WTI $45.94 -11c, Brent $49.52 -9c, Diff $3.58 +5c, NG $2.71 +6c
Fairly short oil comment today, the oil price is relatively calm ahead of the weekly inventory data which is delayed by a day following the Labor Day holiday. Equity markets rallied yesterday, in particular Japan, having its best points rally since 1994 and China and the Hang Seng recovering after Chinese officials said that there would be ‘more forceful’ fiscal policy to boost economic growth. Elsewhere there were rumours, again, that Indonesia are about to rejoin Opec which one has heard before but might be true this time.
The retail gasoline price in the US is falling quite sharply, at $2.437 a gallon it is down another 7.3 cents on the week, $1.02 on the year and as I said on Monday the lowest Labor Day price for 11 years.
With 45 days on the clock the market was itching for news from Pantheon and today the company threw us a small fish. The VOBM#1 well has encountered a potential reservoir in the Eagleford/Woodbine sandstone and the company has decided to undertake a flow-test and have completed and cased the well.
A new, lighter and cheaper rig will be brought in for this and will be on site within 10-14 days. Timing here will be crucial and I dont expect the company to hurry the process, expect something in 3/4 weeks. What can one read into this is the big question, clearly it is very good news that a potential reservoir has been identified and the company are prepared to spend more dollars to test, but I suppose the key is, will it flow? The fact is that you can’t determine permeability by electric log and so a proper flow test will be needed. However the other key point is that the company would be unlikely to spend another million bucks if they weren’t ‘pretty damn encouraged’. Another interesting point is that when engineering the well, the drill team went to a larger casing in case they needed to complete the well horizontally, the fact that they have decided to take what they have through the vertical route is extremely positive in my view. The well has found the base of the Austin Chalk with gas shows and the top of the Eagleford exactly where they predicted which also inspires confidence.
Having completed this well the rig has already spudded the second well in the programme which is VOS#1, targeting not only the Eagleford/Woodbine sandstone but also the Austin Chalk gas which incidentally proved gas shows on the way down on VOBM#1.
Pantheon shares are up 7% as I write which is probably fair, if not a touch parsimonious. The company are saying ‘so far, so good’ which is a reasonable way of putting it. It looks like they have found a very decent reservoir but if it doesnt flow it might be plan B and the Austin Chalk which is not a bad backstop. If however it did flow, then it is bonanza time and that is before we know about the second well, although one can rarely predict market movements this would be one of the best and most profitable discoveries I have ever seen. I would conservatively expect the price to double on that supposition with more if VOS#1 were to come in.
A brief word on an old favourite as Alkane is, indeed I am well overdue a session with CEO Neil O’Brien to get up to date. The figures speak for themselves showing a rise in revenue for core generating of 45%, adjusted PBT up 166% and EPS +119%. The team at Alkane continues to do all the right things and are working in a market which is growing all the time, their deliverability in this space is second to none and I will report back as soon as I have met with NO’B.
Oil Capital Conference- Née Oil Barrel...
Oil Barrel has resurfaced under the ownership of Proactive Investors but if truth be told it is the same old formula under a different logo. Its a sort of good news/bad news situation but overall we are better off for having it. On the bad news front the Proactive team have not taken the opportunity to freshen up the rather tired presentation, they have also stuck to the parsimonious habit of booking a room too small for the number of attendees and they have kept the existing master of ceremonies. Ones mind reverts to the much better facilities at the Merchant Taylors Hall, with better room for out of conference discussions come to mind. The good news is that the companies all still appear to want to present if yesterday was anything to go by and the punters will still be attracted by a good card of presenters.
The line up yesterday was good, keeping to a strict timetable was never OB’s strength but it worked this time and we managed to hear from 7 companies, some of which I will mention, more later. Buru Energy reverted to Eric talking about the Canning Superbasin, I had not heard the story before and was most impressed. Many investors were looking forward to hearing Bahamas Petroleum and Commercial Director Eytan Uliel (Ex Dart) gave a very polished presentation which was better than anything I had seen from the company before. The bottom line though is whether the company can find a farm-in partner to finance what has always been an exciting and huge prospect. It was a shame that Simon Potter couldnt attend, lets hope that he was pressing the flesh with more important people who might come to the party. Madagascar Oil did have the CEO on the podium and I thought that new chief Robert Estill presented well, I wrote this company up after my meeting last week. Sound Energy as it is about to be called, have a good story to tell and few can tell it as well as CEO James Parsons who rolled up his sleeves and certainly gave the best presentation of the day with something for everybody, a well financed company with a vision for being a mid-cap Greater Mediterranean gas play from production through appraisal and and an aggressive potentially rewarding exploration portfolio.
A quick word on Genel as they have announced that they have received payments from the MNR for both Tawke and Taq Taq of $8m and $16.5m respectively. This is very good news and bodes well for the future. Also I took the trouble of checking my maths as the number didnt add up to the $30m I thought the MNR had said the company was going to receive. Apparently they corrected their preliminary statement saying that the $30:30;15m was for the fields, not the companies, so it isnt as bad as I first thought. I am meeting with GKP very soon so will have much to report back on on that front…
Needing to win to stay in the rubber England duly beat the Aussies yesterday and this time there was no jiggery-pokery from the visitors after Starc-Gate. The blog has always been a fan of James Taylor and now he has been given a run my confidence has been vindicated with a hundred last night. Interestingly some uninformed hacks (they are all uninformed if they dont agree…) have said that Taylor is fighting Joe Root for his place, I suspect that there is room for both and it’s other members of the team who should be more worried.
England duly beat Switzerland 2-0 at fortress Wembley although it rather flattered the insipid performance. Wayne Rooney rather rained on Her Majesty’s parade by beating Bobby Charlton’s record notching his 50th England goal, later this afternoon Brenda will celebrate 63 years and 7 months in charge somewhat more impressive…