Posted by Malcolm Graham-Wood - Malcy's Blog
WTI $66.82 +$1.31, Brent $72.06 +$1.02, Diff -$5.24 -29c, NG $2.67-1c
Another strong day for oil yesterday and it is modestly higher again this morning, few could argue that at the moment it is all about geopolitics as the Donald and Putin square off against each other over Syria. Both probably know they are backed into a corner of their own making but still expect some toys to be used in the next few days.
And it's not just in Syria where conflicts are coming to a head, in the Yemen the Houthi rebels, sponsored by Iran, are firing at random targets within Saudi Arabia, it only needs one of these to do real damage and hey presto more Middle East troubles escalate.
Fundamentally, after a positive EIA STEO, the inventory figures have been uninspiring, even flat. Both the API and the EIA reported stock builds, the former 1.8m the latter 3.3m against expectations of modest draws, we are coming into the time of the season when refinery maintenance should be completing and set up for the summer run on gasoline. Although the stats were moderately bearish, the long term picture is pretty strong both in the US, where stocks are down 11% y/y and 1.6% below the five year average and in the OECD locker where inventories are draining all the time at the moment as the Opec/Non-Opec agreement bites.
Another success for SDX who announce a gas discovery at Ibn Yunus-1X on the South Disouq licence in Egypt. They encountered 110.8 feet of net conventional gas pay in the Abu Madi horizon with average porosity in the pay section of 28.5%. The well apparently came in ‘on prognosis but with a reservoir section that was better quality and thicker than pre-drill estimates'. Following extensive testing it will be connected to infrastructure adjacent to SD-1X and is expected to be on production in some time in the second half of this year.
This is a very important discovery for the team at SDX as it confirms their very high expectations for the potential of this licence and I expect much more to come in the future. SDX remains massively undervalued given its continued success with the drill bit in both Egypt and Morocco which are delivering exploration success leading to increased revenues and high margin profits, what's not to like?
I met with Mike Buck, the CEO of Petro Matad recently as I knew that many changes had happened and my sinister experiences of the company from a long way back could be consigned to history. Indeed a number of blog readers had asked me to reach out so when the opportunity came to meet I grasped it and was not disappointed. He is a smart guy and with MATD he has an exciting palate to work on, a good combination of low risk exploration with some higher beta stuff that have every opportunity to come in.
Today the company release an update ahead of their 2018 drilling campaign which produces high quality data that has identified bright amplitude anomalies which are encouraging for hydrocarbon prospectivity. As a result of this work it seems that the Falcon prospect is somewhat smaller than originally anticipated and it has been ‘removed' from the programme. Now the Snow Leopard prospect (90 MMbo) on block V will be spudded first and a rig has been contracted for that, following on from that the company intend to drill the Wild Horse prospect (290 MMbo) on block IV. The company are also tendering for a rig to drill a programme on block XX which should see two wells drilled initially.
With funding in place Petro Matad is now set fair for an exciting old fashioned drilling programme with a mixture of high and lower risk prospects which should provide investors with an interesting diversity of potential returns, I will watch with interest during the summer.
Falcon Oil & Gas
Results from Falcon are totally immaterial as I'm sure P'OQ would agree, we know that they have cash, $9m and are carried as far as the eye can see. The only thing on their radar screen is the report from the scientific enquiry which has been sitting on the desk of the NT Government for a few weeks now. The report in my view was about as positive as it could have been and serious questions would have to be asked if it wasn't waived through but we are dealing with politicians here remember…..
Following the disappointing recent announcement from PANR that the frac job had not succeeded in bringing any oil to the surface the company appears to be back to square one, how much operational misfortune can a company have? And I say that because I genuinely believe that the team here are not fools or rogues but have had dreadful operating problems, given that they effectively started with five discoveries. On this well there are logs showing 60 feet of net pay but the frac job couldnt find it, maybe with heating and perseverance it will work, the alternatives are a sidetrack or a new well a few metres away. Remember it was deemed to be better than the VOBM#1 well and like comparable Double A Wells field wells, hopefully they have local experts on the site.
There are a number of things the company need to do now starting with getting the offtake from Tyler bringing in some cash and maybe the VOBM#1 well can start producing as well. They have enough money to sidetrack or redrill this well but after that it may be necessary to bring in money on a single well basis. The handling of advisory input has been woeful changing that is probably too late now though.
Followers tell me that they might release the full Eagle Ford report which so far they have failed to do for competition reasons, they are now defunct reasons and it would be a good move. I also hear that another highly experienced director may come in, it had better be quick.
When the Pantheon story started it was all about the ‘geological code' and that was going to go through the Austin Chalk and hopefully find the Eagle Ford and produce, very cheaply. Clearly mistake number one was not producing from the first well which is why the casing is now in such bad condition but it was a good well then and still could be. Finding the Wilcox was good but did it put them off the original task and of course the early refusal by the gas trader not to take it was another unfortunate happening.
At 19p Pantheon looks like it has proved those of us believers wrong and I put my hand up too, but it has been more of a series of operational misfortunes than anything more sinister. With nothing much left to lose, the shares are clearly option money but for those shareholders who havent yet given up on Pantheon there could still be a lifeline, this time next week or even after a redrill. If that sounds like not much to offer then I understand, but I am sitting here in front of what looks like a portfolio of excellent prospects with virtually no dry holes, it should have some value.
Last night watching Real against Juve was an amazing affair and had something from Ronaldo in the last minute written all over it. That an English ref decided the result was unfortunate as the pen was by no means clear cut, indeed Buffon, knowing for him the Champions League was over might have just clouted Mr Oliver who is one of those refs who think 100,000 fans have come to see him. But it means that Real and Bayern join the HubCap Stealers and Roma in the draw and the Scousers will have less fear than they did before.
Tonight the Gooners are in Moscow to play CSKA and starting with a 4-1 lead from the first leg should be fine, but then that's what we thought about Barca…..
And up at Aintree the Grand National meeting starts today, I havent had any chance yet to study any form but its a great three days, wish I was there…
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