Natural gas supply shortage over higher energy demand and uptick in LNG capacity on the domestic front is supporting the ASX oil & gas stocks, and while the S&P/ASX 200 is hiting record highs over strong performance from financial and resource sectors, the energy index- S&P/ASX 200 Energy is not lagging behind.
The economy is projected by many independent economic experts to grow, which in turn, is further expected to pull the energy demand as well, and while Australian renewable energy target for 2020 are yet to be formulated, the gas consumption is surging for energy generation and due to higher LNG exports, which is further propelling the ASX oil & gas stocks.
The ASX oil & gas exploration companies are relatively performing better than global peers, who are facing some tough time in the wake of a supply glut.
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While the east coast is facing some hardships over the gas shortage, the ASX oil & gas exploration companies are developing assets to enclose the opportunity emerged in the market.
ASX Oil & Gas Exploration Companies and Asset Development
Sensex Energy Limited (ASX: SXY)
SXY recently released the update on its Surat Basin operations for stakeholders and mentioned that it is on schedule and budget over the development of the prospect composed of Roma North and Atlas, for which SXY had secured many offtakes agreement.
The Roma North gas production is currently growing with production rates exceeding 13.5 terajoules per day, while the production rate at Atlas is exceeding 6.5 terajoules per day.
SXY has drilled 49 wells to date, out of which 33 are on production and the remaining is expected by the company to be online soon.
The production at Roma North is just reaching the initial processing rate, determined by SXY, of 16 terajoules per day, which is equivalent to 6 petajoules of gas production per day for a year. SXY has drilled 26 wells in Roma North to date, out of which 10 are in production while remaining would be online over the coming weeks.
At present, the average daily production of the tenement exceeds 0.3 terajoules per day per well and is further surging.
At Atlas tenement, the explorer is running production at 23 wells with production above 6.5 terajoules a day.
SXY is recovering from a downtrend started during September 2018 quarter, which dragged the share price of the company to $0.265 (31 December 2018) from $0.515 (1 October 2018). Post hitting $0.265, the stock is recovering and is presently trading at $0.350 (as on 23 January 2020).
FAR Limited (ASX: FAR)
FAR inked a binding Memorandum of Understanding (or MoU) with the international mining giant- Glencore (Glencore Energy UK) related to the Sangomar Field.
In an update to stakeholders, FAR suggested that the MoU would fully allocate the company’s share of crude oil at the Sangomar Field to Glencore Energy U.K.
The MoU is now subject to the negotiation of final documentation in line with industry standards. So far, the company believes that the agreement would provide it with a global network and multi-decades expertise of Glencore.
Glencore’s extensive track record of creating markets for new qualities of crude is estimated by FAR to provide marketing benefits for Sangomar, and FAR also estimates the offtake would be for 7 years, during which an estimated 20 million barrels (FAR’s share) would be produced.
The operator of the Sangomar project stated to FAR that the full notice to proceed has been issued for the Key contractors.
The drilling is expected to start during the first quarter of the year 2021, and orders for long-lead items required for drilling and other development activities have been ordered.
FAR is recovering from its downtrend, and the stock rose from $0.039 (intraday low 12 December 2019) to the level of $0.045 (intraday high on 15 January 2020), which underpinned a price appreciation of ~ 15.38 per cent. However, the stock closed on a negative note on 23 January 2020, at $0.041, down by ~ 2.38 per cent against its previous close on ASX.
While the development activities explorers are on an upsurge, it is paying off for some oil & gas explorers.
Santos Limited (ASX: STO)
STO released its December 2019 quarterly performance. STO witnessed a production of 18.7 mmboe during the December quarter, which remained below the previous quarter production by 5 per cent. However, the annual figures (year ended 31 December 2019) witnessed a decent performance.
The company reached an annual production of 75.5 million barrels of oil equivalent (mmboe) in 2019, which remained 28 per cent up against the previous corresponding period (or pcp).
The annual sales revenue surged by 10 per cent for 2019 to stand at $4 billion from the sale volume of 94.5 mmboe.
Comparative Performance (Source: Company’s Report)
STO released an average price of USD 9.07 per mmBtu of LNG, which remained ~9.66 per cent against the previous quarter, with that the annual average price of per mmBtu of LNG stood at USD 9.77.
The average price released by the company on other product is as below:
Average Realised Price (Source: Company’s Report)
STO kept the production guidance for 2020 in the range of 73-80 mmboe (excluding ConocoPhillips acquisition), while sales guidance remained in the range of 93-100 mmboe (excluding ConocoPhillips).
(Source: Company’s Report)
STO is on an upswing with prices surging on ASX from the level of $5.140 (intraday low on 24 December 2018) to the present level of $8.820 (as on 23 January 2020), which marks a gain of ~71 per cent.
Carnarvon Petroleum Limited (ASX: CVN)
The company is currently building on Dorado prospect development and completed the appraisal of the prospect successfully in 2019. The production potential of the prospect is encouraging for the company, and the Caley tenement flow test exceeds 11,000 barrels of oil production a day along with associated gas. The initial test presented high potential flow of approximately thirty thousand barrels a day from each production well.
Post the completion of the appraisal drilling campaign during the December 2019 quarter, CVN along with its JV partner is now focusing on the Dorado field development planning with FEED to commence in early 2020.
The Buffalo project was completed with the change in Maritime Boundary from Australia to Timor-Leste jurisdiction during August 2019, and CVN now plans to drill the well and achieve oil production soon.
Over the Phoenix project, CVN completed the 3D seismic survey in 2019, date from which would be available during the first quarter of the year 2020. The data already identified a number of exploration target near Dorado and Bedout basin permits.
Pavo and Apus are the two standout oil prospects near Dorado, and as per the company, both the prospects are now de-risked amid appraisal and flow test of Dorado. Pavo is estimated to contain 82 million barrels of recoverable oil, while Apus is anticipated to host 612 million barrels, respectively.
CVN is recovering from a recent downtrend, and the stock surged from the level of $0.305 (intraday low on 13 December 2019) to the present high of $0.390 (intraday high on 6 January 2020), which marked a price gain of ~27.86 per cent. The stock closed the day’s trade on 23 January 2020 at $0.355.
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