Posted by Malcolm Graham-Wood - Malcy's Blog
The latest Opec report is so bullish that people can hardly believe their eyes, demand for their crude this year is up 200/- b/d and for next year by 400/- b/d. This would give overall demand for 2018 at 33.4m b/d with a second half of as much as 34m b/d, put into context Opec is currently producing around 32.6m b/d. Now, the market has already priced in quite a lot of this which is I suppose why oil is only just hanging on to these higher levels, much can still go wrong. It is only just over a fortnight to go before the Opec meeting and of course all the other meetings that will happen at the same time with Non-Opec partners and a great deal of optimism is priced into the market. A minimum requirement is an extension of the agreement, let's hope that the recent rally doesn't go to their heads…
I met with Range Resources at the end of last week to try to get a feel how things are going on the ground and also in the ever important lawyers offices. It seems as if things are actually going pretty well on all fronts, they announced the spudding of the GY 684 well at the Beach Marcelle field yesterday and I get the impression that the water injection is progressing quite nicely. The RRDSL acquisition is due to be voted on on 30th November which will be followed by a re-listing in ‘December'. The Indonesian deal has completed and will provide significant operational interest next year and the deal with Trinity is going through the regulatory approvals at present.
‘New Range' as it may finally be nicknamed looks like it may be a good collection of assets, still firmly based in Trinidad with the rig company and a decent portfolio there but the management have clearly decided with the Indonesian deal to give it some diversity which is no bad thing. If the RRDSL deal is approved, and there is no reason to believe otherwise, I get the impression that re-listing may only be a few days behind it, giving patient shareholders a quoted holding again.
As I found out when meeting with WRL in Cape Town recently, things are really beginning to pick up for the company and I suspect that this may be more than just one to watch. Today they provide 3Q results which in themselves are relatively meaningless but production numbers are positive and the direction is important. 60 MMscf/d from Mnazi Bay in Tanzania is the strongest in the company's history and it puts them in a ‘dominant' position in the Tanzanian market place which has significant demand from power generators and industrial users. In a market that has a reduced supply of gas by peers, yet has demand coming through from K-2 and the Dangote Cement plant (which should add between 10-60 MMscf/d by the end of next year) the economics stack up pretty well.
Regarding getting paid things are also looking up, admittedly receivables have ‘stabilised at 4-5 months' but TPDC are paying more and overall payments in the quarter were $5.18m and indeed a payment of $2.6m has recently been initiated by TPDC for the October invoice. Speaking with Vice President, Corporate Development, Katherine Roe today I got the impression that the movement is in the right direction and that the TPDC were making payments more regularly and of a bigger size than before.
Re the company's oil and gas concession in Mozambique things are also moving at a pace with drilling planned at Tembo-2 for 2Q 2018. I wrote in detail about this whilst in Cape Town but the prospects here are significant and with the distinct possibility of one or more industry partners joining WRL there is further upside potential. 2018 looks like being a landmark year for Wentworth and I for one will be watching most carefully.
3Q figures from TXP today which show further growth as production is lifted to 1,437 b/d which is up 8% q/q and 13% y/y. This includes 1 well and 3 recompletions which are to be augmented by 4 more wells in a programme starting in December 2017. With an operating netback of $24.46 per barrel, up by 25% on the 2nd quarter and by 29% on last year's 3rd quarter the company are confident of growing the business.
It is difficult to know quite what to make of the EME announcement which shows ‘sub-commercial gas' in the lowest zone of the Dempsey well which is testing at the moment. Clearly this is a poor sand but I hadnt expected this as I thought the lower discoveries were the best, but the company remain ‘optimistic' so I'm sure there is no reason to panic. I may see if I can locate Tom Kelly and ask him…
For those in the oil industry I suspect the fall from grace of the once mighty GE is no great surprise, in recent years the exposure to the oil industry has been questionable at best. Having said that it leaves a quality company in Baker Hughes in an invidious position as the JV will likely take some time to unravel and as I see it the parent has a serious problem to address over the next year or two. The good news is that if GE Oil and Gas was a competitor, throwing good money after bad to win market share that war is now over.
Shell has sold its entire stake in Woodside as part of its stable cleaning exercise. Yesterday they sold their entire holding of 13.28% of the company for $2.7bn, having initially wanted to sell only a portion strong institutional demand led them to sell it all. This means that Shell are a long way to completing their disbursement strategy ahead of time.
On yesterday's Voxmarkets Podcast I chatted about my meeting with Sachin Oza and Stephen Williams of Reabold Resources (staring at 1m 15s), Independent Oil & Gas (4m 04s), Victoria Oil & Gas (7m 30s), Aminex (10m 4s) and Hurricane (11m 50s).
Italy will miss their first World Cup since 1958 after failing to score against Sweden last night, this evening the RoI play Denmark after a 0-0 first leg.
The Toffees are trying to lure Watford manager Marco Silva as their new manager although he has only had 11 games at the club, whatever next eh?
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