WTI $46.05 -70c, Brent $49.61 -$1.07, Diff $3.56 -37c, NG $2.66 -7c
After fierce swings last week crude oil ended up pretty flat, WTI was up 83 cents in a range of $6.12 and Brent was down 44 cents, range $6.58. Friday saw various data releases that might have had an effect one way or another but didnt seem to inspire the market. With non-farm payrolls coming in low one might have expected rate rises to be deferred but employment is deemed nearly full so the dollar remains firm with all the implications that has for the oil price. Also the rig count was pretty optimistic as well, I even flicked over to the oil price when I saw the number expecting a jump but there was none. Down 13 overall at 864 and oil down those 13 at 662 one might have been excused a modest whoop of joy after a fall of 21 rigs in a fortnight but the market was too weary. With the EIA following my words on the gasoline price they also added that at £2.51 a gallon it was the cheapest Labor Day for drivers since 2004. Finally the news that Opec stated that they were ‘ready to hold talks with other producers’ also gained short shrift from markets, actions will need to be louder than words on this front now.
An operational update from Amerisur this morning in which the company confirms most importantly, that the interconnector pipeline is still on track and should be completed in December and up and running by the year end. The OBA as it is now called (Oleoducto Binacional Amerisur) is progressing with final construction works and the Environmental Impact Assessment is being prepared and will be submitted shortly, this should mean that the licence will be granted within 60 days and cause no delay. Elsewhere, May-August production is almost as expected and not surprisingly the operational netbacks have varied widely with the oil price. Numbers may be trimmed slightly but are pretty much on track with my expectations.
The CPO-5 Loto-2 well is scheduled to spud in mid September and expect to wait around 30 days for the log data, if successful the company will drill Loto North-1 which is a step out from the existing well location. The company are processing the CPO-5 3D seismic at the moment and are reviewing all the geophysical data in the block which will take around 4 months.
The news that the OBA is still on target to be up and running by the end of the year is good news for Amerisur and its shareholders as the massive effect that it will have on the company’s costs cannot be overestimated, any signs of the share price heading back into the low 20’s is a serious buying opportunity for the long term.
Sound Oil, soon to be Sound Energy…
Sound are cracking on with activities in Morocco and today announce that they have agreed a two month period of exclusivity with Maghreb Petroleum Exploration to negotiate and complete the acquisition of a subsidiary of Maghreb which holds a 25% carried WI in the Sidi Moktar licences onshore Morocco. Readers with longer memories will remember this licence as the operator is PetroMaroc Corporation formerly known as Longreach. Looking at PetroMaroc it doesnt appear to be blessed with too much cash and this maybe an interesting opportunity for Sound to expand its footprint in the country, I certainly remember Sidi Moktar to have discoveries worth investigating.
I will write more on Sound’s recent expansion and situation going forward after tomorrow, as CEO James Parsons is presenting a strategic overview at the Oil Capital Conference at which I am attending.
I met with Robert Estill the new CEO of MOIL last week and also Gordon Stein the CFO whom I had met on my last visit with the company. The company’s substantial asset is the Tsimiroro development and Mr Estill certainly has the experience of heavy oil, having worked on the Kern River and Duri giant oilfields in his past life. There are two risks here neither of which involve the oil or the reservoir, the first is the execution of the project which looks to have plenty of support, the second is the financing which is addressed in a statement by the company this morning. In this statement the company formally announce that the data room is now open with Jefferies conducting the process, this will last until the end of this year with the transaction being finalised by the end of Q1 2016.
Right now the company still need interim funding for the working capital of the project and with the Outrider facility expiring on the 6th of October there is a need to secure new financing probably from existing shareholders. It is not in their interests not to keep funding this exciting project just when there is light at the end of the tunnel and with the ‘Jefferies process’ under way new investors are being tapped up by them and VSA. It is entirely understandable that in this oil price environment that they are finding it somewhat difficult to attract the funding but this is a project different to most. Potential investors could be institutional of course but I am sure that traders are all over it, as are service companies given the amount of drilling there is to be done, maybe a US market leader who’s colours are red might be involved?
So, the good news is that with the support of the existing shareholders the development will continue to go ahead and assuming that Jefferies do their job satisfactorily then post the farm-out there will be a reduction in the need to call on shareholders going forward. Watch this space while the process delivers some short term and longer term financing.
News from the MNR this morning that it has today authorised the first tranche of the regular payments to the IOC’s operating in the country. Whilst the MNR realise that the figures are quite low due to the oil price and competition for resources it is important and a figure of $30m for Genel and $15m for GKP is not to be sneezed at and a helpful first step.
Lewis Hamilton was certainly not sure why he was being asked to drive like a maniac to extend his lead at Monza yesterday but then he didnt know that Toto had just seen the tyre pressure report either. With the prospect of a 25 second penalty, coming first by 25.03 seconds had its merits…
The cricket all rather dissolved into mediocrity with Starc-gate leaving a highly unpleasant smell around Lords as the Aussies felt the need to win at all costs was more important than the spirit of the game, not an auspicious start for the captaincy of Smith who could have ‘handled’ it better if that is not the incorrect use of the word.
Muzza and Konta sounds like something out of a music hall act but if Andy and Jo win tonight they will both be in the last 8, quite an achievement.
Nothing greatly surprising about the football, Wales are almost through and barring a spectacular revival of Andorran football should join England and possibly Northern Ireland in the finals. Scotland have Germany at home tonight which is, as they say, quite a challenge…