Posted by Malcolm Graham-Wood - Malcy's Blog
WTI $59.20 -$1.95, Brent $62.79 -$2.02, Diff -$3.59 -7c, NG $2.58 -11c
That certainly was the week that was, kicked off by the jobs report and wages numbers the previous Friday, market turbulence was evident across the world and risk-off positions saw commodities hit across the board. With forecasts of higher US rates the greenback strengthened causing further grief to crude oil, WTI fell by $6.25 on the week while Brent lost $5.80.
Having said that the only other flies in the ointment were the EIA forecasts on US shale production for this year and next and the rig count, the overall count was up 29 units to 975 and oil was up 26 to 791.
Apart from all that it should have been plain sailing, the US economy is clearly still growing and so are others around the world creating greater demand for crude oil. Indeed, take a look at the numbers from China which last year became the world's oil importer at around 8.4m b/d and in January that figure I recently mentioned of 9.57m b/d.
The other interesting point is that we have heard not a squeak out of the Russian/KSA axis which is probably good news. Obviously there will be a high level comment by a combination of Ministers or even Heads of State before long but the very fact that neither side thought it worthy of any holding statements regarding output or adherence levels signals a fairly mature view of the market. It might even confirm my thoughts that the alliance is quite happy in the $60-70 range…
Echo has announced details of its work programme this morning and it looks pretty exciting. Three back to back workover wells will be drilled on Fracción D followed by four back to back exploration wells on Fracción C and Laguna De Los Capones. Also of significant interest is the seismic programme due later in the year on the Tapi Aike exploration block which showed excellent promise in the CPR with over 22 TCF of gross unrisked potential GIIP. This should hopefully lead to a drilling programme here in 2019.
Things are really beginning to kick on at Echo, this substantial programme should start producing newsflow within a month or so and investors will be able to monitor progress on a regular basis, in addition there is an investor visit scheduled for June of this year.
Sound has announced significant progress in Morocco with the announcement of a new Petroleum Agreement at Sidi Moktar. The new 8 year agreement covers 4,999²km including all of Sidi Moktar and some more and will be called ‘Sidi Moktar Onshore'. Sound will own 75% of the licence and be the operator with ONHYM holding the remainder.
The licence has an exploration best case of 8.9 TCF with a high of 11.2 and a low of 6.7 TCF of unrisked gas originally in place (gross) and there is also an existing gas discovery at Kechoula. Along with Tendrara the new, expanded Sidi Moktar Onshore will be ‘an exciting second leg to our Moroccan portfolio' according to CEO James Parsons and will make for an interesting time for shareholders.
Frontera has announced that it has raised £2.5m via PrimaryBid at 0.466p per share. I understand that this will up the drilling programme which is ongoing and the more that they can progress the better it looks likely to be. This was a market driven raise and existing and new investors took part which is most encouraging.
Readers know that since I met the new management last summer I have been most impressed and that the drilling programme is now genuinely meaningful with a number of potential areas for decent upside. I am going to Georgia in two weeks time to see the set-up and meet the operational management so will have much more to say then.
Faroe has announced the sale of an interest in the Fenja development in the Norwegian Sea to Suncor for $54.5m. Selling 17.5% to Suncor will leave FPM with 7.5% which is the same as their assets in the Greater Njord Area and keeps Faroe's costs to around £70m. This is a continuation of FPM management policy whereby they use their exploration skills to find and early stage develop these type of projects before selling down enough to keep meaningful and profitable skin in the game for their shareholders. Or as CEO Graham Stewart puts it, “Faroe has now generated cash returns through a partial-monetisation while still giving shareholders exposure to future cash flows from a continuing interest in this high quality project.”
The market has been awash with chat about a potential raise from private company Corallian lately and today Reabold Resources announce limited details of their participation in this raise. Corallian are raising the money in order to increase their exposure to the Colter prospect, the Wick prospect and to further progress additional assets including the Oulton prospect which will now be fully funded for all activities.
RBD has announced its intention to participate in the fundraising (it took a 35% stake in Corallian in November 2017) in order to increase its exposure to Corallian and thus to Colter, Wick and other Corallian opportunities. RBD remind the market that it is fully funded to participate in this raise and will ‘continue to to have cash on its balance sheet to pursue additional exciting opportunities'.
Readers will know that I have been a big fan of Sachin Oza and Stephen Williams as they deploy their capital in current opportunities in the oil market. I'm sure that it would have crossed their minds that Corallian would come to the market in a fund raise such as this but I know their pipeline of exciting opportunities is also quite full. The market has certainly seen some speculation about RBD raising more money to fund these projects but I am also aware that the discipline on that front is solid.
RBD are therefore under no pressure to raise money but would like to do so if the opportunity came up, having said that I know that they would rather not raise money at all than to do so at the wrong price. Having started so well I think that the company has sufficient supporters who understand such a policy and who would value an investment in the company, and the projects selected by the joint CEO's that they would not expect a heavily discounted offering. Either way RBD already has a stable of excellent investments and can sit tight on current working capital or should the price be acceptable, go to work on a few more.
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It's getting late so a swift run through, in the 6 Nations Ireland dutifully thrashed Italy and England beat Wales, a try wasn't given for Wales that might have been but it had been knocked (not the knee incident, before) on so two mistakes by the TMO. Yesterday Scotland beat a mixed France side, Teddy Thomas looks exciting with the ball but the French ran out of steam at the end.
In the Prem there were wins for the Noisy Neighbours, the HubCap Stealers and Spurs over neighbours the Gooners, the Red Devils were very poor and deserved to lose at the Magpies. There were also good wins for the Swans, again, and the Hammers, the Toffees and the Terriers, it's all very tight at the bottom…
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