Posted by Malcolm Graham-Wood - Malcy's Blog
WTI $61.15 -64c, Brent $64.81 -70c, Diff -$3.66 -6c, NG $2.70 n/c
You heard it here first, the moment you knew that the Vampire Squids had upped their oil price targets to $75 and $80 for this year you should have sold out and watched the market fall…
Another drift yesterday, the markets fell again and traders are very much risk off at the moment. The good news about the Chinese import figure of 9.57m in January was overlooked but the poorish EIA numbers were not and of course the Forties pipeline came back along with Buzzard which didnt help either.
Given that Goldmans have had these forecasts for a week now it won't be long before they change them again and all will be well with the world.
A Seven Energy production update from SAVP this morning for the assets in the three months Nov-Jan which give us a first idea of the scale of the acquisition. November was 14.2 kboed, December 16.7 and January 17.2 and the February number so far is 20.7 (all net numbers) largely driven by sales to Calabar NIPP which is supported by a World Bank Partial Risk payment guarantee.
CEO Andrew Knott says that ‘this is highly encouraging for the 2018 outlook' and it certainly seems that new Savannah is already up and running. With the first of the three back to back wells in Niger on track to spud in Q1 and the formal completion of the Seven deal expected in April these are exciting times for SAVP and will be a worthy inclusion in the bucket list…
It took a while but the market has finally worked out that the news from PANR this morning was actually good news especially after the last RNS which created some uncertainty. It seems that at VOBM#1 the problem is relatively minor, ie blockages in the wellbore likely caused by the extended shut-in. The treatment so far has shown ‘a significant improvement' and given a flow rate of 6,800 mcf/d and 250 b/d of oil but there is more to do and Jay was confident when I spoke to him this morning that a frac job would do the trick.
On VOBM#4 they are going to perforate and test the upper zone this weekend and if needed will frac that too, back to back with the other frac. At VOBM#2 the freezing issue should be remedied by the installation of a heater and interestingly in the last ten days the shut-in tubing pressure has increased leading to the assumption that the 2 well also has skin damage which can be easily rectified.
At VOBM#5 operations continue on schedule and obviously a tight hole so not even guessing but ‘should testing be needed' we will hear at the end of the month or a little later. One way or another Pantheon is just doing enough to keep me as a believer although I have given other stocks fewer chances, I still think that the area has a lot of commercial hydrocarbons and accordingly will probably stick with it in the updated bucket list due v shortly.
Eco Atlantic - In the Right Postcodes...
I was fortunate to spend a bit of time this week with Gil Holzman, CEO of ECO Atlantic, we had met before but I needed a proper run through with so much imminent newsflow. Whilst the stock is not without exploration risk, it has done an incredible job of keeping enough exposure in the exciting areas to still have significant upside whilst cutting sensible deals with the right people to limit the downside. The strategic partnership with the highly rated Africa Oil is one such deal, in which ECO sold 19.77% of its stock for C$14m or 29p a share at a 28% premium, in addition to the investment ECO also gained a very valuable director in Keith Hill.
Another potential deal is with Total who bought the option to buy 25% of ECO's 40% interest in the Orinduik licence in Guyana for $12.5m, whilst the partners look at the 3D seismic on the block there is no announcement as to Total's intention but I for one would be astonished if they didn't convert the option and soon. This may be due to the fact that Exxon are next door with their Stabroek discovery which I understand could be 3bn barrels after six successful wells.
In Namibia the key is not an ECO well but as Gil pointed out ‘a free look' at their Osprey prospect when Tullow drill a well in the adjacent acreage later this year. ECO has four licences in the Walvis Basin and has a highly experienced bunch of partners to work with and nearby Exxon reappears after farming-in to the Galp block right in the middle of the Walvis Basin. After having a false start the Basin is showing signs of significant excitement as most of the majors as well as Tullow, Galp, Chariot and ONGC are getting involved and ready to drill.
The ECO model has been simple, buy significant stakes directly from the Government in preferably english speaking countries and possibly on the Atlantic Margin and slowly farm-down with some carry. On this front as I mentioned ECO is in a very strong position financially, it has net cash of C$18m plus if I am right, the $12.5m from Total, should it farm-in in Guyana. Add to that some carries and a cash rich 20% shareholder and ECO is set very fair indeed, as for initial target price, on a very conservative basis I am going to go with 100p which could easily be on the low side, after all any positive news in either geography could trigger a corporate event…
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I gave an interview on Wednesday to Proactive Investors in which I talked about SDX, DGO, Eco Atlantic and Jersey Oil & Gas, here is the link.
The Winter Olympics have opened in Pyeongchang in South Korea, not many medals expected for team GB but should be fun.
The 6 Nations rugby is back with Italy visiting Dublin, good luck with that, Wales playing England at HQ and Scotland at Murrayfield which will prove a few pre-season myths…
In the footy the big game is the north London derby where Spurs take on the Gooners tomorrow lunchtime, the Noisy Neighbours host the Foxes and the Hammers entertain the Hornets. On Sunday The Red Devils go to the Magpies, the HubCap Stealers are at feeder club the Saints and quite interestingly the Terriers host the Cherries.
A good card at Newbury where Altior is expected to make a reappearance after injury.
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