Opinion

Oil price, Pantheon, Amerisur, And finally…


Oil price

2016 turned out to be a pretty good year for the oil price and the end year comparisons dont tell the whole story about the lows in January and February. WTI ended up with a gain of $16.68, +45% whilst Brent rose $18.85 or 52%. This mornings price are better again, WTI is $54.99 and the new Brent contract is trading at $58.10.

If you look at the efficiencies that the industry has made in the last couple of years then the improvement in margins, even since $115 oil, must be meaningful. Some companies have even benefited from the strength of the dollar, no surprise that BP through word and deed has declared the worst over.

2017 will present obstacles such as compliance and oversupply, at least in the first half but as the year rolls on should get better. Demand should exceed supply as we get into the second half of the year, this will encourage adherence to quotas as monthly cheques get fatter. Also the now, $1.5tn of capex cuts, will start to bite and will last for 4-5 years, even the US shale industry wont be able to fill that gap. With BP leading the way, by encouraging partners at Mad Dog 2 to go ahead with a budget slimmed from over $20bn down to sub $10bn, it has seen the writing on the wall but meaningful production here is unlikely before 2022 even with instant approval.

Who knows, Saudi taking up any cheater's slack this year might prove to be very profitable down the line…And as for demand, if you had any serious pick up from China or India or others, who knows what might happen…

Pantheon Resources

Pantheon announced an operational update from the VOBM#4 well in Tyler County on Friday which delivered some most interesting news. The well has encountered two separate hydrocarbon bearing zones before reaching primary targets of the Eagleford sandstone and the Austin Chalk. The company has decided to test the Wilcox formation, the shallower of the two formations, (the other zone being the Navarro, highly fractured carbonate formation which had gas shows) using a workover rig. The Nabors F-12 rig is being relocated to re-enter and complete the VOBM#2 well and it is likely that another, likely bigger rig will in due course return to the centre basin area to drill for the intended target the Eagleford sandstone using a bigger casing in the well. This is a sensible, safety first and also avoids sending needless quantities of oil based mud into the well.

This potential Wilcox discovery is potentially good on a number of levels, not least as it wasnt really expected. The formation is prolific in South Texas where it is incredibly valuable, a well can come in at less than $1m each and pay back in 60 days, what's not to like. Also the formation contains sweet gas which might help Pantheon with blending, as well as liquids which are easily saleable. The disclosed pay of 35 feet is ‘pretty damn good' in the words of the drillers so there is reason for optimism, with or without this it had to be looked at.

It is true to say that the Eagleford hasn't yet been discovered here but that is no disappointment, it is only a slight delay and for what might be the very best of reasons. It is not yet certain whether the company have an economic field in place yet but I think that they are nearly there. I have kept my 220p target in place through all the ‘problems' last year and am not going to change that now, 2016 may have been a lull, 2017 may be back into action for Pantheon.

Amerisur Resources

Amerisur has announced that two of its executive Directors, George Woodcock and Victor Valdovinos will be stepping down from the Board in March 2017. The company expects to bring in two additional non-executive directors to replace them. This would make the Board comprise the Chairman, 2 executive directors and 6 NED's which should ‘maintain an appropriate balance of skills and experience as suggested in principle B2 of the Code'. In addition to these moves, the Remuneration Committee is making a complete review of its policy and practices for the future. With the exception of some Colombia based personnel there will be no options in 2017 and the Chairman has made it clear that he wants none. Overall AMER continues to keep up with the times and show that it is listening to shareholder requests which seems to be common sense to me.

And finally… 

As we leave 2016 the top of the football Premiership is as tight as could be, few points are being dropped making the head to heads even more crucial. Spectacular goals from Man U and the Gooners dominated the headlines but Tetchy Pep in an awful TV interview rather took the shine off that particular star…

In the rugby Prem it was the sacking of Richard Cockerill as Coach and Director of Rugby at Leicester Tigers that surprised most, himself included…

I was more than happy to give ITV racing a try on New Years Day at Cheltenham, despite 20 or more years of impeccable broadcasting by C4 things do have to change. However after about half an hour it was easy to see that ITV coverage, at least to start with was a complete car crash. Most C4 presenters have been sacked and those retained tried to survive in an ocean of complete crud, led by a buffoon in the betting ring, a toff who I thought Sir AP was going to throttle if he squeaked once more and a football presenter who clearly has no love or knowledge of the sport of Kings….IRMC….

I would like to wish all the readers of the blog a Happy New Year.


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