WTI $44.66 +34c, Brent $45.37 +36c, Diff $0.71 +2c, NG $2.10 +3c
Last week the bears had it, WTI fell $1.26 and Brent exactly $2 as fears of over supply, weak Chinese data, a strong dollar and poor labour data from the US meant that oil drifted in patchy trading. This week could be anything but for choice the bulls may have the upper hand. For them they see supply outages around the world becoming more meaningful as Canada joins Iraq, Libya, Nigeria, Venezuela, Brazil and others who have cut back production one way or other recently. Indeed the fires in Canada could mean more cuts and for longer, I am hearing around a third of production is shut-in, say 600/- b/d and may be for some time, with that number and the others mentioned it’s not difficult to see 1m b/d off the market, albeit of a temporary nature. Not of a temporary nature is the excellent article by Ed Crooks in the FT today, ‘investment cuts see oil discoveries hit 60-year low’. As you know I have been banging on about what is now the best part of $500bn worth of investments canceled or back-burnered, here Ed talks about last year’s discoveries of 2.8bn barrels of oil and liquids as being the lowest since 1954. With offshore spend apparently taking the biggest hit, then the medium and longer term projects will be the hardest hits, in the absence of fossil fuels being replaced there is only one meaningful and long term source…
Talking about Saudi Arabia, much is changing and the weekend found Oil Minister Ali al-Naimi replaced at the helm by Khalid al Fatih who was Chairman of Saudi Aramco so policy will probably not change per se. What is changing under MbS is that project 2030 means that lessening of dependence on oil and of course the potential flotation of SA in 2017/18 at a mooted price of some $2.5tn means that if I can use the expression, ‘nothing is sacred’.
More good news from Range this morning, one cannot dispute that the management are continuing to make deals that, should all go according to plan, and the guidance target of 2,500 b/d by the end of 2017 is achieved, then returns should be higher. Today they have announced that they have agreed with Petrotrin that they will reduce overriding royalty rates on the Morne Diablo, Beach Marcelle and South Quarry fields which will mean that the revised ORR’s will apply when the WTI price is below $50. At current production levels the impact will be minimal but will progressively increase at higher production levels with the revenue benefit estimated to be 7% at 2,500 bopd and the same oil price. The company say that this is ‘a welcome incentive introduced by Petrotrin at a time of sustained lower commodity prices’.
Friday afternoon and PFC slipped out the latest, and hopefully last, piece of bad news on Laggan-Tormore. The ‘final’ charge of £70m will be made in the 1Q 2016 results due to the appliance of liquidated damages, a disappointment but at least it closes this depressing and expensive chapter in Petrofac history.
It never rains but it pours and at the moment for Wood Group it is raining contracts, I hope they havent just cut their prices…Today it is a double contract win in Iraq valued at a total amount of $140m with one of the world’s leading IOC’s, as yet unnamed.
Kosmos has announced another significant gas discovery in its Teranga-1 well offshore Senegal. 31m of gas pay was found in a good quality reservoir in the lower Cenomanian objective and is apparently at least another 5TCF of gas. The find confirms that a prolific inboard gas fairway exists around 200km from the Marsouin-1 well in Mauritania through the Greater Tortue area as far as Senegal. The numbers are impressive, 5 wells, 100% success rate and 25, maybe 50 TCF of gas.
The Sunday Telegraph gave a couple of leading oil analysts a chance to express their views in an article about Premier Oil yesterday. One said that the company was probably not going to be ‘destroyed’ by its lenders and the other said that ‘May is a bigger month than April’ for the Solan field, you won’t get me arguing with those technically correct works of genius….
And Genel has announced that Paul Schofield is to be the new COO, he is another ex Enterprise Oil alumni and has been with Hess in Malaysia but I dont think we are meant to read anything into that, or are we….?
Firstly thank you for the many email reminders about the HubCap Stealers on Friday morning. I would like to say that I was so tired after the Boropa Cup that it left my memory but that was not the case! I had written in my notebook about the fine win that puts them into the final against Sevilla on May 18th but was distracted by a pressing matter and completely forgot, glad I have such a team of minders out there…
The football has thrown up some interesting last week of the season conundrums. At the top, after taking their eye off the ball, Spurs can lose 2nd place to the Gooners and after their 2-2 draw with the Noisy Neighbours they can lose 4th place to the red devils, two serious rivalries tested this week. Down at the bottom the Maccams actually beat Chelski 3-2 which leaves their future in their own hands, beat the Toffees on Wednesday and they stay up and the Magpies and the Canaries get the bird as it were.
In the boxing a rather predictable result for Amir Khan who got mashed by Alvarez and will now go back down two weights. Also good news for ‘million dollar’ Anthony Crolla who also won.