WTI $59.69 -19c, Brent $66.57 -2c, Diff $6.88 +17c, NG $3.02 +1c
As we start the lead-up to the Opec meeting on June 5th the usual pre-meeting stories are doing the rounds as one might expect. On Friday the Venezuelan President announced that ‘some sort of deal is being worked on’ which is probably fair enough as it would be foolish of the ‘have nots’ not to have a plan B of some sort. Now, normally I would suggest that this sort of story doing the rounds is as inevitable as it is unlikely to succeed but there is just a chance that something may be afoot. Last week in Houston gave me the chance to speak and listen to a number of senior industry figures and it does seem like there may be something to this particular story. I understand that behind the scenes the possibility exists, and it is only that, of an agreement to cut by a modest amount to be shared by Opec and non-Opec producers as an attempt to at least show willing in the oil market. I will be keeping an eye out for anything that suggests that this story has legs, as they say.
With another week in which the oil price only just managed to tread water and that was probably mainly due to the weakening dollar, it is worth bearing in mind that the fundamentals are hardly conducive to another bull run, at least not yet. The three agencies reports last week were mixed but hardly showed significant demand uplifts whilst supply remains solid. The state of the US economy is at best mixed, whilst employment figures remain steady, Friday’s numbers on industrial production, consumer confidence and retail sales were not good and the dollar weakness is probably due to predictions of rate rises being pushed back. That greenback weakness is a small branch to be clung to. Add to that a fall of only 8 oil rigs in last week’s count is showing an inevitable shallowing of the rate of decline is happening, a plus number is not far away.
Could the sun be coming out in the Bahamas one wonders? Today’s announcement of a Licence Renewal Addendum being signed is an ‘unambiguous marker for future activity: to commence our first exploration well by April 2017, and a clear period of time in which to both secure a suitable farm-in partner and undertake the necessary preparatory work to ensure safe and responsible drilling operations’.
I took the opportunity to chat to CEO Simon Potter this morning and he is clearly pleased that a number of loose ends have now been tied up. Clearly the Government has been very thorough in its work on the Petroleum Act and the second reading is now rescheduled for next week. With a 31-7 majority it is unlikely to fail and this gives BPC strong tenure and an ability to start talking to potential partners knowing that the Government are fully supportive. This is effectively the start of another three year window and it also clears up another problem that existed before, namely the Cuban boundary issue. The previously approximated boundary is now officially defined and the area is unambiguous, for BPC the whole area is secured.
The company now expect to talk with a number of companies that have showed interest in what it must be remembered is an exploration asset of a scale rarely seen, with the size of prospects that even a major oil company might look at. Whilst it would seem to be a natural opportunity for one of the large independents, it is difficult to rule out any company on size grounds and the regulations, which will be similar to the UK, are not prohibitive. If the company move fast on this front it may be that they might be able to drill before the new deadline which is April 2017, perhaps before the 2016 hurricane season if one was being particularly optimistic.
I have historically been cautious on BPC as I have felt that the combined problems facing the company would mean that I could not get an idea of when this exciting acreage might be drilled. Whilst this announcement doesnt trigger anything per se, it does give everybody involved a proper time-frame and a three year window in which to proceed, a window that might just open up and deliver the promises made over a number of years.
Sound Oil has announced the details of the Open Offer to shareholders mentioned in the recent placing with institutional investors. Shareholders on the register last Friday will, on a 1 for 23 basis be able to subscribe for stock at 19p with a warrant attached to subscribe at 24p valid for 5 years. This means that 18.2m shares will be issued and another £3.46m will be raised by the company. Sound has recently hosted four sets of visits to its Nervesa drilling site which have I understand gone well and given the timetable provided it wont be long before results are due. With the news of the Moroccan deal being announced as well it may be that Tendrara might add to the excitement and fill in the exploration timetable, if so, shareholders might be cashing in on those warrants well before their expiry date…
Whilst I was away Providence announced that they were relinquishing 70% of their acreage on the Polaris prospect, Rathlin Basin, on licence P1885 offshore Northern Ireland. This may be a sensibly timed piece of portfolio re-balancing but it is Barryroe that the market really want to hear about. The market has gone very quiet on the Sequa front although a bond issue did, I understand, get off the ground. If the farm-out ever does happen then one hopes that not only is it financially rewarding but politically correct if that’s not asking too much. Provvies have a conference call arranged for next week so maybe all will be revealed then…
Primeline Energy Holdings
I have mentioned Primeline a few times recently as it is a most interesting play that I used to do some work for. With a substantial gas field offshore China and with CNOOC as its partner the market were wrong to suspect that the development wouldnt take place. Now the potential icing on the cake, the exploration drilling, is imminent and the company announced while I was away that they have raised $20m through a convertible with GEMS. This money will cover the drilling of two wells on block 33/07 and provides certainty and clarity for the company in this part of its portfolio. Seismic has led PEH to the 2 best well locations and I understand that it wont be long before a rig will be contracted after which drilling will be imminent. With a good source rock and sound geology the wells have a better than average chance of success and are relatively shallow so expect them to take around 30-40 days to drill.
Primeline has always been about exciting exploration drilling around in-place infrastructure, this makes for any discoveries to be of significant added value especially given local demand and a strong pricing regime of around $15 even in this market. With strategic local supply being important and results expected by the Autumn things are looking prospective for the company, I just wish it wasnt only listed on the TSX!
In the Prem the top four are sorted as Champions Chelski play tonight, the Noisy Neighbours eventually got past the Swans and Man Who drew with the Gooners. De Gea limped off the Theatre of Dreams possibly never to be seen again as a Bale swap seems eminently possible…At the bottom its looking like the Tigers to go down but the Magpies are making a big effort to get relegated under the ‘best coach in the league’…
A good month for Bristol as Rovers make an immediate comeback from the Conference, on pens mind against Grimsby.
In Scotland, Rangers just squeak past Queen of the South to get into the semi final of the play-offs…
Last week when I was in the US it was all about Tom Brady and ‘Deflategate’ where he has been banned for four games and fined millions of dollars, TV coverage was wall to wall, I mean….?