Oil price, Chesapeake/Devon, Amerisur, Sundry-BP-Ophir-Hurricane-Trinity-Faroe-Tullow-President, And finally…
WTI $78.68 +$1.49, Brent $82.95 +13c, Diff $4.27 -$1.36, NG $4.19 +6c
Proving that the oil price can fluctuate considerably on the most vague of rumours was confirmed yesterday when a pipeline explosion happened in Saudi Arabia. Brent, having been as low as $81.63 during the day, took off and at one stage reached $84.45 before the explosion was confirmed as having occurred during repair work and was not an act of terrorism. The good news is that yet again the price has closed above the critical $82.30 level although it is still dangerously close. Another reason that the oil price hasn’t fallen any more is the situation in Libya which is showing all the signs of a tinder box, yesterday the ‘rebel’ forces seized the El Sharara field and closed it down taking 200,000 b/d off the market.
WTI performed better than Brent as the EIA stats showed a modest build of 460/- barrels against analysts expectations of 2.4m, oh well cant get it right all the time, or hardly ever actually…Today sees the publication of the Opec monthly report at 1430 hours so may have something to say about that tomorrow. It is also time for Super Mario’s press conference at which he will likely do nothing, with the end of QE in the states Europe should do something but they are ‘comme un autruche’ as George Dubya Bush would say.
And the oil industry will be cheering louder than most at the Republican victory yesterday which with a gain of 9 seats in the Senate was even bigger than even I had expected. The Keystone pipeline is the obvious winner as Barry probably cant prevaricate any more on that one and crude oil exports might move forward, funny that one the one hand they want to import oil from Canada and on the other export their own…
Just worth noting that both of the above produced 3rd quarter earnings yesterday and both blew away the market with numbers way above the market whisper. For Chesapeake, earnings tripled and production was up 11$, reaching year end targets in September whilst capex was down 8% and the company were in ebullient form. Devon also had a good quarter and also pleased the market by lifting production guidance for the year.
I recently took the opportunity to meet up with John Wardle, CEO of Amerisur Resources, a company I have liked for a long time in an area I am very keen on. Amerisur is active in Colombia and Paraguay where it has substantial proven reserves and also a large amount of exploration upside with varying degrees of risk and reward. In Colombia it has 1P reserves of 19.8mmbo and 2P of 32.8mmbo, with net mean resources of 235mmbo from unrisked management estimates. It would not be wrong to say that the Platanillo field is the gift that keeps on giving as the company has drilled and completed 14 new wells and 3 sidetracks in the last 27 months, all being successful. In addition to that there is an ongoing drilling campaign on Platanillo with success in the U and T sands possibly to be followed by the B and N sands where oil has already been tested and I expect the latter, a proven stratigraphic trap to add to the reserves this year. With the PUT-12 block directly to the east of Platanillo being of the same geology but five times the size of it, the company are suggesting that mapping currently indicates 200-480 mmbo of potential resource, again net unrisked management estimates. Amerisur also has a 100% WI in the Fenix block in the Middle Magdalena Basin to the North of Colombia. In Paraguay there is massive, possibly transformational potential with an extensive acreage position comprising two E&P and three Prospecting permits. You will know that I am very excited about Paraguay with my work on President , this is equally as game-changing as that may be for them.
First half of 2014 production was 6,561 bopd which is growing but limited by ‘transportation options’, effectively the company trucks crude to market through Orito,Colombia which incurs a very significant cost per barrel, now the opportunity has arisen to connect directly to the Ecuadorian pipeline system. The company can put 4,000 b/d though the link at Victor Hugo Ruales, a number that will increase significantly after a facility upgrade to over 50,000 b/d. The effect that this will have on costs for Amerisur are significant, for over 85% of the 2015 production the cost per barrel will fall from $23 to $6, a massive opportunity and the company expect to have the interconnector operating on schedule by the end of 2014.
Amerisur is in a strong position financially, first half revenues this year were $114m ($64m ‘1H 13) with cash of $96m at the moment. By international oil company standards it has a fairly modest G&A and all exploration and development is funded from cash flow and resources. The company appears to have the full hand of exploration and development with low risk reserve extensions, significant short term upside in producing acreage plus prospects in Put-12, Put-30 and in Paraguay any of which could be game changers. The forward programme is packed with a mixture of development and exploration wells, including the San Pedro well in Paraguay and of course the pipeline into Ecuador which transforms already exciting economics.
With a first class management, supportive shareholders and a portfolio that contains low, medium and high risk prospects, Amerisur remains one of my favourite stocks and when the pipeline comes onstream it will be like having another discovery. For all these reasons Amerisur should be at the top of the list of stocks to own, it has always been reassuringly expensive so the recent market shake out may prove to be an opportunity not to be missed.
The industry press is saying that BP is going ahead with the plans for a third development phase at Clair, West of Shetlands.
Ophir Energy has appointed Excelerate Energy as lead midstream partner for its FLNG plant in Equatorial Guinea.
Hurricane has announced that DECC has extended its licences on P1485 and P1835 which contain the Typhoon and Tempest prospects until December 2016 and January 2017 respectively. Hurricane has been hit harder than most in the recent market shake out and although I understand that there has been an institutional seller in the market this price appears far too cheap on pretty much any scenario.
Tullow, who I think have a market update tomorrow appear to have given it at a presentation in Cape Town yesterday! Much detail about their African progress was given though I am told no new information.
I was at the Oilbarrel conference yesterday and heard some very good and a couple of less good presentations. Trinity E&P came over very well and Monty Pemberton was as eloquent as ever and rather pre-empted the LGO Trinidad speech. I was particularly interested in hearing Trinity as I am most interested in Trinidad and also I have, or at least had, a long awaited one on one meeting with the company next week. Yup, you’ve guessed it, my meeting has been cancelled which is most disappointing but I suspect that canny market watchers will be adding up two and two, just as I am…
Graham Stewart at Faroe was hung out to dry with the graveyard slot but a full house remained to hear a really good presentation and 2015 is going to be a really transformational year for the company, one for my bucket list, no doubt.
Finally President Energy, also mentioned above have a new presentation available on their website, today they are keynote speakers at the Paraguay Trade and Investment Forum in London, attended by many grand fromages.
If I didn’t know any better I would say that the noisy neighbours were throwing the Champions League this year, after the last CSKA game where they imploded they did the same last night, this time losing 1-2 at home and having two players sent off. Manager Pellegrini says that City are ‘in crisis’ which is probably taking it a bit far but its a hard job to qualify from here. Chelski drew with Maribor after Hazard’s awful penalty might have given them all three points but they should still qualify easily enough.
Tonight sees Spurs play Asteras Tripolis and the Toffees host Lille which should be straightforward…