WTI $47.98 +$1.77, Brent $49.17 +$1.98, Diff -$1.19 +21c, NG $2.62 +4c
Last week was a down week for oil despite the sharp rally on Friday which has continued today. WTI fell $1.09 whilst Brent dropped $1.37 as the continuing strong dollar and worries about Brexit kept the fear factor alive and risk certainly off. Things all changed as on Friday the greenback weakened and the final of the monthly reports was analysed which showed that the IEA is continuing the theme of a growing increase in call on Opec crude later this year of 33.10 m b/d. The rig count number that showed a third weekly rise in units, this time overall by 10 to 424 and in oil up by 9 to 337,momentarily slowed the rally but some good buying overcame that. I continue to believe that the oil market will gradually tighten as the year progresses and that a view into 2017 and further may expose the now trillion dollar lack of investment by the worlds largest oil companies for what it is, a necessarily short-sighted action that could cause a spike at the very least.
More good news for Sound from Morocco as the logs look good, with a number of gas-bearing levels in the TAGI formation and net pay of 28m being ahead of expectations, this is ‘a very strong figure’. The next news should come when the operations are complete and the well test results are confirmed. However, excersising the option on the adjacent Meridja exploration permit and extending the licences must show considerable confidence in the asset as it in itself triggers the commitment to the second well. With such positive news from Sound and much more expected in-country and beyond, shareholders must be delighted with progress so far this year.
I suppose one has to comment on the article in yesterday’s Sunday Telegraph with regards to EnQuest although I have the suspicion that it may be all gong and no dinner so to speak. The article says that ‘according to city sources’ the OGA is considering action to support EnQuest regarding its ‘precarious financial problems’ and has set up a ‘low oil price contingency team’ to avert a ‘calamitous raft of insolvencies for the ageing industry’. I’m not quite sure why is is described as an ageing industry, as the North Sea is a relative youngster by world standards but on the other hand I would fully expect the OGA to be keeping an eye on all the companies that fall within its remit as a matter of course. The company has announced that ‘EnQuest routinely engages with the OGA and with the UK and Scottish Governments on industry matters, but is not involved in any company-specific discussions such as were implied by the article’ which seems to have done the trick and one can assume that guidance recently updated remains in line with expectations.
I was away on Friday so missed the AMER announcements which covered a number of bases. RE Paraguay, as a rank wildcat well I had nothing in for it and accordingly the valuation doesnt change, maybe one or two people had been hoping for more. As it happens, despite being sub-commercial I wouldnt say that the well is a total write-off, there is evidence of oil but with such low porosity rates it wont flow and the well probably needs to be fracced. I suspect that John Wardle hasn’t any intention of writing it off at the moment and may return with partners who have deeper pockets and a more acceptable risk profile for the technical issues presented here.
Elsewhere the news is much better as at Coati AMER has farmed-down another 20% to Canacol for $10.75m and pays for the drilling costs. When one remembers that Platino Energy was acquired by AMER for just $7m only this year it is a right royal result and reduces their own spend whilst keeping a powerful local partner.
Finally, at Platino the seismic confirms the strong development of the N sand in that area and the company is planning an appraisal and development plan accordingly. The drilling of the first of the two infill wells is expected to have started by tomorrow.
Again on Friday I noticed that Wood Group had bought Enterprise Engineering Services Aberdeen operations from the administrator, I assume that there was little or no money to change hands but if we are at or near the bottom it is probably a canny deal.
I dont cover Lekoil yet but hope to meet with the company soon, I have had a strong recommendation from an industry expert who believes that it has a strong story to present. Apart from an operational update today the company announce a refinancing of its existing $10 NIA with FBN Capital as well as a 2bn Naira facility – around $10m – also from FBN.
It is the Oil & Gas Council Africa Assembly over the next two days and I am hoping to attend as much as I can. With dozens of speakers and 800+ delegates this is fast becoming the Africa conference to attend. Companies include COPL, Shell, Far, Kosmos, Soma, Tullow, Seven Energy, Seplat, Total, Ophir, Africa Oil and Sound Energy to name just a few. Tomorrow I will be Chairing the Fund Manager Roundtable and have four exceptional energy fund managers to talk to.
Another massive weekend of sport, where does one start? Andy Murray became the first player to win Queens five times and now turns his attention to SW19…
The rugby was exhilarating with England taking a 2-0 series lead over Australia with one match to go although Wales and Ireland lost to the All Blacks and the Springboks respectively.
Dustin Johnson won the US Open after what seemed like a tricky intervention by the rules committee who docked him a shot but glad to see he still won, that would have been tricky…
And after an awesome series the Cavs finally beat the Warriors in the last game, bringing home the NBA title for LeBron James in more ways than one…
Lewis has a problem, a technical problem as the car is going wrong and they cant tell him how to fix it due to rules about radio transmissions, you couldnt make it up… Plenty of spooky stories around that the Merc team are trying to level the playing field a bit and helping out junior in the other car…
So tonight is the last night in Group B, Slovakia play England and Wales play Russia with pretty much all to play for, indeed it is almost more difficult to go out than qualify… After tonight’s games we still wont know who gets who next time until the 3rd places are known. Woy is apparently putting out a much changed side which is just what you didnt want to hear…