WTI $52.07 -24c, Brent $61.18 -14c, Diff -$9.11 +10c, NG $3.41 +3c
The oil price vacillated yesterday, after a weak start the rally nearly took crude into positive territory but not quite. As usual newsflow was mixed, better news on the US/Sino trade front where chatter lead people to think that some tariffs might be eased. With Opec+ saying that cuts were being adhered to Russia said that they would fully commit to cuts but they would take a little time. In Libya trouble subsided and apparently exports are increasing, you pays your money….
Anglo African Oil and Gas
I was invited in to meet David Sefton, Executive Chairman who talked me through what’s going on at the company at the moment. I have seen a number of companies this week but am writing up AAOG first as it is drilling at the moment and a result looks to be imminent. BTW, I have a slight difficulty where companies have both an executive Chairman and a CEO, the important defining of lines as to who calls the shots and has final responsibility can get clouded.
AAOG has, it should be said, just raised £6m at 10p which during such a high profile well as this indicates a considerable degree of faith from both company and investors. I was told that the three largest institutions invested in the company all participated and that there was excess demand which pushed the raise up modestly when they did it very recently. There is some concern that some of the shares taken in that raise may still be floating about, if so it is somewhat concerning on a technical basis.
The only asset of the company is the Tilapia field in the Lower Congo Basin which is offshore but drilled from land where all the facilities are. AAOG own 56% and SNPC, the Congolese NOC holds the balance of 44%. There is no doubt that the success or otherwise of the well drilling at the moment will be of supreme importance but the fact that there are three horizons with differing risk and potential size complicates matters. The well is already through the R1/R2/R3 sands where the nearby 101 well produces 55 b/d, probably not enough reward for such an expensive well. The lower Mengo Sands are thicker than nearby discoveries and whilst no tests have been done, on the way down decent hydrocarbon pay was encountered and if this is to be relied on the company suggest that it may produce up to 500 b/d.
Much more importantly is the deeper, Djeno sands where the drill bit is just approaching, if all goes according to plan news from this formation should be known any day now, hence writing this up first. There is little doubt that if the Djeno sands come in it will be transformational for the company, they say that it could be 5/- b/d per well and that they could drill six wells from the pad. Although we have been talking oil here it is not out of the question that it could be gas and/or condensate bearing, both I’m told would be equally welcome…
I mentioned the cost of the well which is of an historically enormous amount. Endless technical problems have beset the company and this well has been extremely expensive, further wells should be around $8m a go or about $3.5m net to AAOG (It is worth noting that SNPC owes AAOG some $10 which can either be paid in cash or by being granted a larger percentage of the field, a tricky conundrum either way) which would still mean finding more money to drill out the prospect but if they are in the Djeno that is no problem. The company are however not bigging this up, they cautiously are hoping that should the Djeno be dry then on the way back up will test the Mengo sands and produce profitably from there.
The decision therefore is somewhat tricky, an Aladdin’s cave awaits if the Djeno Sands come good with the drill bit which may be happening right now. Whilst the company are playing this down and accentuating the Mengo Sands I’m sure that an announcement that the Djeno was dry would probably not please the market whatever the company say. This weekend won’t make or break AAOG but it will certainly decide whether that transformation is imminent, as they say in the movies, do you feel lucky…?
This weekend in the Premiership Liverpool host the Eagles, historically one that Palace enjoy, the Noisy Neighbours are at the Terriers which is the last thing they want. Spurs are at the Cottage, also a must win game for the Cottagers. The stand out tie is probably the Gooners hosting Chelski, both sides need three points whilst the Red Devils host their nemesis the Seagulls.
A really amazing weekend for rugby fans where there are some really crucial fixtures as the group stage come to a close…
And good jumping too, you can see Altior at Ascot or go to Haydock and watch the Peter Marsh, some great names out as we start thinking about Cheltenham more seriously..