WTI $70.38 -$3.73, Brent $73.40 -$5.46, Diff -$3.02 -$1.73, NG $2.83 +4c
Oil prices crashed yesterday amidst a welter of news, ironically not all bad which left traders to be frank, a bit shocked. Primarily it was the news that export ports in Libya were reopening but that was in the blog, the realisation that tankers were loading hit the market hard. Whether they get back up to over 1m b/d we don’t know but it was the sentiment. Also the extension of trade wars didn’t help as China retaliated by threatening US oil imports. Finally on the negative side there seemed to be some slippage of the hard line case on Iranian sanctions as Mike Pompeo seemed to suggest that there may be some special cases.
On the bullish side the Opec report indicated that 2H of this year would remain pretty tight whatever the supply situation is, an argument with which I concur, it’s next year when supply potentially becomes a problem. Finally the EIA reported a huge stock draw of 12.6m barrels, way in excess of forecasts and primarily due to higher than expected imports. This morning WTI has rallied by 66c and Brent by $1.43 after more contemplation of the news.
A trading and operations update from Prems this morning but little to get one’s heart beating much, production was in line with expectations, Catcher is going very well offset slightly by early summer maintenance work at Huntingdon and Solan. Guidance of 80-85/- boe/d is unchanged with more maintenance but recent run rates of 90/- boe/d keeping the number up. Tolmount has received approval by the Prems board and should be partner approved in Q3.
In Mexico the new Government appears to be transitioning quite smoothly with no sign of any reversal of policy and PMO has a team down there at the moment. Assuming no change, all is in train to progress with appraisal of Zama 4Q of this year and with regards to the new licences seismic work is also expected to start later this year.
Sea Lion progresses with much work being done, the recent appointment of Standard Chartered indicates that the process is very much under way as is formalising contractors LOI’s and Governmental contributions likely to take ‘most of the year’ as expected.
2018 forecast operating costs remain at $17-18 boe and all other expenditure remains at $380m in line with guidance. Debt reduced to $2.65bn in the period and is expected to fall by $300-400m by the year end and the covenant leverage ratio is forecast to fall to 2.5x EBITDA by end Q1 2019. All in all things going according to plan for Premier with an exciting line up of developments to look forward to this year and moving forward.
Things at Ophir would be going quite well if it wasn’t for Fortuna and the resultant departure of former CEO Nick Cooper. No replacement has been found although there is it seems a short list of ‘highly experienced and qualified external candidates’ has been identified. Given that the Fortuna licence expires at the end of this year and still no financing options have been concluded it is not surprising that the shares are stagnant although there is plenty of built in upside should this change.
I had become more optimistic about Ophir at the beginning of the year as I felt that the worst was behind it but absence of financing for Fortuna made my bullishness premature, this is the key to Ophir’s fortunes for the time being which is a shame as I think that the Santos deal is a very good one indeed.
Reabold announced yesterday that it had received the CPR for their Romanian assets which confirm previously announced contingent resource estimates and exceed previously announced prospective resources estimates. The company expect to spud later this year and consider the assets to have ‘extremely attractive economics’.
Europa Oil & Gas
EOG has updated its prospect inventory for the FEL 1/17 and 2/13 licences in the South Porcupine Basin offshore Ireland. It has also launched a farm-out process for three licences, FEL 1/17, 2/13 and 3/13 ‘which together are estimated to hold gross mean un-risked prospective resources of 4.3 billion barrels of oil equivalent’.
CEO Hugh Mackay said that the ‘PSDM reprocessing of our proprietary 3D seismic data sets over our South Porcupine licences has transformed the prospect inventory’ so with the farm-out process now underway the proof of the pudding, so to speak, will be in the eating…
The excellent run by the English team in the World Cup ended last night as they visibly ran out of steam against an improving Croatian side. Still much credit must go to Gareth Southgate who has indeed restored some faith in football.
On the subject of football I notice that the Boropa Cup is back and Rangers play tonight at Ibrox in the Qualifying preliminary round, first leg against Shkupi who finished fourth in the Macedonian First Football League last season, never an easy game, Shkupi….
Nor was it for Roger Federer who thought he was coasting to an easy victory against Kevin Anderson yesterday before realising that he was chasing the game.