WTI $41.80 -13c, Brent $44.27 -2c, Diff $2.47 +11c, NG $2.77 -6c
Friday saw the oil price falling as soon as the better than expected non-farm payroll numbers came out and boosted the greenback. With the end of the week and the price all over the place short covering lifted the price so that the end of the day was back to opening levels. The rig count showed a rise of 1 unit overall to 464 and in oil was up 7 at 381 which showed the highest number of oil rigs since March.
UK Government Shale Wealth Fund-IGas/Egdon
The UK Prime Minister has announced that the Government intends to reward householders directly rather than through councils etc, thus ensuring success by local energy companies can specifically target residents. This fresh and direct approach has given impetus to IGas and Egdon who are natural winners should the UK onshore unconventional industry scale up and start to deliver meaningful quantities of gas. This is still far from certain at this stage although activity is picking up thanks to Ineos, Egdon and IGas, the latter of these I am seeing next week.
Sound Energy- A potential super giant discovery in Morocco
Sound has released the final results from TE-6 at Tendrara in Morocco and confirms a ‘significant gas discovery and a potential single gas column’ which in my view means that this is a significant structure which will be proved up after a couple more wells. The stabilised gas flow rate, post stimulation, of 17 m scuffs a day which is ‘significantly above expectations’ and represents a highly commercial rate. The scale of this discovery could be really huge, the company says that it is a material ‘regional’ scale and of meaningful for the Moroccan gas industry which probably answers most questions about the size of the find. It is worth noting that the pressures here are very positive, with flowing wellhead pressure of 207 bars and a reservoir bottom hole pressure of 420 bars making it an over-pressured reservoir by any matter of means. With the reservoir flowing naturally, (flow rate was 3x expectations), there will be no need for compression equipment for some time and they havent even gone to the secondary target in the Paleozoic…
The next well, TE-7 will be a horizontal one and might well provide much higher flow rates is scheduled for spudding towards the end of August, after which the ‘outpost’ well, designed to delineate the structure should go down before the end of the year.
The conference call which took over an hour and a half,(700+ on the line) gave the company the chance to expand on the announcement and of course jubilant retail shareholders to try and work out just how big this could be for the share price. The company, whilst being understandably chipper were clearly unable to answer the many questions about valuation but they have laid down some helpful yardsticks. The most interesting is that they feel that this discovery is worth around £1 per share for every TCF on a net basis and given that previous guidance of 5-10 TCF should this be a large, connected discovery may even be light, sent the shareholders scurrying for their calculators then the holiday brochures.
Whatever the numbers bring it looks to me as if Sound have made a truly transformational discovery here, both to them and a country that is gas short and which has been incredibly helpful in facilitating all the aspects of licencing, permitting and drilling. Indeed given how much has happened in such a short space of time might be a lesson for other countries. When such wells are drilled it is customary the suggest that it is better to travel than to arrive, as even with success, holders feel the need to take some profits whilst the future is contemplated, on this occasion the upside might be so substantial that this is not appropriate. Having said that, CEO James Parsons did say that there is nothing such as a risk free drilling programme although without much conviction, this to me looks like the real deal.
Ithaca announced on Friday that the FPF-1 had finished its trials and was headed for Stella where it will be producing oil, and revenue in three months time. The extra 16/- b/d will further strengthen Ithaca’s position within the UK independent oil companies and in my view a market cap of less than £250m is ludicrous for such a well run, well financed and profitable company.
There is a double Eni/Exxon whammy with Providence Resources thrown in this morning. It seems that Eni have sold 25% of their interest in area 4 in Mozambique to Exxon as it scales down its exposure there and brings in experience and muscle. At the same time Exxon has withdrawn from licence FEL 3/04 offshore Ireland and Eni has taken over the operatorship and others, including Providence and Repsol have upped their stakes in the block. The block contains the drilled Dunquin North and undrilled Dunquin South prospects.
President has announced that is has spudded the first of a three well programme of development wells in Argentina where the aim is to up production by around 1/- b/d in total. It is also drilling a well in Louisiana aiming for 250 b/d. A blog favourite, it looks like President is rewarding, albeit slowly, shareholders and the stock has more than doubled so far this year.
Going the other way is Victoria Oil & Gas who’s shares have nearly halved since the peak of 53p back in February. Today they have announced advisor changes which may indicate concern about a potential takeover which with a market cap of only £35m wouldnt surprise me one bit. ( See previous blogs re BLVN) Removing its broker and replacing with two new ones and keeping its Nomad is probably overkill but a belt and braces approach at this stage could be wise as the shares are too cheap.
And the residents of the Isle of Lewis got a nasty surprise this morning when they woke up. The Transocean Winner (Indeed!) has broken away from its tugboat and ran aground on the island. Whiskey Galore it is not but the grounding may trigger the semi’s demise as although it was earning $439/- a day up until last month it is old (1983) and due a five year MOT.
Team GB has won its first medals in Rio as Adam Peaty takes gold, and another world record and Jazz Carlin gets a silver, this puts us in 8th place in the medals table.
Elsewhere Muzza wins in the first round but Djoko goes out to Del Potro…
Elsewhere England staged a remarkable team effort to beat Pakistan at Edgbaston after having been over 100 behind on first innings, something commentators repeatedly told us only happened 3% of the time…
The Championship or whatever it is called now started at the weekend and proved those right who said that the relegated teams would find life hard going (Andy…) as Villa and the Magpies both lost although the Canaries started on the right foot by putting 4 past Blackburn Rovers. At Wembley the Foxes had a bad start to the season losing the Community Shield to the Red Devils although it is only a glorified friendly…