UK share markets are pretty flat in Monday business as market traders digest a surge in Covid-19 cases. The FTSE 100 and FTSE 250 are both down as fears over the global economic recovery have worsened again.
The UK Oil and Gas (LSE: UKOG) share price isn’t struggling for momentum, however. That’s even though Brent oil prices have fallen back below $76 per barrel on rising market tensions. The UK oil share is up 5% in start-of-week trading on fresh drilling news (though it remains 27% lower year-on-year).
UKOG rises as drilling starts at Basur-Resan
UKOG’s share price leapt after the firm announced that drilling had commenced at the Basur-3 field in Turkey.
Air drilling of a 17-and-a-half-inch diameter hole began on 26 June, UK Oil & Gas said, following the mobilisation of the Oceanmec Karahan ZJ40DZ rig to the site in recent days. The AIM-quoted share holds a 50% stake in Basur-3 and the surrounding 305 km² Resan M47-b1, b2 licence.
Stephen Sanderson, chief executive of UK Oil & Gas, commented that “the start of Basur-3 drilling is a landmark milestone for UKOG Turkey and the company.” The oil explorer described the appraisal well as the first modern well designed to properly study the extent and commercial viability of the Basur-Resan oil pool that was discovered in the 1950s and 1960s.
It has been estimated that the Basur-Resan oil discovery contains an estimated mean discovered recoverable oil volume of 37.2m barrels. UKOG said back in January that “rapid monetisation of the discovery’s success case is possible within a year.”
UK oil share Petrofac slumps
The news coming out of Petrofac (LSE: PFC) on Monday hasn’t been nearly as encouraging. This UK oil share’s dropped 2% in value on the day to two-month lows. And at 114p, the company is now down 36% over the past 12 months.
Petrofac’s share price dropped after news that the Covid-19 crisis continues to damage project schedules at its Engineering and Construction (E&C) division. The small-cap said “the recovery in oil prices has yet to manifest itself in a significant expansion in capital spending by our clients.”
And it added that “we continue to prudently assume that capital discipline by clients will delay some awards in the near term, with new orders likely to remain depressed in E&C in the current year.”
Orders at E&C had fallen to $2.3bn as of 31 May from $3.3bn a year earlier. And this has caused the order backlog at group level to also fall by $1bn to $4bn. Petrofac said that its recent suspension from competing for new awards in the UAE, as well as clients deferring contract awards in other markets, had caused orders to drop sharply at E&C. The company currently has an active bidding pipeline on contracts worth $48bn through to the end of 2022.