Oil price, President, SDX, Savannah, Cabot, Touchstone And finally…

WTI $65.06 -$1.83, Brent $73.44 -$2.50, Diff -$8.38 -67c, NG $3.02 +6c

Oil price

The usual pre-Opec meeting jousting is going on with a few other outside influences not helping matters into the bargain. Prices fell sharply when reports came out on Friday that an increase of production was most likely on the cards, whilst this may be correct I have yet to see a sensible report that says quite who might be able to satisfy the combination of increased 2H demand, falling inventories and fast falling supply. The only country that could do that is the KSA and they are not inclined to ruin all the hard work and btw it’s summer time if you hadn’t noticed in the Middle East.

It is noticeable that having scaled huge peaks, the differential has fallen back by almost exactly three dollars to a more manageable $8.38, this was mainly due to US inventory falls in recent weeks. It has changed a bit this morning due to one of those outside influences I mentioned, viz, the trade wars between the US and China have led to a tariff being put on WTI, LNG and coal by the Chinese authorities.

President Energy

President has an Argentina update this morning which is very specific in that it addresses oil production only at the Puesto Flores field which has now surpassed 2,000 b/d. Three previously producing wells have been successfully worked over, repaired and put back into production at a much higher rate than had been achieved before. The field is now producing 2,100 b/d which is an increase of over 50% in the nine months since acquisition and has come in below budget into the bargain.

The remaining workover programme has been increased from 7 to 8 wells (for the price of 7…) two of which are oil wells in the Estancia Viejo field. One of the worked over wells has seen production increases which achieve payback on investment in under 30 days, unsurprisingly significantly ahead of expectations. Finally, preparatory work is continuing for the extended gas well test at Estancia Vieja and is expected to commence by the end of July.

The speed, efficiency and success rate of the work on the acquisition has been outstanding and it has clearly been completely missed by the market who are obviously concentrating, incorrectly, on macro issues in the country. In the meantime the three wells have beaten production targets for the entire work programme and we are reminded of the ‘significant potential yet to be realised’ in this concession which in my view should see a share price target well in excess of 30p.

SDX Energy

SDX has announced a gas discovery at its SD-4X well on South Disouq in Egypt. The well discovered 89 feet of net conventional gas pay in the Abu Madi horizon with an average porosity of 24%. Reservoir quality was similar but thicker than in the SD-1X discovery well which bodes well. The well will be completed as a producer and then tested and all being well will be ready for production in the fourth quarter. The rig now moves on to drill the SD-3X appraisal well.

The company has also announced that testing the LMS-1 well is complete but at less than expected rates, this is apparently a temporary phenomenon put down to damage created by fluids reacting to the high pressure whilst drilling. The well itself had flowed a significant amount of gas during drilling so this is not considered to be anything but a temporary problem. Indeed, the reservoir section is not considered to be damaged and of ‘excellent quality’.

Oil shares have mainly fallen today as a follow on from Friday’s oil price fall so a modest fall in the SDX price is misleading I suspect. Either way the company is in a very strong position both in Egypt and Morocco, something I can ask CEO Paul Welch on Core Finance tomorrow…

Savannah Petroleum

SAVP has announced that Non-Executive Director David Clarkson has become COO, moving into an executive role. This is a perfect call for Savannah as his legendary experience in upstream project delivery in emerging markets will be utilised following recent drill bit success in Niger and maybe in the Seven assets as well.

Cabot Energy

Significant developments at Cabot Energy this morning as CEO Keith Bush and CFO Nick Morgan have been summarily sacked by High Power Petroleum who own 58% of the company and have installed their own CEO into that role. They have also sacked the Non-Exec Chairman Jonathan Murphy and another NED Iain Lanagan and will replace with their own choices…

Cabot and Keith Bush and his team had been credited by the market for having done a particularly good job in transforming the former Northern business which had been on its knees when they arrived. Apart from the inevitable massive cost cutting they axed peripheral parts of the portfolio and started the Canadian process which is presumably what  H2P want to take for themselves. In Italy, always an area of concern if only for timing, a shake-up of those assets and cutting a good deal with Shell also helped.

There are a number of choices for H2P from here and it would not surprise if they tried to keep the listing in order to maintain some sort of prestige, Wilde would have a word for it.  Having disregarded the existing management, executive and non-executive and 40% of the shareholders, H2P should be treated with utmost suspicion. More likely is, having used the Cabot management team to set up a commendable asset in Canada they have felt that now is the time to walk in and take it over on the cheap, which when you own 58% of the stock is what you are entitled to do I suppose….

Touchstone Exploration

Touchstone has announced a one year extension to their credit facility, at a cost of $150/- which seems exceptional value for an extended term, no change in coupon and a removal of tricky covenants. The race is now on to get production up and to be able to pay the payments when they eventually become due or to cut a deal with someone, all of which is possible…A smart move but to an extent a moving of deckchairs, I am hoping to catch up with the CEO soon, our diaries havent matched so far but keen to chat.

And finally…

The World Cup is providing plenty of surprises as found out by Argentina, Brazil and even the mighty Germany, the best match, maybe of the finals was the 3-3 draw between Spain and Portugal on Friday evening. Today sees Sweden v South Korea, Belgium v Panama and of course England v Tunisia tonight. Only this year Tunisia were only one place below England in the ratings so it won’t be easy…

In the Catalonia MotoGP in Barcelona, Jorge Lorenzo on the Ducati proved what a stylish rider he can be by leading Marc Marquez to the chequered flag. Whoever is in charge of contracts at Ducati must be rueing their double whammy by signing him for a reputed £12 million p.a. for a fruitless 18 months and now letting him go before back to back wins (He joins Marquez at Honda next year). Valentino Rossi proved his consistency by coming home 3rd.again whilst Brit Cal Crutchlow must be on every Factory Team Manager’s shopping list being the leading independent rider again in 4th.

The US Open was proof that somewhere like Shi**cock Hills might be a great leveller but when one of the most highly respected players in the world such as Phil Mickelson takes a two shot pen deliberately you know it’s all wrong. Tommy Fleetwood equalled the course record but lost by one shot to Koepka.

England went 2-0 up in the ODI cricket with a much better performance especially from Roy Butler.

And the rugby was mixed, pride of place to Ireland who squared the series by beating the Wallabies, decider next saturday. England were poor in most areas and lost 23-12 having scored two early tries again. Wales expectedly won against the Pumas but Scotland were beaten by the USA in Houston, were you there?

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