The Oil Man: Oil price, BP, Sound Energy, Falcon Oil & Gas
22nd October 2015 13:09
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WTI $45.20 -$1.09, Brent $47.85 -86c, Diff $2.65 -51c, NG $2.40 -7c
Oil traded back to the bottom of its recent range yesterday as the EIA inventory stats disappointed the market. Expecting 3.7 million barrels and having seen the API come in with 7.1 million the actual of +8 million barrels was poor. Crude stocks are still 26% ahead of this time last year and 23% above average… Refinery utilisation rates fell again, down to 86.4% but it could have been worse as product stocks drew and the EIA in its report suggested that 3Q gasoline demand would be a healthy 9.3m b/d.
The OPEC "technical" meeting was, unsurprisingly, a waste of everybody's time with output cuts not making it on to the agenda as they discussed long term investment policy. Not to be put off by this, Venezuela immediately called for a "Heads of States from OPEC and other producing nations" Summit to be held in November ahead of the Dec 4th OPEC meeting, we shall see…
BP
Beep's did get the CNPC deal that we had all expected although not quite in the format that many had predicted. There will be a framework agreement, always good to have, including "strategic cooperation" including shale gas exploration and production in the Sichuan Basin. Also there will be deals on fuel retailing in China as well as other international partnerships including selling 1m tons of LNG pa worth $10 billion according to .
Sound Energy
News coming thick and fast from , today it is confirmation that the Heads of Terms has been signed in respect of Sidi Moktar, onshore Morocco . As previously announced this is an existing gas discovery with exploration potential and continues Sound's Mediterranean expansion. Combined with yesterday's Schlumberger deal the management at Sound are certainly not letting the grass grow under their feet.
Falcon Oil & Gas
Really good news this morning from where they announce a cracking gas discovery on Amungee NW-1.This is confirmation of the Middle Velkerri formation east of the first well, falling in a highly prospective gas mature depth window. There appears to be plenty of pay and serious gas shows mean that, much more importantly, the partners (Origin and Sasol) are bringing forward the drilling of the first horizontal well by a full year. Falcon are still carried on this and as CEO Philip O'Quigley states "is a massive endorsement of the potential prospectivity of our Beetaloo acreage".
Although still early days this is very encouraging for the company, which even after today's mark up still has a market cap of less than £50 million, for a company with $10.5 million of cash, no debt and carried on a nine well programme through until 2018 looks remarkably good value.
Far Ltd
Readers will know that I have been a big fan of Far, and indeed the other partners in Senegal, Cairn and Conoco, since the discovery was made in 2014. Far is clearly the most direct way of playing the upcoming appraisal programme and it is not surprising therefore to see a funding from the company which has closed today, well oversubscribed. The company raised A$40 million via a placement of A$25 million and an entitlement off of A$15 million and my Aussie broker contact tells me that even the strongest supporter of the company was scaled back.
Only recently, as I mentioned a few days ago, I was lucky enough to be invited by to a detailed presentation of the upcoming campaign in Senegal. There is no doubt that the potential upside here is huge and the results from the first well may end up being a very Happy New Years Eve gift…
Sundry
The last couple of days have seen intense gossip about the flow testing of VOBM #1 well in Polk County East Texas. Today the company has put a holding statement out as the share price was once again on the move, up a short 12% at the close. I get the impression that the company don't want to release anything yet as by the looks of it testing is far from over which in itself is a very positive sign. With the next well already drilling and with two prospects to go for there appears to be much upside still in PANR…
It seems as Australia is the place to be if you are a big bid watcher as today has seen a speculative bid of $7 billion from Scepter Partners for Santos. Following hot on the heels of the Woodside bid for Oil Search there is certainly a feeling of bid fever around down under, this bid from an investment vehicle which includes private equity, Middle East and Asian ruling families should not be under-estimated. This is particularly the case as Scepter includes former Santos CEO, John Ellice-Flint amongst its numbers, indeed, should they win and take it private the he is proposed as Executive Chairman, the biter bit indeed as he was bumped for current Santos CEO David Knox. Santos is in the process of the old "current strategic review" process, this has certainly lit a small fire under it in which asset sales and a rights issue have been mooted, watch this space…
Finally and both beat the earnings whisper but the latter missed its revenue expectations. If the deal goes through Baker looks a cheap way in…
And finally…
Last night in the Champions League it was the turn of the Manc clubs to play, the Noisy Neighbours got a last minute winner against Seville and the Red Devils came from behind to get a 1-1 draw at CSKA.
Tonight its back to the Boropa Cup, Celtic travel to Molde, Spurs are at Anderlecht and the HubCap Stealers host Rubin Kazan.
In the MLB postseason, the Mets have won the NLCS after beating the Chicago Cubs 4-0. It appears as though Back to the Future 2 was indeed a work of fiction. Who'd a thunk it…? They will face either the Toronto Blue Jays or the Kansas City Royals in the World Series. The Royals currently lead 3-2.
The second Test match between England and Pakistan is under way in Dubai and winning the toss and batting, Pakistan are 182-4 which looks a promising start for England.
This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.
Malcolm is a Founding Partner of HydroCarbon Capital, which provides independent advisory services to the Oil and Gas sector. He is a Director of the Maven Income and Growth VCT 4 PLC, a venture capital trust listed on the Premium segment of the main market of the London Stock Exchange.