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Monday, April 12, 2021

Liza Phase 1 rapid start-up good news for oil industry – Wells Fargo

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From discovery in 2015 to start of oil production less than five years later, the rapid start-up of the Liza Phase 1 Development is good news for the global oil industry says a senior analyst at US multinational financial services company, Wells Fargo.

“[It] is a positive development in our view that the industry is demonstrating the ability to deliver projects on time and on budget to meet returns goals,” Roger Read, Senior Energy Analyst at Wells Fargo Securities writes.

Market reaction to the start of oil production in Guyana and Total’s entry at Suriname’s Block 58 show things are starting to go right for oil stocks, analysts say.

The Total farm-in comes just three weeks after Apache’s announcement on Dec. 2 that it needed to drill deeper at the Maka-1 wildcat offshore Suriname, which caused its stock to drop. The implication, at that time, was that the drilling would be a bust, but the new JV seems to suggests otherwise.

“The JV is notable not only because of the attractive terms, but the agreement adds credibility to a play that many had begun to write-off,” writes SunTrust analyst Neal Dingmann. “While no specific results were reported yet from the first well (Maka Central-1), APA & Total both sound confident on results thus far.” Apache stock has gained 16% to $26.25 at 1:27 p.m., while Total has advanced 0.8% to $54.82.

Over in neighbouring Guyana, the start of oil production on December 20 was closely followed by another discovery at Stabroek Block where US oil major ExxonMobil is operator with a 45 percent stake, along with co-venturers Hess (30%) and CNOOC (25%).

The news is particularly good for Hess, explains Read. “The start of oil production from Phase 1 of Guyana’s Liza field in the closing weeks of 2019 is a clear positive for Hess,” he writes. “While the volumes alone are not as material for XOM, its success as operator in bringing Liza from discovery to first production in less than five years is noteworthy in our view.”

The Liza Phase 1 Development features four drill centers with 17 wells in total; eight oil producing wells, six water injection wells, and three gas reinjection wells. The project is utilising a floating production, storage and offloading (FPSO) vessel – the Liza Destiny – built by Dutch floater specialist, SBM Offshore.

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