Posted by Malcolm Graham-Wood - Malcy's Blog
At this rate with crude up modestly this morning the week may end up being flat or even up a touch, news in the market has tugged the price this way and that reflecting diverse sympathies. The downward pressure has come from agencies reporting higher US shale production and today the EIA reported that Brazil's production had reached 3.3m b/d of liquids so far this year which would make them the 9th largest producer worldwide. The inventory numbers provided food for both bulls and bears, the latter didnt like one bit the huge build in gasoline stocks (not unusual ahead of the Christmas holiday) whereas the bulls liked the crude draw, especially at Cushing. Finally, what matters maybe most and that was the closing down of the Forties pipeline taking 450/- b/d off the market for 2-3 weeks for the UK marker crude.
Another Morocco update from SDX where the KSR-15 well on the Sebou Permit has now been completed and tested at restricted average flow rates of conventional natural gas into the sales line of 7.52 MMscfd and is now on production. The KSR-16 well has been connected to the existing infrastructure and should be starting test production in around ten days. To try and get some perspective on quite how successful SDX have been at the start of this campaign these two wells ‘now exceed our daily commitments of 6 MMscfd on a stand alone basis. We are now very confident in delivering on our planned natural gas sales rates of 10-11 MMscfd in 2018'. SDX has been very successful in 2017 and with a big campaign of drilling planned next year and with upside potential across the portfolio the shares remain remarkably cheap under these circumstances.
Another company on a roll is President Energy where they announce today significant workover success from the first two Puesto Flores Field wells,, ahead of expectations. PFO-50 tested new intervals totalling 11m net perforated metres giving production of 400 b/d which is 100% better that pre shut-in output. The formerly producing interval has been repaired and successfully tested but is being kept in reserve for future production due to the success of the new perforated section. There was always a chance that diligent drilling would find such new intervals and it is good news that this has been found so early on in the drilling process. With the PFO-9 producing at 100 b/d the total current gross field production is around 1,500 b/d with two remaining workover wells yet to come. With the December price to PPC of $60.80 per barrel from this field cash flow is growing and looks increasingly positive, and there is much more to come.
Months of hard work is coming to a climax as yesterday SAVP announced the indicative price range and formal launch of the placing yesterday. They confirmed that there is to be a placing for institutional investors for the cash consideration portion of the Seven acquisition and that book building has started and is expected to finish today at 5pm. The indicative pricing is 40-50p and at those prices the SAVP market capitalisation would be in the region of £375-400m. The final price should be announced on the 18th +/- and dealings are expected to commence on the 19th. With this transaction close to finalisation and with book building under way SAVP will go into 2018 in a very strong position with substantial production, a stake in a midstream company and significant upside from its Niger drilling campaign which gets underway in Q1. This announcement gives an idea about newsflow and timeline for the transaction, all very positive steps. At that stage I suspect that it will finally take its place in the bucket list initially planned back in June…
Another catch up after my few days away, yesterday AMER announced a Platanillo-27 update, this well is the 4th on Pad 2N to test the northern extension of the field. This is the 21st well of the Platanillo drilling campaign and has been successfully completed as a medium deviation directional well at a TD of 9,600′ ‘on time and on budget'. Log interpretation indicates 12′ of net pay in the U sand formation and 9′ in the T sand, the N sand was not a target in this well.
The company also states that the well intersected the M2 sand and the A limestone and the log data is being evaluated ‘to determine their potential as pay zones'. With a regular procession of good news from AMER and the expected hitting of production targets which should continue to rise, I am perplexed at the very least why the shares remain at current levels.
Petrofac announced its trading statement yesterday which was in line with expectations at both the profit and debt levels. Order intake is $5.2bn in the ytd and the company is seeing ‘high levels of project activity' and are ‘maintaining cost competitiveness through operational excellence'. Orders just this week from Basra Oil and BP totalling around $1bn prove that operationally at least PFC is up with, if not ahead of the game.
Independent Oil and Gas has announced that it has received a 12 month extension of its licence for the Blythe gas discovery to end December 2018. With first gas expected in mid 2019 life is about to get busier for IOG and I think that the shares are an interesting play having drifted back in recent weeks.
The third Ashes Test in Perth was looking like a strong performance from England until the familiar late order collapse led to a score of 403, probably below par on this track. Failure to build on the centuries by Malan and Bairstow may prove a bad mistake if they can't get Smith out…
The weekend's outstanding fixture in the Prem sees Spurs visit the Noisy neighbours, many have tried but few have succeeded in recent weeks…The Red Devils go to the Baggies, the Saints visit Stamford Bridge, the Cherries welcome the HubCap Stealers, the Magpies go to the Gooners and the Seagulls host Burnley.
With good jumps racing at Cheltenham and Donny and the Sports Personality of the Year on Sunday there is something for everybody this weekend.
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