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Msg  65846 of 66045  at  9/20/2019 8:35:29 PM  by

carswell


Energy Summary - 20th

Energy Summary for Sept. 20, 2019

2019-09-20 20:22 ET - Market Summary

by Stockwatch Business Reporter

West Texas Intermediate crude for October delivery lost four cents to $58.09 on the New York Merc, while Brent for November lost 12 cents to $64.28 (all figures in this para U.S.). Western Canadian Select traded at a discount of $13.05 to WTI, up from a discount of $13.15. Natural gas for October lost one cent to $2.53. The TSX energy index added a fraction to close at 142.44.

Guyana- and Namibia-focused Eco (Atlantic) Oil & Gas Ltd. (EOG) added 23 cents to $2.72 on 379,900 shares. It is ending the week slightly down, even after Monday's announcement of a new oil discovery in Guyana on its Orinduik block, an offshore joint venture with Tullow Oil and France's Total. The joint venturers' Joe-1 well hit 16 metres of net oil pay in Upper Tertiary rocks. Despite the dip in the stock, Eco's chief executive officer and co-founder, Gil Holzman, was in a jubilant mood during an interview yesterday with Proactive Investors. (Proactive Investors is a self-described financial news and event management company that seems primarily to provide PR services. Its disclosures list Eco as a "paid client," its term for a paying customer.) Mr. Holzman gave two possible reasons for the stock's dip this week. The first is simple profit-taking; Eco's stock has quadrupled from less than 70 cents at the start of the year, and Mr. Holzman congratulated everyone who has made money on their investment.

The second reason -- and the more usual one given by executives when their stock is not behaving the way they want -- is that the market just does not understand the significance of Eco's announcement. Joe-1 was a "very, very significant discovery in many, many ways," insisted Mr. Holzman. He pooh-poohed rumours that the discovery was smaller than expected, saying sampling is still under way but the size looks similar to predrill estimates (75 million to 100 million barrels). More importantly, the discovery was made in the Upper Tertiary formation, representing the first time in the region that oil has been found in these relatively shallow rocks. Their shallow depth should enable easier and cheaper drilling and development next to the commonly tested formations, the Lower Tertiary and the Cretaceous. Mr. Holzman noted that Exxon, the largest and busiest driller in the region, has mostly targeted the Cretaceous, but he "knows for a fact" that Exxon is now examining the Upper Tertiary too.

Eco is now done with this year's drill program -- Joe-1 was the second well in a two-well program at Orinduik, both of which were successful -- but Mr. Holzman said investors still have plenty to look forward to before the end of the year. Next week, Eco's joint venturers, Tullow and Total, will spud a Cretaceous well at their (non-Eco-owned) Kanuku block, right next to Orinduik. The results should be "very telling" for Orinduik's Cretaceous potential. Using the data from the Kanuku well and the two Orinduik wells, Eco, Tullow and Total will go "back to the drawing table" in late October or November and come up with next year's Orinduik drill program, which will likely include at least three to four wells, said Mr. Holzman. He added that Eco should be able to release a new CPR (competent person's report, outlining prospective resources) within about one to two months.

The above-mentioned Tullow and Total have a separate joint venture with Lundin promotion Africa Oil Corp. (AOI), unchanged at $1.25 on 93,600 shares. (Africa Oil also happens to own 18.8 per cent of Eco.) This joint venture is in Kenya's Lokichar basin. Since June, the companies have been operating a pilot program at Lokichar producing 2,000 barrels of oil a day, with all of that oil being trucked to the port city of Mombasa. The longer-term plan is to produce 60,000 to 80,000 barrels a day and move it through a proposed $1.1-billion (U.S.) crude pipeline to the port city of Lamu. Yesterday, Bloomberg reported that the Kenyan government will invite bids on the development of this pipeline next month. According to Andrew Kamau, Principal Secretary of Kenya's Department of Petroleum, it could take three months to name a contractor and two years to build the pipeline (imagine that). Mr. Kamau added that route surveying and land acquisitions are already under way. The joint venturers expect Lokichar to reach full commercial production in 2022, so the government would like the pipeline to be ready by then. Ownership of the pipeline is to be split 25-75 between the government and the joint venturers.

All of this comes at a busy time for Africa Oil, which is in the process of relocating some of its senior executives to a new office in London while also bringing in some new hires. Earlier this month, it appointed Pascal Nicodeme as its new chief financial officer, replacing Ian Gibbs. Mr. Gibbs has left to serve as CFO of Josemaria Resources, which is a different Lundin promotion that is working on a copper-gold project in Argentina. Africa Oil will keep Mr. Gibbs involved as a newly appointed board member. Mr. Nicodeme was most recently the CFO and interim CEO of New Age African Global Energy, a London-based private company with assets in Cameroon, Congo-Brazzaville, Ethiopia, Nigeria and South Africa. Separately, Africa Oil appointed a new IR man, Shahin Amini. Mr. Amini is a former energy research analyst with TD Securities and Pareto Securities. Africa Oil is one of the stocks that he has covered over the years (as is the above Eco). Mr. Amini has not always been an analyst; he began his career in the upstream industry with a company called Kvaerner Oil and Gas. He moved into equity research in 2010. Now he is making the switch back.

Returning to South America, Colombia-focused producers are wrapping up a noteworthy week. The Colombian energy regulator has just opened up 59 blocks for bidding during its next auction round, the second round of 2019. The first round earlier this year had just 20 blocks on offer, of which 11 were ultimately awarded. Winning bidders included Parex Resources Inc. (PXT: $21.91), Frontera Energy Corp. (FEC: $13.90) and Gran Tierra Energy Inc. (GTE: $1.96). This time around, for the first time, the regulator has allowed prequalifying companies to request that specific blocks be up for grabs. Twenty-seven such blocks will be included in this auction. The final list of companies qualified to bid in this auction will be published on Oct. 21, and initial bids will be due Oct. 31.

In addition to the auction news, this week brought a legal update on the status of fracking in Colombia. The practice is effectively banned in the country, not because of a specific law against it, but because the government says more studies and regulations are needed before it decides whether fracking should be allowed. Colombia's energy ministry has said that fracking could triple the country's oil and gas reserves. State-owned Ecopetrol has even proposed a small-scale fracking pilot, but its request was put in limbo in July. Ecopetrol asked Colombia's top administrative court to lift the fracking ban. This week, the court gave its response: No, er, well, maybe. Essentially, the court has upheld the ban for now, but has emphasized that its decision "does not impede the development of comprehensive investigative pilot projects ... made by the expert commission convened by the national government." This commission previously recommended in February that three pilot projects be strictly monitored before the country makes its final decision on fracking. While the court's decision presumably paves the way for Ecopetrol's pilot -- and indeed, Ecopetrol has informed Reuters that it is moving ahead with basic preparations and community outreach -- any project will likely take months to begin.

 


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