Oil price, Chariot, JOG, Soco, IOG And finally…

WTI $62.58 +99c, Brent $69.37 +36c, Diff -$6.79 -63c, NG $2.68 -2c

Oil price

More of the same really, Opec production holding at lower level despite Russian cuts being slower than expected as the Saudis rein back, the last quarter consensus seems to be around 30.4m b/d from the cartel which if continued would draw stocks in the 2nd Q.

The GDP concerns have also slightly lifted as Chinese data seems stronger and the US is not quite so dire as some thought. Indeed, to hark back to my old guide of the retail gasoline price it continues to rise, another 6.8 cents per gallon w/w takes the US overall to $2.69 and remember only at new year it was only 2 bucks.

The API stats were again mixed but back up my theory as crude built an unexpected 3m barrels whilst yet again products drew, gasoline was down 2.6m b’s and distillates 1.9m, let’s see what the EIA numbers show us later. In the meantime Brent is knocking on the door of $70…

 

Chariot Oil & Gas

A most interesting move by Chariot this morning as it announces that it has been awarded the Lixus licence offshore Morocco. Lixus brings a gas discovery, Anchois-1 with 307 bcf of contingent resources in gas sand A and gas sand B whilst gas sand C in the deeper potential adds another 116 bcf making 423 bcf in the vicinity. Anchois and its other satellites  are an amplitude-supported discovery and prospect inventory with remaining recoverable resources of >900 Bcf whilst the eastern area prospects add around 800 bcf.

So, phase 1 with four production wells gives production from the original 307 bcf at 70 mmscf/d over ten years and adding the extra 116 bcf to make 423 bcf would take production to 90 mmscf/d. Phase 2 adds another 674 bcf and 90 mmscf/d for twenty years. This makes this project highly appealing and potentially very profitable.

The only commitments at this stage are a seismic campaign at a cost of <$1m which would lead to an Anchois-2 appraisal well, currently scheduled for 2H 2020. With such a high percentage of the licence, (75%) it is clear that Chariot will seek to find ‘strategic partnerships’ for funding of the longer term process but this should be a good deal easier than in previous high risk wells. With a very strong gas market in Morocco with high prices and a supportive Government to cut down on fossil fuel imports, the potential pool of investors is substantial and brings in many new institutions.

With both these thoughts in mind, Chariot have Netherland Sewell completing an up-to-date CPR and will have a gas market analysis within 3 months. Overall this looks good to me, Lixus brings what should be a marketable discovery with lots of potential upside, more importantly it changes Chariot’s risk profile which needed doing. The company will continue with other parts of the portfolio but this brings a bit lower risk and more balance, maybe the right thing to be doing right now.

Jersey Oil & Gas

JOG has announced the Verbier appraisal test results which reveal that the well did not encounter the Upper Jurassic sands as anticipated. This result will commute the resource estimates to the bottom end of the previously published range, 25 m boe. There is obviously significant disappointment at JOG which is understandable but there is plenty to be getting on with.

The fact that the partners had the huge 3D seismic survey done means that they can integrate those results with the well data and evaluate the potential for further Verbier appraisal in particular to the north which is untested and also a deeper horizon below Verbier. With the Cortina prospect to be assessed, an imminent licencing round which should offer nearby opportunities and the area looking likely to have the potential to be a local development hub all is not lost. I imagine that the partners were disappointed and surprised in equal measure when they saw the result, a feeling I share but I remain confident that the excellent team at JOG will come back fighting and they remain well funded for the ongoing return to growth and will live to fight another day.

Soco 

Soco has announced the completion of the Merlon acquisition for which it is paying cash and shares. It increases production by a little under 6,000 b/d and I would expect that figure to rise. After the deal was announced I interviewed Ed Story and the link is below so you can refresh.

Core Finance CEO interview: Ed Story of SOCO

Independent Oil & Gas

I intend to write something a bit more detailed about the whole RockRose/IOG saga before long, in the meantime comment on today’s raisette. I am meeting with both companies in short order.

IOG has announced this morning the details of the Open Offer to shareholders with plans to raise £2m at 10p on a 3 for 19 basis. This portion of the recent raises is for ‘working capital and management expenses’ whereas the other raise was for the Harvey appraisal well 2H of this year and sundry gas field costs which I’m sure that ordinary shareholders will be pleased about. I have always been a big fan of these assets but also been concerned about the funding, this goes nowhere close to solving those long term problems, let’s hope they have Jim Ratcliffe on speed dial…

The money I assume that is being raised on this occasion will keep the company going until the farm-out process is finished and/or the raise of some £250m+ needed for the development of its gas assets has been completed. In addition the company confirms that  they are issuing 20.5m shares to LOG as part of a debt for equity swap, what I can’t understand is what on earth the administrator thinks it is doing taking shares worth 10p against an offer of more than twice that much, responsible, I’m not so sure but then it turned down £52m in hard cash….

And finally…

Last night the Cottagers finally lost their grasp on the Premiership, quite why they sacked the previous manager is as usual a total mystery but I’m sure that Scotty Parker will do the trick…Wolves also beat the Red Devils, again.

Tonight it’s the big return of Spurs to White Hart Lane, everyone is assuming they will every game at home..tonight it is the Eagles. Also Chelski host the Seagulls and The Noisy Neighbours welcome the Seagulls.

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3 comments on “Oil price, Chariot, JOG, Soco, IOG And finally…
  1. Richard Davies says:

    A tough call for the Seagulls tonight!

  2. Keith Quick says:

    When you meet with IOG, perhaps you could ask why they thought the company was undervalued at the RockRose offer of 20p, but were then happy to issue new shares at 10p. Keeps the Board members in jobs, but quite a few unhappy shareholders.

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