Malcy’s Blog – Oil price, PetroTal, Union Jack/Reabold, Petrofac

Oil price, PetroTal, Union Jack/Reabold, Petrofac. And finally…

WTI $63.38 +25c, Brent $67.05 +28c, Diff -$3.67 +3c, NG $2.75 +7c, UKNG 52p n/c

Oil price

Not much to add I’m afraid, the same factors are influencing the oil price today and Brent is almost $68 as I write. Given that the only new news as such is that India has suffered a record rise in infections and now totals some 15m + cases it is quite surprising.

In the US retail gasoline is virtually unchanged on the week or the month but I am seeing some noticeable signs of a pick-up in the demand for gas from the market ahead of the driving season.

PetroTal Corp ()

PTAL this morning provides a Risk Management Update in which the remaining 1.4m barrels of oil in the ONP are now hedged by Petroperu and an additional 622,000 bbls which are hedged by PetroTal. PetroTal also maintains ‘low cash flow exposure from Peruvian currency fluctuations’.

In more detail, the remaining 1.4 million barrels of oil in the North Peruvian Pipeline have now been hedged by Petroperu, thereby securing future total true-up revenue payments of approximately USD$31 million for the original 1.8 million barrels.

At the corporate level, over 1.2 million barrels in total are now hedged, representing 32% of forecast oil production for April 2021 to December 2021.  PetroTal completed a second layer of its oil hedging program for 2021.  Approximately 338,000 barrels have been hedged (representing 9% of forecast oil production covering August 2021 to December 2021) in a Put structure with a $60/bbl strike.  In addition, 284,000 barrels have been hedged (representing 8% of forecast oil production covering May 2021 to July 2021), in a synthetic Put structure with a swap price of $62.15/bbl and a call strike of $66.00/bbl.

 To address the recent volatility of the Peruvian Sol, the Company has maintained low cash flow exposure to the currency, with Peruvian Sol accounting for an estimated 8% of operating costs, 60% of Peruvian general and administrative (“G&A”) costs, and 8% of capital expenditures.

Manuel Pablo Zuniga-Pflucker, President and Chief Executive Officer, commented:

“Over the past month we have been working closely with Petroperu to finalize hedging arrangements for the remaining barrels in the ONP.   Working with their risk management team has been seamless and we have an efficient working process to execute further derivative strategies together for future oil deliveries through the ONP.  The total true-up revenue of around USD$31 million will be a welcome addition to our 2021 liquidity. 

Furthermore, we are now in a position of strength to potentially layer on additional opportunistic hedges with approximately 32% of our volumes currently price protected.  We are naturally hedged from a currency standpoint from fluctuations in the Peruvian Sol, which has experienced increased volatility recently. 

Internally, financial and technical fundamentals have never been stronger, and our management team have many years of experience operating in different environments that transition politically.  Peru has attracted material external global capital and we believe it will continue to remain an attractive jurisdiction for investment, following the results of the upcoming Peruvian elections.”

Ahead of the results and given the huge amount of change that has happened at PTAL in recent months I think that the shares are significantly undervalued and with so much further news yet to come the prospects are extremely good, for the time being I think the price target of 50p per share is not unrealistic.

Union Jack Oil () / REABOLD RESOURCES () 

An operations update and…