WTI 45.20 -$1.12, Brent $47.98 -60c, Diff $2.78 +52c, NG $2.36 +10c
With the continued strong dollar and only signs of further build up in stock levels the pressure is firmly downwards at the moment. Strikes in Brazil and shutting in in Libya are temporary, monotonous pumping from most producers is, at least for the time being less so. News yesterday that the Saudis had cut their prices to US and EU customers didnt help and the interesting thing about that was the EU bit, not normally a key client, Europe has clearly got onto the radar screens of the marketing department at Aramco…
Today is non-farm payroll day and the reason why the greenback is so strong, a number over 200,000 will fuel the flames of the December raisers and be another downward pressure on the oil price. Finally, it is worth taking a look at the EIA gas report just out, they note that the winter natural gas strip prices (4 contracts from Dec 15-March 16) average $2.419 which is 40% lower than the five year average.
A disappointing result in the end for Loto-2 with water cut in both zones and mobility problems. Further testing and analysis will be needed but this should be taken in the context of the whole Petro Dorado deal which not only brought the company CPO-5 but the Tacacho contract and tax losses worth $20m to AMER, all for $6m…The well was drilled very cheaply, about $2m all in to Amerisur and continued proof of how well the guys on the ground work operationally.
The key focus however for AMER is the upcoming opening up of the interconnector pipeline between Ecuador and Colombia which is on track for the end of this quarter. At this stage the company will be able to increase its production by drilling more wells and reinstating those shut in earlier this year. More importantly the costs of distributing the oil will fall, dramatically transforming the economics of the company, indeed if they persuade other companies to share the pipeline then you have another income with negligible costs.
Just as I was about to complete a valuation of the last well, news comes in that the current one, VOS#1 has encountered an oil and gas bearing zone at 12,600 feet which has flowed hydrocarbons. This is a separate and completely independent zone to the primary and secondary objectives which were the Eagle Ford/Woodbine and Austin Chalk respectively and is very exciting news indeed. The well intervention operations needed at this stage, which also involved flaring gas, will mean that the well will be around 14 days longer to complete than previously expected but for all the right reasons. It would not be right to assume any valuation for this new zone yet but it must frank some of the previous numbers, I am happy therefore to put out a number of 200p as a reasonably conservative yardstick for Pantheon, you can apply a discount to that for this well but if it comes in that discount will evaporate.
Halliburton came in with the long-awaited issue to part finance the Baker Hughes acquisition, $7.5bn of senior notes being announced. Given that this should take away some of the risk of the deal not taking place, at $49.88 Baker Hughes stock appears to be a cheap way into HAL, assuming that’s were you want to be…
So, it didnt take long for Sam Burgess to decide to go back to rugby league in Oz and I cant say that I blame him after his treatment by the RFU, correctly described this morning as a ‘laughing stock’. In the Premiership I guess the key games are the Saints v Sarries and the Chiefs taking on Leicester.
Its the first round proper of the FA Cup this weekend and may non-league clubs will have their chance for a day in the sun, I suspect that Salford, live on TV tonight will have more fans than usual..
In the Premiership the big game is the North London derby with Spurs visiting the Gooners who until they played Bayern on Wednesday were full of confidence…Chelski go to Stoke without the Special One who misses the trip and under new management Villa have the easy task of taking on the Noisy Neighbours. Elsewhere the HubCap Stealers are on a roll and host the Eagles and the Baggies go to the Theatre of Dreams.