Posted by Malcolm Graham-Wood - Malcy's Blog
Oil bears were out in force yesterday waving copies of the IEA monthly report as if the agency rarely got anything wrong. As long term readers know, my view is that this expensive research company should do what the industry has been doing for some time and that is at least halving in size. Their short term view is diametrically opposite to the Opec one the day before, well it would be wouldn't it, but it seems to think that next year oil demand growth falls. For the longer term they are actually more positive with the market for fossil fuels continuing to be strong which it puts down to the petrochemical market, interestingly Bo Diddely was talking at a conference this week in which he warned governments not to expect so much from renewables…
After hours the API stats were very mixed, the headline crude figure showed a build of 6.51m barrels, bigger than forecast and they had gasoline building too, by 2.4m barrels although as one might expect at this time of year distillates drew and by 2.5m. The crude number at Cushing drew though, by 1.8m barrels which leads me to think that for some reason US exports had another bad week, let's see what the EIA say tonight.
SAVP has announced an agreement whereby it locks up Seven Energy and a good number of its creditors ahead of acquisition of certain of its assets. Today's announcement is very much a confirmation that the deal is moving ahead and is by its nature aimed at bondholders more of whom are being signed up at the moment. It also tells us that there will be an equity issue, which was to be expected and I assume that having been highly supportive in the past its backers will fully support the management. Having looked at Seven in the past, albeit some time ago it is clear that the assets that SAVP hope to buy are very significant indeed. They are most definitely cash flow generative and what one might describe as being materially strategic assets in the region, it also has the potential upside of the reinstatement of the SAA which is not in the package but where SAVP has an option if it ticks the right boxes.
The release today is clearly only the beginning of the public unveiling of the Seven process and should be considered as such, I expect much more detail in due course and the analysis of the asset portfolio should pleasantly surprise those not familiar with them. I think that these significant assets will transform the company and in a remarkably cost effective way, not many CEO's would have seen this and have the perseverance to carry it through. Concern of late has been that with the shares suspended there is no time to get a deal over the line before the six month deadline expires. Whilst I am not informed on such matters, I would be surprised if work on the Aim admission document wasnt a long way down the line, having been prepared through all this time of negotiation and due diligence and the company have a large number of creditors onside already. It is worth noting that company brokers Mirabaud are suggesting that they ‘expect trading in the shares to commence by the year end subject to publication of an admission document and completion of the equity placing'.
This announcement provides the market with a good idea of the size and scope of the deal and how it is to be financed. Although we don't know quite enough details regarding the full potential or the final costs, it looks to me as if SAVP are buying a substantial portfolio of assets including a midstream business very cheaply indeed.
Ascent has released an export gas production report from the Petišovci field in Slovenia now that everything is up and running. Starting earlier this month the Pg-10 flowed a maximum of 2.1 MMscf/d and the Pg-11A well flowed a maximum of 1.4 MMscf/d, the agreed November maximum production is set at 2.1 MMscf/d and they are producing around 110 barrels of condensate with that. The INA contract states an upper and lower limit on production of 2.1-2.7 MMscf/d for the first two months and 2.2-2.9 MMscf/d for the next ten months for plant capacity reasons, although I understand that should production be able to handle a higher number then INA would likely be takers of more gas. This is especially likely in the winter months so I wouldnt be surprised to see a spike up in December or January.
Having completed the hard yards and entered phase 1 of the FDP AST are now planning re-entry and recompletion of ‘suitable existing wells to further increase production'. This month's revenue, based on scheduled production will be around €300,000, a figure that could increase if winter gas prices rise or if INA take more gas this season. All in all a very positive start and with potential upside from higher gas prices, increased production and of course upgrading the wells in the field, Ascent is very much in the ascendant.
It's been a busy morning, after speaking to Andrew Knott I then had a long chat with Jay Cheatham, Pantheon CEO who as ever was up early. They announced this morning that the gas processing facility in Polk County was successfully commissioned yesterday with wells VOBM#1, 2H and 3 all tied in and are now selling gas. Revenues from this should start late December or early January but although we knew about it seeing is believing and at over 3 bucks for gas and $55 for liquids it is looking good. The plan is to put 15m scuffs through the pipe and carefully manage the well outputs, no opening of the chokes here, they also get valuable NGL's as well.
The VOBM#4 well is progressing and too early to tell what to expect but we will know before Christmas and it may be a handy addition to the production numbers, if the Wilcox comes in that would be great news. It seems that Pantheon is now actually as they say, an E&P company not just an E company. With revenues of between $1.2-1.5m a month and a successful raise earlier in the year Pantheon are in danger of being able to fund future drilling organically, those who have had the patience to hang on should see a decent rise in the share price…
There is no way of making the result between the RoI and Denmark any more palatable i'm afraid as they went down 1-5 at home and won't make the World Cup finals next year.
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