Oil price, Ascent Resources, IGas, Premier Oil, And finally…
WTI $53.17 -61c, Brent $55.52 -72c, Diff -$2.35 -13c, NG $3.39 +1c
Still very quiet with no obvious signs of breaking out either way. Looking at the CFTC numbers on Friday the money managers have added to their long positions again, up by 24m barrels in WTI which is as high as they have been since 2014…The other positive is that reports are still coming through that the production cuts are being adhered to, as we hit the end of the month reports will start coming in, corroboration would be good.
The bears are still working on a non-adhesion to the treaty and the continued rise in the rig count showing that the current rate, which is the highest since November 2015, will lead to a huge rise in US shale production thus wrecking the deal, I think US production will inevitably rise but won’t stymie the deal.
News this morning from Ascent where we have been waiting for the result of the flow test at Pg-10 at the Petišovci project in Slovenia. The result ‘exceeded management expectations’ which isnt always a good guide until you know whether you are dealing with an optimist or a pessimist but I have put a call into the company to find out, I think the person I spoke to thinks I am mad. Either way, until I have guidance I think that this is a good flow rate and would, I suspect be a decent step forward towards the ever present off-take agreement.
I have, since those words, spoken to Colin Hutchinson and feel that the 8.8m number is genuinely good, being higher than the 2011 number after which time anything might have happened. Indeed having to perforate the tubing meant that I suspect that anything much north of 5-6/- mmscf/d would have been acceptable. The company is eager to start selling gas and hopes to be under way by the end of this quarter all being well. Considering its past, this marks a most interesting situation for Ascent and with phase one looking good, the upside for phase two is also worth looking at.
Looking at the statement from IGas this morning it looks as if the company has been forced to make a payment to bondholders as it appears to have undershot its oil and gas investment last year by $2.3m. This offer is open until March 1st and will obviously reduce the cash in the company and have a modest restriction on activity.
I took the opportunity the other day to spend a bit of time with Tony Durrant as a catch up and also so he could correct any errors I might have made in my recent podcast. There is little doubt that whoever you talk to that Solan has been a huge disappointment and the company are lucky to have been able to carry the passenger as long as this. The company have spent ‘far too much money on it’ and whilst the P1 well is producing 10-11/- b/d the P2 well has significant water injection problems and is doing 1-3/- b/d and the company needs to find a solution. Unfortunately there isn’t an obvious one around the corner, a frac job might be possible when the weather improves and a sidetrack well is a possibility but unlikely before April 2018. Putting in a call to Dr Trice who is nearby is a possibility but a long shot in my view.
On a much more positive note it seems that Catcher is up with, if not ahead of events and is planned to leave Singapore in late June/early July and will take around 45 days to get to the North Sea and first oil still expected in the 4th quarter. With work going better than expected the company are already talking about de-bottlenecking and the current plan for 50/- b/d could be nearer 65/- b/d if the FPSO can handle it. Also continuing to impress is Tolmount which was definitely sold too cheaply and will actually take much more investment than first envisaged, indeed one can expect a farm-down of around 20% at some stage. There is added value to Prems due to their tax losses and here one might find a potential buyer amongst the growing army of infrastructure funds who could make it work for them.
The market has taken the view that Sea Lion is on the back burner, especially with the bank debt being renegotiated at the moment. TD said that they were ‘digging their heels in’ with the banks to ensure that they had the flexibility to go ahead with both this and Tolmount but it too needs a funding package. They need to find a partner, same old, same old, but with the relationship with Argentina being re-kindled more doors should be opening all the time. Indeed it in this day of flexible financing it could be that a service company might find it interesting, after all there are 20 wells in phase one and 30 in phase two and over ten years of work for somebody. Given the falling industry costs and that at $55, margins are higher than with oil at $110 one might have expected some action here, after all developments of such size are creating vibes around the industry elsewhere. Elsewhere there are exciting possibilities in Mexico and with the Tuna project both of which are considered by the technical department to be most interesting.
Finally the renegotiation of the debt which has taken way longer than the market expected and I suspect longer that the company did too. TD says that a 50 page term sheet has become 110 pages but I think that the end may be near, despite wobbles in the process partly as stories of banks bailing out swept the marché. After the lawyers have finished it goes to the banks, private placees, convertible holders and private retail bondholders who must surely now p*** or get off the pot. This whole process has been a considerable frustration all round but should now be signed and sealed and banks should work out whether they want to be in energy financing or not.
It has been a long year for Premier and it’s not quite over yet, once the financing is sorted they only need to fix Solan, deliver Catcher and fund Tolmount and Sea Lion, after all if they dont where is the growth going to come from?
The FA Cup always throws up surprises but nowadays minnows who win can have the gloss rubbed off as stronger teams field weakened sides. Dont tell that to Sutton who beat Leeds or Lincoln City who beat Brighton. Indeed the Hubcap Stealers lost to Wolves and both Watford and Hull City Tigers lost to Championship sides Millwall and Fulham respectively. Oxford will be happy to be in tonight’s draw having seen off the Magpies who also dropped almost all the first team and Spurs managed to revive Fergie time as the fourth official held up the board that said ‘until Spurs score’ as they eventually beat Wycombe Wanderers 4-3. The Gooners, Red Devils and Noisy Neighbours went through to the draw with ease.
And although it is no excuse, competent umpiring would surely have made a difference in yesterday’s T20 but it makes Wednesday’s decider much more fun!