Energy Summary for Jan. 11, 2021
2021-01-11 20:32 ET - Market Summary
by Stockwatch Business Reporter
West Texas Intermediate crude for February delivery edged up one cent to $52.25 on the New York Merc, while Brent for March lost 33 cents to $55.66 (all figures in this para U.S.). Western Canadian Select traded at a discount of $15.02 to WTI, unchanged. Natural gas for February added five cents to $2.75. The TSX energy index lost a fraction to close at 99.49.
Colombian oil producer Parex Resources Inc. (PXT) lost five cents to $19.80 on 1.16 million shares. Today's drop aside, it has climbed from about $17.50 since the start of the year, with investors seeming to expect good things out of the quarterly operational update that arrived today. Parex pegged its fourth quarter production at 46,550 barrels of oil equivalent a day, within its guidance of 45,500 to 47,500 barrels a day. It also forecast that its production would rise to a range of 46,500 to 47,500 barrels a day in the first quarter.
Parex also provided drilling updates, some of which would have been of particular interest to two other companies. Notably, at the VIM-1 block -- a Parex-operated, 50-50 joint venture between Parex and Frontera Energy Corp. (FEC), up seven cents to $3.80 on 225,400 shares -- Parex announced an extension of the block's boundaries by 32,000 acres to the east. It cited "the estimated extent of the 2020 La Belleza discovery." The joint venturers had drilled the La Belleza-1 well last February and tested it at over 4,700 barrels of oil equivalent a day, with plans at the time to drill one or two more wells by the end of the year. These plans were upended, like many during COVID-19, but today Parex said the joint venturers are getting back to work with a two-well program during the second quarter of this year.
Separately, at Parex's 100-per-cent-owned Fortuna block, the company announced a potential new oil discovery made by its Cayena-1 exploration well, which has found oil shows in several formations. This is the first well drilled at Fortuna since 2012. Fortuna lies just north of the Acordionero field owned by Gran Tierra Energy Inc. (GTE), which today shot up 12 cents to 68 cents on an unusually busy 6.03 million shares, with no news to explain the excitement. Gran Tierra did, however, mention in a recent presentation on its website that it restarted its development drilling program at Acordionero at the very end of November, with plans to bring two new wells on production during January. A bit of area play excitement from a larger producer certainly cannot hurt.
Elsewhere in Colombia, Serafino Iacono and Frank Giustra's NG Energy International Corp. (GASX) added three cents to $1.05 on 329,000 shares, after talking up a new study on its Maria Conchita gas field. Investors will recall that Maria Conchita sprang into the spotlight last summer after NG Energy unexpectedly found "a large amount" of gas while doing repairs on the 40-year-old Arucharu-1 well. The company quickly set about quantifying the large amount by testing the well at rates of up to 11 million cubic feet a day (around 1,900 barrels of oil equivalent a day) and releasing a reserve report that pegged Maria Conchita's net 2P (proved and probable) resources at 25.8 billion cubic feet. Today's update covered the more speculative -- but always higher in quantity -- prospective resources. "New prospective resources might exist ... [that] could reach a global total of 200 bcf [billion cubic feet]," declared NG Energy, through a mouthful of the fudgiest weasel words. It added that it is "reviewing options to define the optimal development plan."
The near-term development plan involves re-entering a different older well, Istanbul-1, in the first week of February. NG Energy is also building facilities to increase Maria Conchita's overall production capacity. In the longer term, the above resource report identified another candidate for a re-entry (the Tinka-1 well) and found locations for five potential new wells. NG Energy repeated its eventual goal of having Maria Conchita deliver "approximately 20 mmcfd [million cubic feet per day] to the premium-priced Colombia gas market." Mentioning premium prices is always a good idea when one does not actually have a timeline for delivery. In Colombia, gas sells for about $5 (U.S.) a unit, well above North American prices of around $2 (U.S.) to $3 (U.S.).
An ocean away, Craig Steinke and David Elliott's Reconnaissance Energy Africa Ltd. (RECO) added 19 cents to $2.50 on 2.76 million shares, after announcing the long-awaited start of its very first drill program. It has spudded the first of three wells targeting the unexplored Kavango basin of Namibia and Botswana. As noted when Reconnaissance was previously discussed in the Energy Summary last Wednesday, the company was originally hoping to start its drill program in October, but faced months of delays related to COVID-19. It tried to make up for the delays today with all sorts of hype about this "important" and "rare opportunity" for a "state-of-the-art" program. Investors had not minded the delay anyway, based on the stock's rapid rise to $2.50 from 30 cents over the last nine months.
Now they will have to wait another 45 days or so for the well to reach total depth and for initial analysis to begin. That was the estimate provided today by Nick Steinsberger, senior vice-president of drilling and completions. Mr. Steinsberger also likened the geology of Kavango basin to the famed Permian basin in Texas. He is certainly familiar with U.S. shale basins, although his main claim lies in a different part of Texas, the Barnett shale. This was where, 24 years ago as a petroleum engineer at Mitchell Energy, Mr. Steinsberger had the idea that ultimately led to the first commercially successful fracked well in the United States (a story Reconnaissance related with breathless excitement when it hired him last June). Incidentally, Mitchell Energy had hired Dan Jarvie to provide geochemical analysis of the Barnett -- part of a long career that saw Mr. Jarvie become one of "Hart Energy's Most Influential People for the Petroleum Industry" in 2010 -- and years later, Reconnaissance snapped him up too. Mr. Jarvie made an appearance in today's press release to share his favourable opinion of the Kavango basin. Investors should know more by the end of next month.
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