WTI $66.81 -57c, Brent $69.64 -28c, Diff $2.83 +29c, NG $3.65 -16c
The oil market fell yesterday on the news that I mentioned about Saudi pricing for January liftings, the interesting thing about about it was that it only fell less than a dollar, indicating that the market has already adopted a tolerance to such news. Reuters is reporting this morning that at least $150bn of oil and gas projects due to be authorised for next year have already been put on hold, if true this is the start of the cycle which will lead to higher prices further down the road, the oil industry can never be accused of not being short termist or predictable eh?
The EIA in its latest report on US oil and gas reserves will have made grim reading in Riyadh, oil reserves were up for the 5th year in a row last year growing by 9% or 3.1bn barrels proven. The increase was primarily in North Dakota (2m barrels) which now has more reserves than the Gulf of Mexico and Texas (up 903m barrels) which retains its crown as the biggest state by oil reserves. In natural gas, reserves were up 10% offsetting last years 7% decline at 354 TCF.
Last week I took the opportunity offered to me to sit down with Kevin Hart and Kerry Crawford, CEO and Finance Director respectively at Bowleven. Having turned more positive about the shares in the summer after being a bear for a long time I was interested to see how things were going, especially at Etinde where the authorisation approval had triggered my more positive stance. Obviously the oil price movement in the same time frame has left the shares easier but relative to some in the sector its performance has been ok.
The farm-out of Etinde and award of the Exploitation Authorisation in July were key to the process, previous worries about funding the development and more importantly the upcoming wells could be banished in one go. Having received Ministerial approval the development now only awaits Presidential approval and whilst this cannot be taken for granted I expect it to be announced before long. The arrangement of a possible bridging loan from Macquarie Bank is, I understand, merely a back-stop should approvals take slightly longer than expected. Warrants due in 2015 shouldn’t worry the market either, with a price on them of 50p most shareholders would take that share price every day of the week at the moment.
Assuming all goes according to plan, BLVN will enter next year in a very strong position with $170m of cash plus a $40m net carry and a $40m staged deferred cash payment. This is what I wanted to hear, the development goes ahead, the wells are fully funded and the company is in a very strong position for the next two years. Indeed next year they will drill two wells offshore and two onshore which I would expect to add further value to the portfolio. Stage 1 of the Etinde development will, should the GSA progress, supply enough dry gas to support the fertiliser plant, in the future any increase in gas available by successful drilling might mean sales to the possible Cameroon LNG plant or the GDF Suez scheme.
Onshore the company are expecting a rig to arrive early next year and will drill two wells which have gas and condensate as well as oil potential, there are also deeper, higher pressure targets which will not be tested by the initial exploration programme.
Elsewhere it should not be forgotten that BLVN has significant acreage in the East African Rift system in Kenya with Adamantine Energy who themselves are in the process of farming-out some of their position which could lead to another ‘sensible party’ joining the consortium and franking some value. Expect drilling here at the end of 2015 or early 2016 to make the position more interesting. Finally, BLVN has been awarded three blocks with two pending in the Luangwa Valley Karoo Basin of Zambia which is pretty blue sky but comes with a minimal commitment and you never know, funnier things have happened.
I am happy to remain positive on Bowleven as although the negative sentiment in the sector is bound to continue for a while it demonstrates the right kind of defensive characteristics plus potential upside that I am looking for in my 2015 bucket list of undervalued stocks. This ticks a lot of boxes and can justifiably be all about the African gas infrastructure play which is not going to go away just because the oil price is taking a bath, accordingly I remain positive backed up by a good meeting with the company.
I was planning to write an article about the goings on at Range but the barriers are up and so far its not looking too clever on the contact front. Yesterday saw the departure of CEO Rory Scott Russell and the appointment earlier in the week of the Abrahams directors. At the moment it looks like the company will disappear from view at a price around here which is going to be a big disappointment to a number of shareholders, many of whom will not have realised that apathy in voting at the recent AGM would result in this, be careful of what you wish for eh?
Halliburton has appointed executives to oversee the Baker Hughes acquisition so at least they think its still going ahead…
Ophir has signed up for a PSC in offshore Myanmar block AD-03 which contains the Rakhine Basin.
In the rugby its back to the European Cup with the Saints at Treviso, Castres v Wasps, Quins host Leinster, Leicester host Toulon and Glasgow travel to Toulouse. The Glasgow performances in Europe have been heroic this autumn and a number of readers keep pointing this out.
Ronnie O’Sullivan turned on the style last night winning 6-0 and including a 147 break in 8 minutes to finish it.
Tiger Woods returned by ending the day stone last and saying that his short game was ‘awful’.
In the Premier league the Magpies host Chelski, the Maccams having had some some hard games lately travel to Anfield, the Gooners host the Potters who have also had some hard games lately. Spurs host the Eagles the Noisy Neighbours take on the Toffees, the Hammers host the Swans and Villa host the Foxes. Utd are at the Saints on Monday evening.