WTI $103.74 -33c, Brent $110.36 -19c, Diff $6.62 +14c, NG $4.36 -11c
Its been one of those days! The blog was three parts finished and the self-saving mechanism failed and you know what happens then…
I have already written one blog today on the RKH/MOG situation but now will briefly recap on other news.
After a hectic week with the WTI expiry and the inventory stock draws oil prices have eased off their highs. In Kurdistan the KRG has announced it has completed the first sale of its crude which has gone to Ceyhan and by tanker to Europe, the money is being held in a designated account.
On Monday it is Memorial Day in the USA which signals the start of the driving season when out come the SUV’s and camper vans as long-distance travel is routine.
In the UK the British Geological Survey is out and offers the prospect of onshore oil in the south of England. This will come as an unpleasant surprise to the tory MP’s in the shires who think that it was all going to be happening up north. They could do a lot worse than visit Singleton which is a perfect example of how little damage can be done to the environment, I bet they couldn’t even find the well…
The Shimela-1 well onshore Ethiopia has come in dry, unless you count the water that is. Although traces of thermogenic gas were found it is a disappointment but no more than that.
Rockhopper/Mediterranean Oil & Gas
I will write up the story in much more detail in the next few days but I have spoken to all sides in the deal and it appears to be good for both sides if that is possible. Although it would never have been what MOG wanted, I think that with all the recent problems on Guendalina which took their toll on the share price, and whilst not being short of cash they were not funded enough to put the scale of capital needed behind their biggest projects. Certainly Rockhopper can handle that side of it and they will be able to fund wells on Ombrina Mare and Monte Grosso to kick start the programme. The portfolio can be worked with this investment and more if needed but it wont affect Rockhopper’s overall financing plans unless they beef it up a lot and that is at their option.
I think that for a company looking to diversify from the Falklands like Rockhopper is this is quite a wise move and at $1 a barrel hardly expensive or an undue risk. With MOG’s cash it will less that 5% of RKH’s market cap, dilution is only 2.7% and is a good starter pack for a potential investment in the Mediterranean and North Africa. With the Malta well going down at the moment they have put nothing in the valuation for that and will compensate MOG shareholders if it comes in, so the risk that would have been quite substantial for them alone is mitigated.
I had been to see Bill Higgs very recently and was, as you know about to write up the notes of my meeting. My conclusions were that for the next few weeks the shares would be at the mercy of the Malta well which, with only a 12% COS, might have played havoc with the share price. I had a target of 10p a share as I tried to mix my long-held concerns about the Italian regulatory morass with the potential in at least two of the assets in the portfolio.
The company have received temporary permission for the test sale of crude oil from Tsimiroro which is good news for the company. Madagascar is on my high risk buy list and I rather like the play there so I suggested last autumn that it may be worth following and this news endorse that view, it is still high risk though until I meet with the company.
At the risk of overdoing the mentions of Andes I note that the figures are out today, that however, is not the point. After Exxon’s discovery yesterday I note that Chevron have added to the spice by saying ‘Argentina can be the next hot spot for large scale developments’ and that the corporation plans to scale up in the Vaca Muerta. At 50p I think these shares have potential huge upside and the acreage in the Vaca Muerta whilst being far from all of Andes’ assets would be worth several times the current share price on its own.
Its a Bank Holiday weekend over here too and as the sports seasons change we can see a bit of everything. The end of the football season (except the World Cup!) means the play-offs and the biggest is QPR vs Derby at the weekend and there is the small matter of the Champions League final between the two Madrid clubs in Lisbon.
And David Moyes in a wine bar fracas, he certainly wouldn’t have been attacking…
England finally produced a decent display in the cricket as Chris Jordan inspired the team to victory with bat and ball, more matches in the series which will be close, especially if its stays wet and windy! And a quick question, why have Warwickshire suddenly become the Birmingham Bears for the T20?
The last ever Heineken Cup final will be fascinating as its a difficult call who to support between Saracens and Toulon, on the one side you have England legend Jonny Wilkinson and the other side is South African, no contest then…
And the most exciting and extravagant Grand Prix of the circuit as Monaco takes its turn to host the sewing machines this year. Assume that pole wins it as usual so might be Mercedes again..