WTI $52.74 -4c, Brent $58.73 +12c, Diff $5.99 +16c, NG $2.77 +4c
Those prices up above do not reflect the nature of this mornings marketplace as the deals being done in Brussels and Vienna have rather altered things. WTI at $51.36 and Brent at $56.97 is more realistic as the talks between P5+1 and Iran have continued and the final deadline has been extended until tonight. That has led people to believe that a deal is in the offing although still with little certainty as to the timing of the ending of sanctions and the nature of the arms ban yet to emerge. Let’s assume that white smoke does puff from the chimney, crude markets would probably fall although I suspect that much of the bad news is already in the price, so to speak. Yes, production and exports will rise but given there is already cheating it may be less than feared, and yes with plenty of crude in floating storage some will come onto the market and knock prices but it may not be as bad as some pessimists think. Uber bears think that this extra supply will be the straw that breaks the camel’s back with oil markets already awash with crude.
The three main oil forecasters are setting out their stalls with the IEA coming out on Friday to add to the EIA and Opec will publish this morning, all either have, or are expected to say, that the market remains oversupplied and oil prices will remain subdued. The IEA went on to say that the recent ‘golden era’ for refiners would end soon although if oil prices remain low and product demand even holds up, (remember all that data from Friday’s blog) I wouldnt shed any tears right now. With the 2Q results season just over the horizon the majors will report very good numbers downstream, it will be interesting to see what the outlook is.
So, Greece has done its deal with the EU and must now get it approved by Parliament, having backtracked so much it will be interesting to see how Mr Tsipras sells this to a country that voted 60% No only a week ago…I suspect that he will avoid the use of the word humiliating but perhaps good housekeeping may replace austerity.
There is certainly a pattern emerging in the weekly rig count numbers with Fridays data showing a rise of one overall but of five in oil, to 645. With most of the service companies reporting that the 2nd quarter was as bad or worse than expected the 3rd has at least showed some signs of a rally, the next few weeks will be most interesting. Watch out for Canada which has so far seen the harshest of falls, Baker Hughes report that ‘Canadian Rig Count is up 30 rigs from last week to 169, with oil rigs up 19 to 91, and gas rigs up 11 to 78’. That is a spookily big percentage interest by my calculation.
No surprises today from Genel in either its trading update or management changes, the latter having been flagged for about a year and seems perfectly reasonable to me. Tony Hayward moves to Chairman where he can continue to be in charge of strategy and running the board, no change there then, whilst Murat Özgül takes over day to day management, operational performance and ‘delivering’ from the KRI.
As for trading, production continues to rise with net net working interest flow of 88,800 b/d in the period being up 41% with May and June being 95,000 and days of scoring centuries. The KRG are ‘committed’ to ensuring that companies are paid in full for their production and with 600/- b/d flowing via pipe to Ceyhan, distribution of revenues is becoming a distinct possibility. On the gas front, which has been, in my view a key long-term value enhancer for Genel things are moving along nicely. With the GSA signed between the KRG and Turkey in 2013, last month the company made significant progress on delivering from Miran and Bina Bawi by signing a detailed term sheet for the upstream PSC.
With unchanged revenue guidance of $350-400m at $50 oil and a much more promising outlook in oil production, sales and even payments, Genel appears to me to be extraordinarily cheap at 467p, and you get the gas for free…
Nostra Terra Oil & Gas
I took the opportunity to chat with Matt Lofgran on Friday about his recent deal with Koch Exploration in which NTOG is to operate 2,440 net acres on a new prospect in Wyoming. It is not quite what I or the company had envisaged doing this summer after last years big deal but it does show that Lofgran is keeping his eyes open for deals that can potentially fly in the current oil price environment.
NTOG will pay for the first well on the project at a cost of just $1.2m and earn a 100% WI for doing that, the well is expected to spud in the 4th quarter of 2015. Koch retains an ORRI which it can convert into a WI on success and NTOG will earn 80% of the net revenue of the first well. NTOG will now start to market its stake with the view to keeping approximately 25% of the deal, if all goes well the upside could be considerable, the acreage is analogous to the nearby Enigma field and has 25 or more potential locations available.
NTOG has a new Chairman in Ewen Ainsworth whom I knew pretty well from his time at GKP, this appointment along with the recent dealings show that Matt Lofgran is at least trying to ensure that the company remains busy even at a time when a fair bit of the portfolio is on the back burner. Still worth keeping on the radar screen should we hear that the farm-out process has been successful and then at the end of the year with the drill bit.
News today from President who announce that the seismic work in Paraguay has been completed, whilst the data will now be analysed for about two months the preliminary review of the raw data processed in the field is ‘cautiously encouraging’. I am hoping for an update with Peter Levine before long and will update again after that.
Cancelled meetings tell a very good story and I was due to meet Tethys Petroleum tomorrow before it was blown out at short notice. Now we know why, Nostrum, the Kazakh operator has seen the AGR deal and returned to the fray with an offer of C$0.2185, a 46% premium to the price before the approach. Historically Tethys has been a no-go area for all sorts of reasons but only recently I have been persuaded to take a fresh look and meet with the highly regarded new management. At this stage I guess it is a wait and see situation with the jury out on the bid, the raise and the AGR deal all possible…
The cricket was most impressive with New England winning inside four days and going to Lords one up, beware wounded Aussies though, it’s a long series. Shame for Watto though as he not only favours being out LBW but thinks that the two reviews allowed are his allocation for the match, his teammates think that DRS stands for Dont Review Shane and that LBW stands for Leg Before Watto…
At Wimbledon Novak turned on the burners and won against Roger so a Djoc did win after all, Jamie Muzza losing in his final. Meanwhile Lewis turned up at the Royal Box sans jacket, tie and socks and was surprised to not be admitted…
The TDF rolls on with Froomey still in possession of the Yellow Jersey, anyone to challenge him?
And the Noisy Neighbours have agreed a deal with the HubCap Stealers of £49m for Sterling which makes him the highest ever English player to be transferred, big money for the bench…
And its always nice to see that the BBC are cutting back given their enormous cost base. I spotted that they have applied for 200, yes 200, passes for their journalists for the Lib Dems party conference, to put this into context there are only 8 Lib Dem MP’s and ITV have applied for only 5 passes, a long way to go Auntie before you are in the real world…
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