WTI $105.37 -37c, Brent $112.36 -94c, Diff $6.99 -57c, NG$4.46 +5c
As I mentioned yesterday, the risk in the oil market is easing off and combined with plentiful supply in the physical market, short term demand in the market has eased. This has taken a good bit of the sting out of the market and one should bear in mind that in recent weeks there has been a significant increase in what might be called ‘non-professional oil investors’ in the market. In the absence of any significant further geopolitical problems in Iraq any weakness in the oil price may well be led by short-term punters not normally accustomed to this market, if you know what I mean. In this respect it looks like $112 for Brent and $105 for WTI are the next support levels.
Tonight will see the API stats which analysts are expecting to show a draw of 2.5m barrels, these and tomorrow’s EIA numbers will be interesting in crude and product inventories ahead of the Independence Day holiday weekend. Finally, the US domestic gas statistics released by the EIA yesterday showed that in April of this year production was 2,080 BCF, the highest on record for April in the country.
Premier has announced the sale of PO Sumatra North BV to Kris Energy for $40m post tax which whilst not being big bucks is the continuation of the modest programme of divestments of non-core assets and follows yesterdays North Sea disposals to MOL. I hope to have a meeting with Tony Durrant at some stage although I know he is incredibly busy in his new role.
After results yesterday San Leon has followed up with a farm-out of some of its acreage in the Poland Permian Basin to Palomar Natural Resources. PNR are paying $5m and $15m respectively for 65% stakes in the Southern and Northern Permian Basin concessions. San Leon is carried for a defined work programme and ironically PNR is the baby of former SL man John Buggenhagen who will know his way around this acreage package alright. I have asked for a meeting with Oisin Fanning, as despite a sharp rise this morning, the market has steadfastly not believed this story, if it is working then the stock is very cheap, more if I speak to the company.
I had a long meeting with Range last Friday, I wanted to catch up after so many announcements and to ensure that my positive stance on the shares was justified. Also I notice that the company has done a team interview on Proactive Investors, has a conference call scheduled for this morning ( I listened, it was professional) and is presenting at the Oil Barrel conference tomorrow. The confidence that is shown by the management, specifically Rory Scott Russell the CEO, is indicative of how much progress the team has made in a few short months.
When I met Rory for the first time he had only been on board for seven weeks and the scale of the problem was daunting, it should not be underestimated quite how much has been achieved in such a short space of time. I don’t intend to go into detail again, it is all with hindsight obvious, but clearing the debt, the deals with Land Ocean and Abraham and the concentration on Trinidad have set the company up well, new, high quality management is already in place and the goons who got them into this mess should be history. I was lucky to find such a recovery when I did, since the first recommendation the shares have already tripled, the blog now calls it ‘doing a Range’ which is fun. I would finally say that when I first put the shares on the buy list there was an inevitable caveat in the risk factor of it not working, I now feel that I can say that the risk factor has gone to a large degree and that my next target of 5p is very achievable, I hope to be at Oil Barrel tomorrow so see you there.
Last week I had the chance to sit down and have a long chat with Jay Bhattacherjee, the new-ish CEO of Aminex. I have known Jay for some time and worked with him at Longreach and am aware of his deep knowledge of Africa and the industry there. Aminex is focused on Africa and has disposed of the non-core assets in the USA and raised $15m in January which ensures the company is fully funded to execute the current work programme. The Kilwani North Field is the key, subject to Ministerial sign-off it should be in production in the first half of 2015 and after that might produce between $12-15m of cash revenue p.a. The Ruvuma PSA is currently shooting infill seismic and has some very interesting prospects coming up. The Ntorya-1 well flowed gas and condensate and the Likonde-1 well had oil shows, it may be that despite the tertiary being the target it may now be looking at the Cretaceous for the liquids after all.
Aminex is a very interesting play, Jay and his team have put everything in place for success in the future with a strong cost discipline, a good work programme and a good asset base. If they can get the production on next year as envisaged this should look very exciting, as a result of the placing management are, as they say, aligned with other shareholders and will share in the excitement. The shares, having been a very poor performer have picked up recently and whilst only one to watch at the moment should definitely be on the radar screen.
Wood Group have, according to the industry gossip, won the contract for Tullow for the TEN project offshore Ghana. The project, which envisages first oil in mid 2016 has been a bone of contention for Tullow lately and had I been invited to the Capital Markets day I might have been able to discuss it with them, c’est la vie as they say in the best circles…
Ithaca has priced the $300m of senior notes of 8.125% at par this morning which looks like good financing to me, still very much a favourite here.
Hurricane has been a star lately and ever since the Lancaster well came in has been going higher and higher, yesterday it reached 53p at one stage and having been on the buy list here down at 23p only in March one could justifiably ask whether that was enough. I understand that Dr Trice and team are presenting in the City today and I’m sure that will be very positive, I hope to catch up with them next week but in the meantime there is still a lot to go for, remember they still have 100% of these assets.
At the World Cup the round of sixteen concludes tonight with Argentina v Switzerland and Belgium v USA match which should prove victory for chocolate over candy… Last night France cruised past Nigeria but Germany made hard work of beating Algeria although they always looked like they were going to win it. And Suarez apologised to one and all yesterday, thinking of his new club maybe…
At Wimbledon, the Committee who won’t consider playing on a Sunday when everyone wants to watch, are now complaining that they are terribly behind with players having to perform on consecutive days, oh well it’s a tough job but someone’s got to do it and the Chairman of the Club has to sit next to David Beckham all afternoon on a Saturday! Muzza cruised through as did Djokovic, a good afternoon today.
And New Zealand won the test series against the West Indies with a last match victory in the Caribbean.