WTI $102.66 +18c, Brent $108.61 -18c, Diff $5.95 -36c, NG $4.71 +1c
Its Opec week and as I said last week I don’t expect any change in quotas or lengthy discussions on demand that occupied the last meeting. Demand is firm enough and the non-farm payrolls on Friday showed that that US economy is slowly picking up whilst China continues to increase imports including for strategic stocks. On the supply side all is as I said last week, the nuclear talks in Geneva with Iran are heading to the July deadline with no sign of an agreement, indeed it is likely that it will be extended and no increase in exports will be allowed yet. If anything there may be a call on Opec of slightly higher than 30m b/d which might tighten the price.
My spies in the oil market tell me an amusing (well it is the oil market..) story about the benchmark Flotta blend of crude oil. Apparently it is changing with the addition of oil from the Golden Eagle field and Talisman Sinopec are gleefully re-naming the blend Flotta Gold, how we laughed….! The very best stories come from the marvellous Liz Bossley at CEAG …..
Hurricane have announced a drilling update on the Lancaster well where the drilling phase is complete in the operation to drill and test this horizontal appraisal well. A one kilometre horizontal section through the basement reservoir has been successfully completed and is being prepared for testing. Comments by CEO Rob Trice are that they are ‘extremely encouraged by the data so far acquired as it indicates that the target fault zones are present and that the encountered section is fractured and oil bearing’. Now whilst this early news is just that, it is encouraging to hear that things are going well and that the difficult early drilling has been completed pretty much on time. The next month will be an interesting time for the company which has so far not farmed down any of its interests in the projects and I expect the industry to be watching with significant interest.
Caza Oil & Gas
You can never please some people, at least not oil investors who have seen the value of their stock triple in less than three months! Today Caza announced that it has increased its proven reserves by 10% since the start of the year as Netherland Sewell give them 4,875 mboe of P1 plus some smaller increases in P2 and P3 assets. These gains are due to the successful drilling and development programme of the Bone Springs which has been an unqualified success. I remain very confident of the potential for this asset as it can only get better and increasingly valuable and the share price has much further to go despite the slight fall that has happened this morning. ( My TipTV interview from last week which contains a piece on Caza can be found on the website www.malcysblog.com )
Readers will know that I have been most impressed by the work done by Sound so far this year and holders have been rewarded by another near tripling in the share price. This is another where this is probably only the beginning of the story as Sound has combined the achievement of near term production with the potential of significant exploration upside. Today the company has announced a reserve upgrade for Rapagnano which albeit being a relatively small part of the portfolio, provides cash flow that pays a good deal of the day-to-day costs of the business. Post planned maintenance, where bottom hole pressure was measured, internal 1P reserves have risen to 30 MMscm which is up 31% and the production plateau is estimated at 12 years, overall, much better than previously expected.
Sound has done much of what it had promised, it has brought in an institutional investor at a 70%+ premium to the price who is already in the money and achieved a very good farm-out of Nervesa at the same time. Funded for the next two years and with the flexibility to fund developments through debt, the company is now paying the bulk of its costs from production but keeping a substantial upside with an exciting drilling programme over that period. The Sound share price looks like it has a long way to go as investors realise that there is plenty more to come. ( Sound is also on that TipTV interview mentioned in the Caza piece above)
Another one of my current favourites continues to do well, Range Resources is being looked at in a new light as the team continue to do the necessary work to repair the damage done by the previous management. The shares have admittedly come up a long way in a very short period of time but if the transformation continues then there is no reason why they cannot consolidate and even continue to rise well above current levels.
Shell has announced that its Chairman, Jorma Ollilla is to step down at the next AGM which gives the head-hunters plenty of time to find the right person for the job.
Another busy weekend of sporting action as Rafa wins in Paris where he has dominated for many years. Muzza has appointed a new coach and starts this week at Queens Club as defending champion.
The England ‘B’ team will be kicking themselves as they nearly took something from their game against the All Blacks on Saturday, the rest of the series will be most intriguing especially as Manu Tuilagi may play on the wing next game.
England had a kick about, literally, against Honduras who added venom to the word friendly and wont be on anyone’s list of favoured nations for next time. Plenty to be encouraged about despite the nil nil draw.
The Canadian GP turned out to be one of the more exciting ones for a long time as cars crashed, broke down and generally defied predictions all over the place. It is going to be a most interesting summer but Ricciardo certainly was deservedly pleased to break his duck yesterday.
Australia won the Derby like the good thing he is but I must remember never, ever, to back a horse that Richard Welfare of Hogan Lovells has weighed down with his money. Hogan Lovells you will remember is the law firm that had a great drinks party that no one has yet owned up to being invited to…