WTI $49.56 +39c, Brent $52.70 +56c, Diff -$3.14 +17c, NG $2.88 +6c
You can’t keep a good thing down and crude bounced again yesterday and is up again in early trading today. Interestingly Brent is the poster boy, now three bucks above WTI and in backwardation for the first time for a while, someone believes that the Saudis mean what they say…
The EIA inventory figures helped, a crude draw of 6.5m barrels validated the API stats and were more than twice the 2.4m guess from the teenage scribblers on Wall Street. Refinery utilisation was up yet again, now at over 96% with throughputs of over 17.5m b/d, the highest since September 2005. Offsetting that was an unsurprising build in gasoline stocks of 3.5m which was disappointing although we are slowly inching towards the end of the driving season. Distillates however got everyone out of jail, a draw of 1.73m was better than expected and showed that product demand in this area is very strong still.
The IEA also produced their STEO, always a good read and is now more bullish about oil for the first time in a while. They have supply and demand neutral in 1H 2017 but expect a call on Opec of 32.88m b/d in the 2H, up 720/- half on half and should adherence be high then there is a modest opportunity for optimism.
I had a long awaited meeting with Steve Bowler, CEO of IGas a few days ago and things are most definitely looking up for them and I would wager the UK hydrocarbon industry in general. IGas completed their refinancing and fundraising in April and are now a much more well balanced and tidy beast. They are cashflow generative at current prices after a rigorous attack on the cost base and have a carried potential programme of up to $230m which is not to be sneezed at. With a solid conventional portfolio delivering at present and with potential upside, they also have the more public face, a substantial non-conventional asset base where activity is very much ongoing.
I am expecting activity from them at Springs Road and Tinker Lane towards the end of the year and they are not alone. Cuadrilla have a rig on site at Preston New Road whilst Third Energy and Ineos are becoming more active, the latter having already taken out an injunction to prevent trespass and harassment and much more at their sites. So it is fair to say that after a number of false starts the UK shale industry has momentum, concerns about importing gas from Russia and Qatar are valid and need to be addressed. The world is appropriately excited about electric cars and the good they will do, remembering that when they are plugged in the power they use doesnt come from thin air may be worthwhile bearing in mind…
IGas is now in a good position, it has applied to test the Pentre Chert formation at its historical Ellesmere Port well, here there are possible deeper CLS shales in the south with South/North up-dip migration. Previous well information suggests that geometry allows for an accumulation of conventionally trapped hydrocarbons within the Pentre Chert. This should lead to a better understanding of the potential volume of gas and its viability. With new shareholders and the finances on a sound footing (and a huge carry) IGas are now in a strong position to take advantage of the potential for conventional and unconventional gas resources in the UK.
Q2 results from WRL this morning which are as usual not that helpful being historic, the excitement at this company is going forward. Gas sales and revenues are down on comparables whilst losses are up, capex is down but cash is better at $3.83m after the fund raise in May. After the rainy season in Q2 gas sales are rising and with guidance remaining at 40-60 MMscf/d that should be on target as I understand they did 70 scuffs at Mnazi Bay yesterday.
The struggle remains getting paid, TPCD and TANESCO are poor payers and the company is reliant on cash flow for managing working capital which is not ideal. The farm-out discussions continue but they are positive on that and an appraisal well will be drilled regardless there. Despite the difficulties I remain positive on WRL although the ever present problem of getting paid by Government agencies must put off investors, will these countries never learn?
Premier Oil has announced that Roy Franklin is to succeed Mike Welton as its next Chairman, this is excellent news on many fronts. There are also two new non-Execs in Dave Blackwood and Mike Wheeler who replace Joe Darby and David Lindsell, also good news.
Quadrise Fuels has announced some cost reduction measures and a directorate change. I met with Chairman Mike Kirk a little while ago and was very impressed but market changes must be making things very difficult at the moment especially after the Maersk decision. I am not a big fan of not having the CFO on the board but needs must here and the man moving out stays on as a non-exec which is helpful. Technology businesses like this are hard going, with the cost cutting across the board I hope that QF stays in the game.
And Phoenix Global Resources has its first day of dealings today following the Andes Energia back-in, ticker is PGR and it will be interesting to see how trading goes with such minimal free float.
The HubCap Stealers fans must be biting their nails to the core, Barca came back with 100m Euros yesterday for Coutinho which was turned down but should the player start making noises that he would like a move it will be game over…
Yesterday at the tummy bug games Makwala won his rearranged heat easily enough and got through his semi final too, now grumbling that he couldnt do the 400…. Sir Mo Farah got through his heat and will be in the final on Saturday night, will that be the next or only other medal for team GB?
And today sees the start of the US PGA, the fourth major at Quail Hollow in Charlotte, after next year the tournament moves earlier in the season leaving ‘the’ Open as the final major of the year.