WTI $47.72 +$1.51, Brent $48.97 +$1.14, Diff $1.25 -37c, NG $2.03 -7c
Things are becoming a bit clearer in the oil market as I have been discussing in recent days. My scenario that oil will be supported later this year and into the next three years, primarily as $500bn + of capex has been withdrawn from the market by the short-term behaviour of the majors, remains intact. Add that to the loss of other expensive crude and yesterday’s announcement by the EIA that US shale is shutting in faster than expected and we can see the emergence of a perfect storm in the oil market. What has now happened, and even the vampire squids have worked out, (see yesterday’s blog), is that short term outages are slowly making inroads into the massive oversupply keeping storage tanks full. When the aforementioned squids went to a $20 forecast they used as their main premise that the storage tanks were overflowing, at the moment they are not, recent outages may have been a get out of jail card but we dont look at such gift horses in the mouth do we?
Overnight news from Canada is for more, not less, outages as fires sweep through more oil installations and companies are withdrawing further personnel. Nigeria and Venezuela both get worse and Libya isn’t going to add barrels anytime soon whatever they say, in the US watch out for the inventory stats this week, if stocks were by any chance to fall in the fortnight before the driving season, those squids could be served up with a nice Chianti…
RKH has announced an independent reserves audit by ERC which confirms that the Sea Lion Complex, now no longer just a few wells, has audited 2C resources of over a half a billion barrels which given the auditors conservative workings is very positive indeed. With a STOIIP of 834m barrels net with masses of upside makes this growing asset base particularly exciting for the long term. In addition the auditors have had a stab at putting a number on the Isobel Elaine area even though, for technical reasons there is a notable lack of data for them to have worked with. Using their own tools they have come up with evidence of discovered STOIIP for each of the fans and contingent resources for the Isobel Deep fan where significant oil was recovered to the surface.
The outcome makes very encouraging reading for a potentially world class development, Sea Lion has audited 2C of more than 500m barrels and Isobel and Elaine have very achievable numbers that must also be in the 500m + region. Both these numbers are conservative and with the drilling success the consortium had last year there must be significant upside.
If you were to assess the net 2C that Rockhopper has announced, and compare to what is an admittedly difficult peer group to assemble, RKH starts to look incredibly cheap to others and although the market worries about the timing it may very well make the short-term-ism of the majors talked about above look odd at the least. With many interested parties in the playground and a development that at least to start with will be using lowest ever industry costs, what might a billion + barrels and 85/- b/d + be worth at the end of the decade? Finally it is worth mentioning that the company is growing in a significant way outside of the Falklands. The Greater Mediterranean strategy is keeping to company active and honest as they look for new assets and production with the revenue that it brings. The area will be producing $12m of revenues and has already seen a doubling of reserves, keeping the G&A paid for by this arm of the company and with such good news from down south is making RKH an all rounder of merit.
Range has announced that the dispute with Lind AM is over which is very good news as this has been one of the major overhanging problems investors worried about. The company has paid $325/- and Lind keeps the 38 million shares and this mutually acceptable agreement seems to be satisfactory for both parties.As I have said here recently, Range is developing a strong position, it is sorting out the waterflood developments, has an interesting drilling programme with new kit and is well funded, I look forward at some stage to seeing the assets on the ground.
Good but not unexpected news from PANR this morning as they announce the spudding of the VOBM#2H well in Polk County, Texas. Expect this to take around 55/60 days subject to testing etc, meanwhile the fraccing of VOS#1 is under way and we may hear more from this sooner. With revenues imminent and an exciting drilling programme upcoming this should be another good summer for the company, my 200p target may well be on the low side.
The company has announced that the drilling at the NW Gemsa field in Egypt has been completed and that the second well is now on production at a low rate.Sounds good if they get paid for it…
Sheffield Wednesday are in the play-offs and may now be in the Prem next year, lets see what Hull City Tigers think about that…
And its the Red Devils v the Cherries take two tonight after the debacle of Sunday. The bloke with the fake bomb was on the telly last night and to think that the security of somewhere like the Theatre of Dreams is in the hands of such a nincompoop is quite astonishing.