WTI $50.44 +61c, Brent $52.51 +65c, Diff -$2.07 +4c, NG $3.05 +1c
With the Opec machine working flat out to keep the kettle boiling, this time finding a conference in Istanbul worthy of a side meeting, the oil price is, at least for the moment only going one way. It will be interesting to see today’s figures to see what the hedgies have done this week, a smidgen of short closing perhaps? WTI has closed above 5o bucks and is better again this morning, as always never let the truth get in the way of a good story. Whilst on good stories I hope that you have also noticed the natural gas price which has now also changed its big figure, going into winter at $3.05 has a nice ring about it.
This is sort of between the commodity paragraph and the share chat, but as I have just remarked to the grand fromage at Oval Investments, Mr Johnny Sutton one must not forget that all this talk about weak sterling is manna from heaven for a lot of oil companies who quite often have costs in sterling and revenues in dollars so will be feeling even better when cutting costs. Taking it to another level there is very little not to like about investing in the majors at the moment and doesnt have to be too fussy about which one to choose.
Both yield over 7%, pay their dividends in dollars and have a good amount of costs in sterling. The oil price is by no means a given but the worst certainly looks over and I am quite positive on a medium term view. Agreed the shares have done well this year, partly on the oil price and partly on Brexit but from this valuation still seem to have much to go for. They have cut costs out of all recognition as well as capex and cover is ok if not super comfortable.
Finally the UK Government stepped in and approved Cuadrilla’s planning request yesterday with more to come I assume. Now this isn’t the time to go into long form arguments about it, but the sight of Jim’s big Ineos boat importing gas last week should show that we need the stuff and if we can prove that it can be done safely without scorching our earth it’s a no-brainer. A recent tour of Nottinghamshire going past above ground derelict mine workings and evidence of a once great industry made me wonder what the fuss was all about…
Sound has announced that it has completed drilling at TE-7 at Tendrara having reached a total measured depth of 3,454m. The company has successfully completed a 700m sub horizontal drill through the TAGI reservoir and has seen ‘significant’ gas shows from those sandstones. So, total vertical net gas pay of 28m, in line with TE-6 on a vertical basis and this being a horizontal well should increase the surface area contact and increase the flow rate. From here the key is the EWT and then the TE-8 outpost well where the objective is to significantly add volumes in the TAGI and possibly what would be a transformational investigation of the Paleozoic formation.
Sound are progressing well with their successful discovery in Morocco and this well has confirmed the potential of the TAGI sandstone discovery whilst leaving the door open for further significant opportunities. These are exciting days for Sound and investors visiting Tendrara next week should be most impressed not only with the scope of the operation but with the quality and depth of the management team that James Parsons has built up in recent months. At around £500m market cap Sound has rapidly become one of the largest stocks in the E&P sector and with an exciting range of drill ready prospects in Morocco and Italy continues to merit attention. In addition to the Morocco investor trip I hear that the company are holding their annual European investor conference this weekend, these key cornerstone investors will be delighted with their investments, particularly Continental.
Ithaca continues to deliver the goods and is a worthy member of the bucket list, yesterday it delivered 3Q figs and an operational update that beat market expectations. Production in the 3Q was 9,900 b/d giving an average of 9,550 for the ytd, neatly above the 9/- b/d guidance. FPF-1 is all hooked up and first production is expected in November, this is key, it will add 16/- b/d of production and to use an overused word, will indeed be transformational to Ithaca. That will get better when the pipeline comes into operation next year after the initial export by tanker. The increased revenue next year will dwindle the debt and give the company many opportunities to grow, nearby there are such opportunities which I expect IAE to take advantage of.
It is true to say that by the sounds of it if anything could have gone wrong with this well in Argentina, losing a 1000m of casing seems to have been only the half of it. The statement lists a number of oil industry services company household names, all of which I suspect got the benefit of a terse word or two from Mr Levine as fault after fault was brought to his attention. The rig has moved off to the neighbouring block to fulfill a commitment after which PPC will presumably have another go. The expected increase in production wont happen quite yet but all is not lost, the share price took a battering falling from around 11.5p to 6.5p which is bad but in the context of a very good run so far this year can be recovered.
England started their much publicised tour to Bangladesh this morning and have made a reasonable start, 153-3 as I write.
Last night saw Wales draw 2-2 with Austria and the ROI beat Georgia 1-0 in the World Cup whilst Gladden host mighty Malta at Wembley tomorrow.
The Japanese GP has started practice with Nico fastest, suspect Lewis needs help from someone from now on…
And in the rugby, with all due respect to the Quins v the Saints the game of the weekend is the clash between the Sarries and the Wasps….