WTI $48.66 +$1.37, Brent $53.38 +$1.04, Diff -$4.72 -33c, NG $2.97 -10c
A handy increase in the oil price yesterday as crude caught up with products who have now had their run, at least that is until Irma sweeps through…It is already category 5 which makes it one of the strongest and is heading for Florida and the south, fast. Oil picked up because refinery openings led to a swift demand for crude and with 11% of all US refinery capacity offline, margins rose sharply benefiting those who get get back onstream fastest. Pipelines also reopened and product got to market adding to the recent gasoline cargoes that have been landing in New York harbour. Last week retail gasoline got up to $2.68, more in places which was a rise of 28c w/w and 46c y/y, dependent on Irma that should come back post Labor Day.
Internationally, Russian and Saudi ministers announced that they had had talks about extending the treaty which is good and with the KSA already reducing cargoes and Libya remaining under pressure there is a chance that recent strength might remain but it is still tentative.
SDX has announced that it has raised $10m in a ‘massively oversubscribed’ private placing at no discount to last night’s close. Existing major shareholders MEA and Ingalls & Snyder, as well as pretty much all of the major institutions fought it out over what is a modest funding but gives the company great opportunities with the drill bit in coming months. In Egypt SDX are planning to drill two exploration wells on the Kelvin and Bragg prospects targeting 150 bscf of prospective resources at a cost of $2.5m each. There is significant potential here, the Kelvin prospect and South Disouq may be one large prospect with a continuous gas bearing section connecting them. In addition to this it may be possible to double the plateau rate from 50 to 100 MMscf/d which would make a huge difference to gas sales and achieve rapid profit payback, with this raise SDX will be fully funded for its programme until the end of 2018.
In Morocco SDX are, as predicted in recent notes, drilling two additional development wells at the Gharb Centre and Sebou permits respectively targeting 1.91Bscf in aggregate. These wells are in addition to the existing seven in the programme and are close to existing infrastructure for speed of startup and early cash generation. These wells, at $2.5m each which incidentally also includes connection to the customer, enable the company to benefit from allocating the relatively high mobilisation and demobilisation costs over 9, not 7 wells. As a result of this SDX is targeting an increase in gas volumes sales in Morocco by 50% over the next 2/3 years and it should be remembered just how high margin this business is.
Following this funding SDX is in an extremely strong position, funded through the end of next year with potentially significant, high margin projects with the addition of some very exciting exploration upside. At the risk of repeating myself the shares are extraordinarily cheap and should easily go back to and indeed break through the April high of 67.375p, it in itself would still be incredibly good value.
Two contract awards since yesterday have added over $1bn to the backlog, yesterday a $340m contract in Turkey for Gazprom and today one worth $700m from Sakhalin Energy for the onshore processing facility. Whilst PFC may have extra curricular problems it seems that at least for the time being it is business as usual.
Aminex has announced that the FDP for the Ntorya field has been submitted to the TPDC, this will enable the company to unlock the value here through one of the several options for gas monetisation. Details of plans for Ntorya-3 will be announced during Q4 2017.
I dropped into the Capital Oil conference yesterday and the new format appears to be going well, at least there was a good array of companies to listen to. Fiona MacAulay, CEO of Echo Energy updated the market with an erudite and interesting presentation which further adds to the excitement building around her South American gas strategy. With the first deal(s) done in Bolivia Fiona has a strong team around her and they are clearly looking at a number of differing assets for the portfolio. Expect plenty of news in the upcoming months and it is impossible not to notice that Latin America is ‘hotting up’ in terms of activity. Chairman of VOG Kevin Foo presents well and with a style that is impossible to resist, describing it as ‘spiky’ I thought the part that I heard was a really good analysis of the company. I have described VOG as historically misunderstood but from the feedback I am getting I suspect that investors are beginning to work out just how attractive the company is, whether you describe it as a full cycle company or maybe more realistically a utility in a market with huge demand it stacks up very well. Sam Moody, CEO of Rockhopper is in sparkling form at the moment as he was when I met with him last week, it is really looking like things are about to start moving with Sea Lion and he updated on all the current financing opportunities. With a detailed run through and analysis of their Greater Mediterranean activities as well RKH is looking in a much better space than for a while. Finally, Larry Bottomley gave an upbeat review of where Chariot are and pointed out that whilst the drill bit isn’t spinning at present his team are very busy indeed.
I have done three interviews this week and the links are below. On the Voxmarkets Podcast I covered Savannah Petroleum, SDX Energy, Premier and Empyrean Energy.
Yesterday I went on to Core Finance TV (formerly TipTV) and chatted through the performance of the bucket list so far this year. It is not as good as last year but to be expected, then the oil price had just troughed, this year was a peak. Nevertheless I discussed all 14 stocks which you can see on these two links.
Not much sports news but it looks like Muzza is out for the rest of the season with his hip injury.
Wales scored twice in the last 10 minutes and beat Moldova 2-0 with every chance of at least getting second spot and a play-off for the World Cup in Russia next year.