WTI $82.71 -4c, Brent $85.40 -76c, Diff $2.69 +90c, NG $3.67 -10c
Oil price
All eyes were on the Chinese data overnight and there was relief that they weren’t bad, in the end slightly beating the whisper at 7.3%. Forecasts had centred around 7.2% after last figs of 7.5% but overall not too bad. The oil stats were actually better than economists had predicted with oil demand up 6.2% to 10.3m b/d which I am sure will include a degree of stock build.
Retail gasoline prices in the USA are beginning to show the advantage of the lower crude realisations with gasoline falling sharply again this week. At $3.12 a gallon the price is down 9 cents on the week and is 24 cents a gallon less that this time last year.
Total
I’m sure that everybody in the oil and gas industry was very shocked to hear of the death of Christophe de Margerie in an aeroplane crash in Moscow last night. The man with the moustache was Total though and through and was one of the most highly respected, not least universally liked leaders in the business.
Ophir Energy
Ophir has announced the results of the DST on the Fortuna-2 well in Equatorial Guinea this morning. They were described as ‘excellent’ by the company and will significantly alter for the better the economics of the area with fewer development wells being needed, at present 7 are planned.
Madagascar Oil
Having recently raised $20m at 10.25p in a fully subscribed offer by three of its major shareholders, Madagascar announced yesterday that it was going ahead with the open offer that it announced at the same time. The only trouble is that the share price is now 8.8p giving rise to questions about the status of the process.
I have recently spent some time with Gordon Stein, the CFO and effective leader of MO in which he took me through the situation in country and more importantly the situation regarding the Tsimiroro development for which a development plan is about to be submitted. The project is indeed huge, 1.7bn barrels of heavy oil is extracted by steam injection over two, possibly three stages. Whilst the political situation in Madagascar has been pretty turbulent in recent years there is a degree of normality returning and the overwhelming need for resources for power generation should override such obstacles although they should be borne in mind.
Although stage 1 for the project will bring in 10/- b/d the move to stage 2 will be the making or otherwise of MO, this will involve a pipeline and the production could be 50/- b/d and conceivably twice that if other wells on the very large acreage were to come in. Clearly this will need much more funding than has been announced so far and whilst the three shareholders who funded this raise have said they will put another $50m up more will be needed. At this stage I expect to see the company set the wheels in motion for a farm-out if only to get more technical expertise along with the extra capital required, who that company might be is anyone’s guess but I suspect that there will be serious interest from all parts of the industry from exploration companies at one end to the big traders at the other.
This takes me back to the offer announced yesterday whereby it seems as if the company are in the strange position of offering shares at a premium to the current price. If one assumes that they aren’t going to reduce the price of the original deal, one has to conclude that the attraction of being able to secure a strategic stake in the company albeit at a modest premium holds considerable attractions. This could end up being a plus from all sides, the company would be vindicated in their confidence going forward and extra liquidity would be provided with the increased shares being placed.
Overall the situation at MO looks fairly appealing, there will be frustrations particularly on the ground with little infrastructure and political cohesion being minimal but I expect the development plan to be approved, probably after a few tweaks. When that happens everything else can shift into gear and they can go ahead and fund the development of the rest of the licence. This area has vast potential and there is no doubt that it is a concept, but with a strengthened board, another partner or maybe two you never know, you might make serious money out of this but remember the risks which will diminish as further progress is made.
Lamprell
Lamprell has announced that it has completed the second jack up rig, ‘Mercury’ to be delivered to the Caspian Sea ahead of schedule. Pricing here has been a bit opaque but as a bigger than usual bit of kit I suspect that the bill was over $200m with decent margins. It also means that the company can releases contingencies which will make the 2014 results even better. I remain confident that despite some on-going corporate issues Jim Moffatt has the company in excellent shape.
Northern Petroleum
An interesting announcement from Northern this morning with information about all three wells being drilled in Canada. It really is the case of one really knockout well significantly overpowering some disappointment elsewhere. The first well produced 1,300/ b/d which for there is areal barn burner and at the moment it is restricted due to flaring restrictions. The second well showed poor reservoir quality although it was on the edge and the central one was water wet and will be for liquids disposal. When the big well gets tied in it will produce 3-400 b/d and the company will be on target for the 5-600 b/d to make some serious cash flow. All in all the situation at Northern continues to improve…
Sundry
In brief, BP and Reliance are unhappy with the $5.61 gas price in India, wanted much more. Egdon spuds the Burton on the Wolds-1 well as part of a very busy spell.
I got a lot of stick yesterday for not mentioning the Xcite deal with Baker Hughes, I agree that it is an important step towards Bentley going ahead but they still need the farm-in partner..
Its the Faroe trip to Norway so expect some notes written by those on the river cruise, shame I am not there but afraid was on the ‘B’ list of minor importance!
And farewell to Malcolm Webb who is hanging up his boots after ten years running Oil and Gas UK…
And finally…
In a thrilling game at the Hawthorns last night the Baggies only had two shots on target but scored both whilst the all-stars just managed to get a draw! Tonight Chelski host Maribor which should be a stroll in the park whilst the Noisy Neighbours go to CSKA.
And there is no truth in the rumour that ‘Arry asked about my availability for the weekend after revealing that Adel Taarabt is three stone overweight…
And Oscar Pistorius gets a maximum of 5 years in prison for the cold blooded killing of his girlfriend, only in South Africa……..
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