WTI $38.05 +$1.29, Brent $40.79 +$1.01, Diff -$2.74 -28c, NG $2.41 +1c
A bounce of some sort was pretty inevitable after three dollar fall on Tuesday and traders saw the short coverers coming miles away. The negative was the EIA STEO which took a red pen to the demand figures although by the end of the year it still looks to be picking up again although still well short of pre-virus numbers. Opec+ needs to think carefully about their expected production increases…
The API stats came out after the close and they were a mixed bag too, not a surprise after Laura blew through so crude turned out to be a build whilst gasoline drew by a massive 6.9m barrels after the teenage scribblers forecast less than half that. In the end today the oil price is pretty much unchanged
Pre tax profit of £20.4m (51.9m) with cash flow of £19.3m (£89.8m). Production in H1 averaged 21,600 boe/d which was lower than expected due to the challenges of COVID-19 but mainly as there was a 45 day shut-in of BKR production to secure a damaged caisson on the Bruce platform.
Despite this the company remains in a very strong financial position, cash on the balance sheet at the period end was £101.1m, the same as at the 2019 year end of £101.8m. This was despite payment of £15m of BKR liabilities and £7.2m of capex on Columbus and the Rhum R3 project.
With 80% of SQZ production being gas the spot chart showed in the presentation pack was most interesting and and whilst gas prices did fall sharply in the spring and early summer they have since bounced significantly. At current prices of c.28p/th, nearly back to the years peak and more importantly well above the ytd average price of 18p the break-even of 16p has been left behind and it will get better as 2H costs are expected to be lower without the BKR problems.
All this was aided by the gas price hedging policy with currently approximately 50% of retained gas sales meant that gains of £11.6m were made before fair value deductions of £3.3m.
The company paid a maiden dividend of 3p per share in July 2020 and with a healthy cash position, strong hedging policy through 2021 the company are still in a strong situation where meaningful acquisitions could be made if market conditions allow. Serica is well managed across the board is strongly financed and should be a cornerstone investment in the sector.
JSE interims today, 1H production was 12,116 b/d down 8% with 40% lower commodity prices and bad weather and maintenance issues but the company remains in an incredibly strong position. Guidance for the full year has been deliberately reduced to protect further returns and is now 11,000-12,500 b/d.
This gave revenue of $115.7m, down 33% and costs of production were $44.5m down 28% and equates to unit operating costs of $23.27/bbl, down 4% from H1 2019 of $24.13/bbl, due to better cost efficiency achieved in the current period compared to H1 2019.
This has all been done by managing capital spending commitments and driving deeper efficiencies and cost savings. Capex down 37% to $19.5m mainly due to the deferral of Nam Du/U Minh development in Vietnam this year and the 49H infill well last year.
CEO Paul Blakeley remains confident and expects a market recovery through next year. In this respect a number of interesting projects are on the white board. These include closing the Maari deal later this year, Lemang in Indonesia expected to cloRead More – Source