The Oil Man: Oil price, Range, Petrofac, Premier
9th May 2016 13:39
WTI $44.66 +34c, Brent $45.37 +36c, Diff $0.71 +2c, NG $2.10 +3c
Last week the bears had it; WTI fell $1.26 and Brent exactly $2 as fears of over-supply, weak Chinese data, a strong dollar and poor labour data from the US meant oil drifted in patchy trading.
This week could be anything but, for choice, the bulls may have the upper hand. For them, they see supply outages around the world becoming more meaningful as Canada joins Iraq, Libya, Nigeria, Venezuela, Brazil and others who have cut back production one way or another recently.
Indeed, the fires in Canada could mean more cuts and for longer; I am hearing around a third of production is shut-in - say, 600/- barrels per day (b/d) - and may be for some time. With that number and the others mentioned, it's not difficult to see 1 million b/d off the market, albeit temporarily.
Not of a temporary nature is the excellent article by Ed Crooks in the Financial Times today, "Investment cuts see oil discoveries hit 60-year low". As you know, I have been banging on about what is now the best part of $500 billion (£347 billion) worth of investments canceled or back-burnered; here Ed talks about last year's discoveries of 2.8 billion barrels of oil and liquids as being the lowest since 1954.
With offshore spend apparently taking the biggest blow, the medium- and longer-term projects will be the hardest-hit; in the absence of fossil fuels being replaced there is only one meaningful and long-term source...
Talking about Saudi Arabia, much is changing and the weekend found oil minister Ali al-Naimi replaced at the helm by Khalid al Fatih, who was chairman of Saudi Aramco - so policy will probably not change per se.
What is changing under Deputy Crown Prince Muhammad bin Salman (a.k.a. MbS) is that project 2030 means lessening of dependence on oil - and, of course, the potential flotation of Saudi Aramco in 2017/18 at a mooted price of some $2.5 trillion means that, if I can use the expression, "nothing is sacred".
Range Resources
More good news from this morning; one cannot dispute that the management are continuing to make deals that, provided all goes according to plan and the guidance target of 2,500 b/d by the end of 2017 is achieved, ought to take returns higher.
Today the firm has announced it has agreed with Petrotrin that they will reduce overriding royalty rates (ORRs) on the Morne Diablo, Beach Marcelle and South Quarry fields, which will mean the revised ORRs will apply when the WTI price is below $50.
At current production levels, the impact will be minimal, but will progressively increase at higher production levels, with the revenue benefit estimated to be 7% at 2,500 barrels of oil per day and the same oil price.
The company says this is "a welcome incentive introduced by Petrotrin at a time of sustained lower commodity prices".
Sundry
Friday afternoon and slipped out the latest, and hopefully last, piece of bad news on Laggan-Tormore. The "final" charge of £70 million will be made in first-quarter 2016 results due to the appliance of liquidated damages - a disappointment, but at least it closes this depressing and expensive chapter in Petrofac history.
It never rains, but it pours - and at the moment for it is raining contracts; I hope they haven't just cut their prices…
Today it is a double contract win in Iraq, valued at a total amount of $140 million, with one of the world's leading international oil companies, as yet unnamed.
has announced another significant gas discovery in its Teranga-1 well offshore Senegal. 31 metres of gas pay was found in a good quality reservoir in the lower Cenomanian objective and is apparently at least another 5 trillion cubic feet (TCF) of gas.
The find confirms that a prolific inboard gas fairway exists around 200km from the Marsouin-1 well in Mauritania through the Greater Tortue area as far as Senegal. The numbers are impressive: 5 wells, 100% success rate and 25, maybe 50 TCF of gas.
The Sunday Telegraph gave a couple of leading oil analysts a chance to express their views in an article about yesterday. One said that the company was probably not going to be "destroyed" by its lenders and the other said that "May is a bigger month than April" for the Solan field; you won't get me arguing with those technically correct works of genius...
And has announced that Paul Schofield is to be the new COO; he is another Enterprise Oil alumnus and has been with Hess in Malaysia - but I don't think we are meant to read anything into that...or are we?
And finally…
Firstly thank you for the many email reminders about the HubCap Stealers on Friday morning. I would like to say that I was so tired after the Boropa Cup that it left my memory - but that was not the case!
I had written in my notebook about the fine win that puts them into the final against Sevilla on 18 May, but was distracted by a pressing matter and completely forgot - glad I have such a team of minders out there…
The football has thrown up some interesting last-week-of-the-season conundrums. At the top, after taking their eye off the ball, Spurs can lose second place to the Gooners and, after their two-two draw with the Noisy Neighbours, they can lose fourth place to the red devils - two serious rivalries tested this week.
Down at the bottom, the Maccams actually beat Chelski three-two, which leaves their future in their own hands; beat the Toffees on Wednesday and they stay up - and the Magpies and the Canaries get the bird, as it were.
In the boxing, a rather predictable result for Amir Khan, who got mashed by Alvarez and will now go back down two weights. And good news for "million dollar" Anthony Crolla, who won.
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.
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