WTI $43.23 -97c, Brent $46.02 -89c, Diff -$2.79 +8c, NG $2.91 +1c
Momentum seems to be the watchword in what is a particularly lethargic market at the moment, general blaming of Opec and Non-Opec production from Nigeria, Libya and the US is deemed to cover the situation. Whilst on those organisations it seems that Opec compliance in May was 108% and Non-Opec 100% giving a record level of 106%. This is no time to panic unless your uncle is King of Saudi Arabia as he has just removed you from power as Crown Prince and replaced you with his son, thick blood being thicker than thin blood one might say…
API stats after the bell were better than expected but all eyes will be on the EIA release later particularly looking at product inventories as the API crude draw was better than forecast.
At long last the first deal has come through for Echo and the hashtag #Boliviaandbeyond really did give the game away. The company has signed a technical evaluation agreement with Pluspetrol for an 80% operated interest in the Huayco block in the Tarija Basin in Southern Bolivia. The evaluation will take place and if a well is drilled Echo will pay for 100% before reverting to 80%, and no cash back worries either. As promised this has huge potential upside and I’m sure that it is not the last in the opening gambits from Echo. I interviewed Non-Exec Chairman James Parsons and new CEO Fiona MacAuley on TipTV yesterday and the link is below.
I’m not sure why I have put Cairn in the title, a nod to the fact that this is their operatorship but the other partners are where the current arguments lie. Back in early June we saw a skirmish as WPL appeared to want to kick on with becoming the operator as per an alleged JV agreement that had been made with COP although that seems to have little credibility. As FAR has filed for arbitration, as I understand it to protect their own ability to have taken part in COP’s disposal, at the moment this is the first time since COP sold their stake without referral to the JV agreement, which is why FAR are now having to use arbitration. Another point is that whilst going through arbitration is a slow process that may take between 9-12 months, operationally nothing should change, drilling continues and the size of the prize continues to rise.
To be honest the argument about operatorship strike me as being a bit of a side-issue, unless there has been a legally agreed pre-empt it is neither here nor there. This is the nitty gritty, WPL say that they have ‘Government support’ for their entry but it is not for the Govt to handle, quite rightly they have said that it should be sorted at JV level and FAR do not recognise WPL as a legit JV partner to do business with. Finally on this issue it seems that at the original time of the ‘deal’ between COP and WPL, FAR may have been considered the poor relation, that is sublimely no longer the case, raising A$600m +/- with their recently announced backers will be less of a problem. I think that FAR has called Woodside’s bluff here and for modest legal fees may force WPL and COP to undo the deal and re-offer a correctly legal pre-empt, either that or settle out of court….
Ophir has announced a new $250m RBL and an added $100m accordion with a syndicate of seven banks. Whilst I am more comfortable with Ophir after a recent company meeting I have always thought that they would sell down some of the Fortuna stake to keep the business on a sound footing, maybe this loan will help that process.
More good news for Faroe as Statoil announce that the Njord and Bauge development plans have been approved. Whilst realistically this was never in doubt it is highly encouraging as these developments will be key to Faroe in the future.
I have done a number of broadcasts this week and they can be viewed on links which are below.
Muzza lost in the first round at Queen’s yesterday so with other losses and withdrawals the tournament looks a bit star-lite now. Long odds for Wimbledon now one thinks…
After being accused of not mentioning English rugby enough it was cheering to watch the second defeat of the Pumas on saturday, even more galling as at least half the team would make credible Lions although not being Welsh hampers that opportunity…
Royal Ascot started yesterday and was, as usual a fantastic display of the best international equine talent around, no Frankie was a big loss.