FRR) has announced that mobilisation of more pumping equipment and services to the T-45 well as fraccing and testing is imminent.

After this the kit will move to Ud-2 and then to Dino-2 which was announced as having spudded this week as well.

Having visited the company’s operations and taken a close look at the potential I think that there is every chance that at long last these assets may about to deliver.

Lamprell (LAM) announced results which showed yet again that it has a feast-famine-feast existence and with the huge losses on the East Anglia One project showing in these numbers we are in the famine section at the moment.

But I remain convinced that the company has the wherewithal to fight its way out and can reach the sunlit uplands again before too long.

My comments on the Saudi JV recently show that this can provide profitable work and I wouldnt be surprised if there were not more contracts for the yard around the corner. Not for the first time I am suggesting that ditching Lamprell at this juncture would be wrong…

And finally…

It’s the dreadful international break where ‘friendlies’ happen that no one wants to play in or watch…

The cricket can be added to footy and rugby that we dont want to talk about…

Please tell me that the boat race tomorrow at 5.30 is not the highlight of the weekend’s sport…

At least be up early for the Australian Grand Prix from Melbourne. Who will have the best new kit and who’s halo will be the best?

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

These articles are provided for information purposes only. Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties. The content is not intended to be a personal recommendation, and is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. 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.

Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company’s or index name highlighted in the article.

Source.