WTI $44.90 -$1.39, Brent $47.10 -$1.22, Diff -$2.20 +17c, NG $2.91 -1c
The reports from Opec and the IEA in the last couple of days have been bearish for the oil price but it has been fairly resilient, under the circumstances. With Opec saying that non-Opec supply was stronger than previous forecasts to the tune of 190/- b/d 17 on 16 giving them a surfeit of supply over demand of 760/- b/d and the IEA taking the knife to the demand numbers forecasts of a balance next year, let alone this year are fading fast. Having said all that, the API came in with a crude oil build of 1.4m barrels after the close last night against the whisper of +3.8m and this morning oil is up around 40 cents thus hardly being affected by the news…The EIA stats tonight will be important not only to frank last nights data but to confirm that last week was not an aberration caused by Hermine.
Interims never really help, things change so fast that interpretation of the last period is usually superceded by events since which have been announced as news. Resource estimates at Sea Lion have improved again and now RKH has a 2C number of 517m and a 3C number of 900m which is highly compelling especially when compared with recent offshore discoveries that have had plenty of coverage. This is even more compelling when you look at the Sea Lion cost reductions where capital investment expectations have fallen to $1.5bn gross and a break even oil price of around $45. If you look at the numbers for say, Senegal, they are nowhere near as attractive but pre-FEED at Sea Lion is looking very competitive indeed.
Rockhopper had $65m of cash at the period end, rising to $75m at 1st of September as bills were paid and progress was made on insurance claims, with more to come. The Ocean Rig claim remains ‘absolutely refuted’ by Premier and Noble and RKH are only liable for 40% of the Premier slug, these claims seem highly over inflated and smack of a rather desperate attempt by the owner to come to a quick and dirty settlement if that were possible. With the Beach deal completed the company expects to be producing around 1,500 boe/d across the group by the end of the year which is handy as operating cash flows are expected to ‘broadly cover the group’s overheads going forward’.
Finally it is worth noting news just out from the Foreign Office following a visit by Minister Sir Alan Duncan to Argentina. In a remarkably open and welcoming statement both Governments have agreed to ‘an improved relationship through closer co-operation on areas of mutual interest including trade and security’. The Minister met with President Macri and many other senior ministers and the mood from both sides is clearly that Argentina is very much ‘open for business’. In the talks they agreed to work towards removing restrictive measures around the oil and gas industry amongst others in the South Atlantic and the Falkland Islands. Obviously a really significant step in relations between the two countries and one that can only help make a huge difference for all the parties involved.
It looks as if Andrew Austin has got himself his first deal, shortly after suspending the shares this morning it was announced that talks are in progress whereby RockRose buys from Maersk a 7.43% stake in UK onshore field Wytch Farm, 5.16% of Scott and 2.36% of Telford fields in the North Sea. This is a reverse takeover under panel rules and more information should be forthcoming soon, at a guess it looks like around 2/- b/d of production to start him off.
Falcon Oil & Gas
Rather as expected things are going operationally very well for FOG but politically sour. News from the Beetaloo W-1 well is good with gas bearing shale of 570m, proving the extension of the Velkerri formation. With such good operational results it is a shame to see another part of Australia looking like it might declare itself closed for business to the oil and gas industry after the Northern Territories PM announced a moratorium on fraccing. Obviously FOG is carried and has cash in the balance sheet but this is if not unexpected, further bad news and will at the very least, delay this unconventional play for which I had so much hope.
Cross Tom is a man of mystery and as few words as possible, today PMG has announced that it has increased its stake in the Perth and Dolphin fields to 60.05% which increases 2P by 19%. The mystery is that there is no data on who it has been bought from, or for what cost but the shares are up 13% all the same, its called pulling power. I’m assuming Atlantic, because it works especially if Faroe is involved. Watch this space…
Chariot Oil & Gas
With a market cap of some $9m less than its cash and a conservative management team ensuring that few if any risks are taken in this ‘lower for longer’ environment then what can go wrong? Chariot’s survival instincts are laudable and they have some seriously high beta prospects still in the portfolio to drill if and when they become economically sound and when cash is freer, in the meantime it looks like just three wells to look forward to in the next two years. This includes the exciting RD-1 well where they are carried by Eni offshore Morocco and capped just to ensure no comeback of any sort. So, not much can go wrong and there are some faint signs of excitement in what is an interesting if mainly dormant portfolio, conservative is good but doesnt always make for returns which are clearly quite a long way down the road.
Yesterday I had the opportunity to interview James Parsons, of Sound Energy on my CEO chat on TipTV.
Vox Markets podcast
On Monday I talked to Justin Waite about Hurricane and Pantheon, in case you are interested here is the link.
A mixed bag of news in the Champions League last night as the rain fell on the Noisy Neighbours pushing them back until tonight, the Gooners getting a good point in Paris and Celtic, well Celtic what can we say? Missing a pen that would have made it 1-1 they lost 7-0 against Barcelona for whom Messi got a hat-trick and others joined in. After the match Brendan Rodgers said that it was ‘no embarrassment’ and he is clearly waiting to get them back to his place. Never mind Brendan there is always the joy of the monthly Manager of the Month to wait for…
Tonight sees the Foxes debut in the Champions League at Club Brugge while City go again and Spurs host Monaco.
The GB Paralympic team has already passed its London gold standard and with more to come in another exciting few days.