WTI $52.61 -16c, Brent $55.91 +3c, Diff -$3.30 +19c, NG $2.66 +5c, UKNG 53.15p -1.38p
Lots of moving parts acting in different directions in the oil sector at the moment but a number of them are White House centred… On the international front Iran are acting as if they have been given the nod that President Biden is preparing to welcome Iran back into the fray and relax sanctions. I find this difficult to believe for one that Iran has resumed 20% enhancement at its Fordow facility and think that they are trying to see how much oil they can increase sales of into the market. China has remained a key client for Iranian oil and condensates throughout the process…
Back to the President, he is announcing a temporary suspension of oil & gas leasing on federal lands and water which in the former hits such states as New Mexico and the latter obviously the Gulf of Mexico. The IMF is getting into the virus trade! 2021 GDP forecasts are up for the world, +5.5% the US +5.1%, China +8.1% and Eurozone 4.2%. Stand by for the Fed policy announcement from Jerome later today.
Finally, and after hours the API inventory stats showed a big crude draw of 5.3m b’s (scribblers forecasting a build…) of which 3.5m was at Cushing but products added.
Diversified Gas & Oil
An operations and trading update from DGO this morning which confirms that 2020 results are in line with market expectations and are due on March 8th. We can expect record full-year average daily production of ~100 Mboepd, up 18% vs. 2019 which consists of legacy assets of ∼69 Mboepd consistent with 2019 as yet again the Smarter Asset Management process continues to offset natural declines within the portfolio.
DGO continue to deliver on key metrics, full year cash operating expense was $5.58/Boe a 15% fall on 2019 and FY total cash expenses which includes G&A of $6.93/Boe down 10% on 2019.
In addition they made in 4Q 20 accretive bolt-on acquisition of five gross unconventional wells in Ohio for $8.4 million or ~2.6x cash flow and robust hedge portfolio provides cash flow and dividend stability with ~90% of 2021 natural gas hedged at a weighted average floor price of $2.66/MMBtu. Finally, improved pricing outlook provides a constructive backdrop as the Company consistently layers in additional hedge protection in future years.
Commenting on these accomplishments, CEO Rusty Hutson, Jr. said:
“2020 proved to be another dynamic year for Diversified as we completed our transition from AIM to the premium segment of the Main Market, invested in enhanced Governance and efficiency-driving technology, and completed a series of accretive acquisitions funded using a balanced mix of equity and low-cost, fully amortising and hedge-protected financings. Additionally, the unprecedented events of 2020 have underscored the inherent resilience of our business model. We’ve built our business to operate in any natural gas price environment, and the strength of that model was evident throughout the significant volatility of 2020. Not only did our business model perform well, but the resolve of our employees was outstanding.
“With our successes last year, we are positioned to enter 2021 with momentum including our most recent fourth-quarter complementary bolt-on acquisition of unconventional assets. With a strong balance sheet, efficient cost structure, improved commodity price outlook, strong hedge protection and a robust outlook of potential accretive growth, we are poised for another exceptional year. Our opportunities to acquire high-quality assets that enhance or meaningfully enlarge our portfolio continue to increase with prolonged lower commodity prices and a sector increasingly motivated to consolidate. As we’ve demonstrated with each previous transaction, additional scale can further improve efficiencies and support the high cash operating margins that add stability to our dividend.”
DGO remain in a very strong position, they continue to prove that the model works and that there is substantial upside from the many acquisition opportunities yet balanced by a superb hedge portfolio. Their use of available scale provides excellent margins which feed through to stable dividends and a high return to shareholders via capital and income. A key member of the Bucket List, DGO is amongst the better placed companies in the market and of course now on the main market.
Very briefly as this has just come out prior to publication, more tomorrow if necessary. They have announced a placing to raise £1.5m at 1p per share plus warrants at 1.2p, 1.35p and 1.5p.
George Lucan, CEO, comments: “We are grateful to investors new and old for showing this vote of confidence in Angus as it continues its evolution into a more broadly grounded Energy Transition company. We will be following with a comprehensive presentation to shareholders on the strategy, prospects and opportunities of the Company during the course of February and an investor call in the days following.”
Last night in the Prem the Hammers went to the Eagles and came away with all the points, the Magpies lost again, this time 1-2 at home to Leeds, the replay of the cup fixture when the Saints knocked out the Gooners led to a change, this time it was 1-3. With the Noisy Neighbours seeing off the Baggies 0-5 they go top of the table and the Hammers win takes them to 5th, ahead of Liverpool until they face Spurs tomorrow.
Tonight Burnley host the Villa in a battle of claret and blue, Wolves visit Stamford Bridge, the Seagulls host the Cottagers, the Foxes go to the Toffees and the Blades go to the Theatre of Dreams…