WTI $61.34 +74c, Brent $64.33 -3c, Diff -$2.99 -77c, NG $2.58 -1c
Traders say it was a funny old day in the market yesterday, an early sell off was closed with a weak greenback helping out, but WTI gained most as it finished up on the day. The differential is now below $3 and means that it won't be long before it has less attractions than say, Brent in the global marketplace.
To add to all the other supportive voices yesterday saw the Saudis, the Nigerians and the UAE all claiming that adherence was high and will remain so for the long term. This was reinforced when the stories of a long term axis between Russia and the KSA were not denied, remember you heard it here first. The bearish talk is all about the USA but as long as Opec and its friends remain tight and control that marginal barrel they will still be getting more revenue than otherwise, despite how galling it is to see the Shermans revelling in moolah…
Saffron is back with a bang as it reopened this morning at a huge premium to the old days after announcement of the Aim admission document publication. Subject to shareholder approval Saffron will become Coro on or around the 9th of April. There is the small matter of an Open Offer to raise £2m but at 4.38p, the same as the recent bigger raise it should prove popular.
Last night saw the formal launch of Coro Energy with all the razzamataz that you would expect from a Parsons project and amidst the fireworks, smoke and mission impossible music could be seen new director Ilham Habibie who had flown over from Indonesia just for the launch. He is a very impressive man and I suspect that he will be key to the startup of the South East Asia part of the new company's strategy. Yesterday I interviewed Sara Edmonson who is to be CEO of Coro Energy and to watch the chat and hear more detail about plans for Coro's future see this link.
Victoria Oil & Gas
It is fair to say that the operational update and 2018 guidance announced this morning is a bit of a mixed bag. Operationally last year concluded very well, La 107 and 108 were completed with gas flow rates ahead of expectations with gas sales in the quarter up 18.56% up on the equivalent 2016 number. That made production in the year a highly respectable 10.98 MMscf/d, indeed a record and one that had demand problems not occured would have had the company set very fair indeed. But, and it is a big but, supply projections will be impacted following the news that ENEO does not place its Logbaba and Bassa power stations back on line, the company estimate 13 MMscf/d if online, 9 MMscf/d if not.
So the company has to rethink strategy for 2018 following a macro event with regards to ENEO which was outside of their control. Taking these things one at a time can give us an idea of what scenarios face the company. Firstly there is little doubt that ENEO, the regulator and the Ministry want the gas switched back on, power cuts are becoming more severe with between 10-15 blackouts a day in Douala at the moment so an agreement has to be reached at some stage. ENEO have said that they don't want GDC to demobilise the kit and cannot afford to lose the 50 MW from the grid out of 1,300 plus another 100MW that is also missing as a result of this action so hope remains.
There are two obvious ways that VOG are planning to counter this loss of such an important customer, firstly by adding more new thermal customers (three were added in the quarter) and secondly by ensuring that existing and new customers can use GDC gas to power their factories and plants. Using bespoke gas to power installations, especially when gas is already on site, can save companies money, often up to 10%, and of course mean that power is not interrupted as it is at the moment. With modest gensets minimal capital is required and local gas can be switched on immediately.
Other ways of minimising the disruption, although in the longer term, is for the company to ramp up its CNG and NGV solutions and develop its markets and to address the possibility of raising prices for its very valuable condensate products.
Losing a 50+% client is not easy but it is possible ENEO will return but in the meantime VOG must assume that it will not and adjust accordingly. Further reductions in costs are under way and capex has been put back but exciting prospects at Matanda and Bomono are still very much in process. Indeed ENEO receivables, announced as being $8.7m in January have already fallen to $5m and are likely to continue to come down. The ENEO saga has been a blow to confidence just when VOG was about to deliver in a big way, whilst there is no sign yet of it blowing over one must remember that there is still a substantial and highly profitable market in Douala which shouldnt be forgotten.
3Q results from Zenith today but as usual on results day all the information is already in the market. The company continue to work on a number of wells in Azerbaijan with increasing success, when I visited the sites in the period I was impressed with the technical staff on site. Elsewhere the company has signed a commitment letter for the purchase of an onshore rig which will have an immediate positive effect when it arrives. The company are still committed to discussions with regard to potential acquisitions and have a number of transactions under consideration at present.
Here is a message from my lovely wife Netty who is for reasons best known to herself running the London Marathon, again in April. Any donations would be really appreciated and your previous years kindnesses are not taken for granted!
I am running the Virgin London Marathon on 22nd April 2018 in aid of the Lords Taverners, giving disabled and disadvantaged children a sporting chance.
It's the FA Cup again and tonight there are two ties, the Foxes play the Blades and Chelski host the Tigers from Hull. Tomorrow the Owls play the Swans, the Seagulls take on the Sky Blues, the Baggies host the Saints, Rochdale entertain the Spurs and the Red Devils are at the Terriers.
Some great jumps racing this weekend, tomorrow at Ascot sses the Betfair Chase with a great lineup and at Haydock it is Grand National trials day.