The Oil Man: Cairn, Amerisur, Pantheon, Falcon, Chevron
9th March 2016 13:42
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WTI $36.50 -$1.40, Brent $39.65 -$1.19, Diff $3.15 +21c, NG $1.71 +2c
After yesterday's paucity of company news, forcing an oil price-only blog, today the tables are turned; there is oil price news, but companies are doing all sorts of stuff today.
The vampire squid poured cold water on the crude price yesterday; the recent substantial rise is clearly not what Goldman Sachs thought when it predicted $20 oil. It was sort of inevitable - the fall, that is, not the lousy forecast, and is what they say "makes a market".
Weak Chinese trade data also punished oil bulls, who had got Brent up to $41.48 during the day. After the close the American Petroleum Institute stats showed a stock build of 4.4 million barrels, just north of the guess of 3.9 million for tonight's Energy Information Administration (EIA) numbers.
Kuwait added to the gloom by saying that, whilst it was happy to freeze production, it would only do so if everybody else did - and they mean Iran…
The EIA also published its Short Term Energy Outlook in full, which was like the curate's egg; demand forecasts were lowered again, but so was production. US production this year is now expected to be 8.7 million barrels per day (b/d), falling to 8.2 million b/d next year - this compares with 9.4 million b/d in 2015.
For natural gas geeks, there were many figures to absorb; current inventories are 46% higher than this time last year and, at the end of the season, (31 March) will be 54% above last year.
Their Henry Hub forecasts are $2.25 for this year and $3.02 for next, which might cheer people up - as will another stat, which shows that this year 33% of all electricity generation in the US will be gas-fired, the first time ever that it overtakes coal, stuck on 32%.
Amerisur Resources
has announced this morning that it is to raise $35 million (£25 million) by way of a placing to fund further drilling in Colombia and to take advantage of low industry costs.
Last week, in the updated presentation, the company foresaw a decline in reserves, so this makes much sense - particularly as the CFO has an iron-like discipline about spending only from cash flow.
With the recent rise in the oil price and, in some cases, significant share price rises too, I am not surprised to see those companies with supportive shareholders taking advantage of the massively reduced drilling costs; it is what should be done.
If you combine this with the recent good news on the OBA pipeline due on stream next month, all is beginning to justify what has been a very strong share price of late.
Cairn/Far - the best is yet to come…
Exceptionally good news from Senegal this morning and, for one of my bucket list top favourites in , there is still significant upside.
The SNE-3 well has way exceeded pre-drill expectations - by my reading, flow rates may be twice as good as had been expected. There appears to be excellent reservoir quality and correlation between all three SNE wells.
This successful completion of the SNE-3 appraisal well showed two Drill Stem Tests, a gross 15 metre zone flowed 5,400 b/d and a stabilised main flow rate of 4,000 b/d. An additional 5.5 metre zone was added to the first flow and produced at a combined stabilised rate of 4,500 b/d.
The key to this, as reported in my last Far note, is that the "upper reservoir units have been demonstrated to flow at commercially viable rates" and make a material contribution to oil volumes.
The oil is 32º API and this result is certain to support a further upgrade in the field resources estimates. Indeed, these flow rates not only make obsolete the numbers produced by Far only four weeks ago and de-risk the 2C and 3C resources as published, but should increase 1 and "c contingent resources as well.
This well further confirms the overall scale and extent of the field's size; it is clearly a good deal bigger than mapped, even pre-the SNE-3 well. I would go as far to suggest that, with the deliverability of the upper units, any doubts about this being a hugely commercial discovery can be put to bed.
The well has been plugged and abandoned and now heads to BEL-1, the Bellatrix prospect on the Buried Hills play.
Whist this has clearly been good news for , reflected in the near 10% rise in the shares this morning, it is much more meaningful for Far, where I will have to upgrade my expectations yet again.
Although the shares are up 57% in the year to date, they still only trade at 10.5 Australian cents; my previous target was 30 cents and that is now embarrassingly low - the risk in Far is not being invested…
Pantheon Resources
has announced that the long-awaited fundraising has been successfully completed. The company has raised $30 million through the placement of 18.4 million shares at 115p.
The offer was, I understand, significantly oversubscribed and the company is now set fair to accelerate the pace of developing its recent discoveries, whilst at the same time drilling more exploration wells. This is another company taking advantage of the current low-cost environment by tapping shareholders who are happy to support successful managements.
Few will have been more successful that Jay Cheatham and his team at Pantheon, as well as Vision, their partners. From the start, Jay has said that this programme was as exciting as anything he had seen before and, if they really have "cracked the code" (and I think they have), the value of Pantheon is way above the current level.
Falcon Oil & Gas
has announced that its programme for 2016 at Beetaloo is at an "advanced stage". Locations have been finalised for two test wells to penetrate the condensate-rich gas through to dry gas mature sections of the Middle Velkerri shale. The company will also re-enter and frac the NW-1 well on EP98, drilled in November 2015.
Falcon is fully carried and has $12.7 million of cash on the balance sheet. Given that they have a potentially transformational drilling and testing programme about to get underway, 2016 should be an exciting year for shareholders.
I am overdue a meeting with the company and will report back after that.
Chevron
Production is underway at Gorgon, one of the most challenging - not to mention expensive - gas projects in the oil industry's history. Happy memories of Kentz getting involved and receiving company-making contracts which eventually led to them being taken over!
also announced in its analysts' presentation in New York that it has further cut its capital expenditure plans, but will maintain production growth at current levels.
Talking about projects such as Gorgon, the CEO, John Watson said that there would be a shift away from mega-projects towards smaller-scale developments such as shale in the US, Canada and Argentina - so good for then…
And finally…
Also a bit quiet, but the Gooners got through their FA Cup replay at Hull City Tigers last night easily enough, winning 0-4 in the end. Still in with a shout of the Prem, the Champions League (just) and the FA Cup - and there were still "Wenger must go" banners…
Chelski host PSG tonight in the Champions League and, although they are two-one down from the first leg, you can rule nothing out with them at the moment.
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.