WTI $53.40 +4c, Brent $55.81 +16c, Diff -$2.41 +12c, NG $2.83 -2c
The oil price was effectively flat last week, a few cents off between friends. The same influences are exerting and unless something changes dramatically we will remain range bound. All the reports are in and show around 90% adhesion to the Opec and Non-Opec agreement which is better than the doom mongers predicted and talk is already about not just extending the agreement come June but tightening it as well. By then it should be showing signs of working and even a rollover should create a modest shortage, a further cut would see prices rising again. The rig count only rose by 6 in oil last week, less than the overall number of 10 which is hardly blowing the doors off. The US is closed today for Presidents Day.
News from Sound that TE-8 spudded yesterday which is highly encouraging as this 12 km step out appraisal well is drilling further into the TAGI reservoir and on deeper into the Paleozoic formation. The initial well should take 40-50 days plus 30 days for the sidetrack. In addition, the company has signed binding contracts for the OGIF deal which is very good news for shareholders as it opens up more of the company to them. With only weeks before the spud of the Badile well in Italy everything appears to be firing on all cylinders for Sound.
I remain confident that President will deliver and today it announces a Puesto Guardian operations update. The rig is mobilised and operations have commenced, the programme is first to sort out the 2 producing wells that are in maintenance followed by the workovers of shut-in wells. To ensure value for money they are doing the multi-well frac programme in batches of three and also creating a water injector. All being well the target of 1,200 b/d in Argentina by the ‘end of summer 2017’ should be achieved.I have a call with Peter Levine coming up so may be able to add more later but this is broadly positive. at long last….
I met up with Lekoil recently after a number of followers suggested that it would be a good idea, it certainly was and particularly well timed. Today they have announced that they have started continuous production at Otakikpo, 5/- b/d now and up to 10/- b/d by the end of Q2 2017. The well is in a relatively safe part of town in the eastern Delta, away from the violence and the Shell/Chevron pipelines, I am told….It is also highly efficient with a cash breakeven of around $24. With some exciting projects on the case, highly supportive shareholders and now signs of activity Lekoil looks quite interesting, even to someone who normally avoids Nigeria for choice.
I recently met with David Pummell, CEO of Velocys, a company I have always found most interesting, if not usually rather too far away from visible progress. On meeting David again he greeted me with a glass jar and significant smile, a jar of wax made by VLS only 15 years after conception. With a plant now capable of making the product the key is how to leverage it and bring it to the market. The ENVIA plant in Oklahoma is the first smaller scale commercial GTL plant in the world and the opportunities are plenty, most important, these things are done in partnership which VLS have been building lately.
The company has a number of avenues to follow which shows important diversity and risk aversity, industries, technologies and geographies help to give balance and avoid any single market. These include focusing on the renewable jet fuel market in the US, stranded gas onshore in Canada and a number of ‘significant’ opportunities in Asia. The former has a substantial addressable market in the US for jet and diesel, up to 30 plants where VLS could put in kit and of course without doing the heavy lifting, design, build and hand over the keys is the mantra. Partnerships have been and will continue to be important, indeed take the potential with fuel traders with their need for credits, VLS have made a significant hire in this area already. Refiners and feedstock owners also come into this category as do airlines who will see increasing regulation on fuel blendings.
With regard to Asia much progress has been made in the last year and in the longer term I expect this area to be extremely valuable to the company. The size of the plants in China, made in partnership will be the most cost effective in the market and of course here, as in the USA, bank financing and loan guarantees are available at the right times. I am reliably informed that much progress is being made in some key areas in China particularly where stranded gas is also a problem.
As time moves on there is little doubt that VLS is growing up, last years raise and a much lower cash burn helps and the balance sheet actually looks moderately healthy, by its standards. Shareholders appear to be highly supportive, the next year is looking increasingly exciting and progress is looking as good as it has for a long time.
It was mainly about the FA Cup at the weekend and the giant killing by Lincoln City who beat Burnley and to a lesser extent Milwall who beat the Foxes. Chelski, the Red Devils, Spurs and Boro go through as well although the Noisy Neighbours were held to a draw at Huddersfield…The Gooners are at Sutton tonight and will play Lincoln in the next round, apart from that the stand out tie is at the Bridge where Chelski host the Red Devils.
Cue card was majestic on Saturday and the Tizzard yard will be busy on Gold Cup day with four already in the picture.
Ben Stokes went for £1.7m in the IPL to play for the Rising Pune Supergiants, as one does, Tymal Mills went for £1.4m (?) with Woakes fetching £500/-, Morgan £245/- and Roy £120,-.