Posted by Malcolm Graham-Wood - Malcy's Blog
Pick your own crude and decide if you are a bull or a bear, yesterday all choices were on offer. Brent tried to break through the $80 barrier and stay there and failed, it it doesnt at least the chartists will be bearish. The bears are also thinking in terms of the June Opec/Non-Opec meeting for a relaxation of production quotas, if done very carefully it shouldnt create problems, the glut has well and truly gone and as predicted the US is not a swing producer after all, it never was but some people take a lot of persuading…
As you know I watch the US retail gasoline stats on a weekly basis, it doesnt get much more exciting than that I hear you say, but with the average gallon now creeping towards $3 at $2.92 up another 5 cents on the week, 52c y/y things are firing up. Over on the West coast the 3 buck barrier was hurdled some time ago, Californians are at the moment paying $3.44 a gallon which with the driving season set to start on Monday will sort out the wheat from the chaff…For what it's worth they are paying the equivalent of 40p a litre….
Other reasons for the bulls to be happy were the increasingly strident comments from Mike Pompeo regarding both Venezuela and Iran, making Total's hopes of getting a golden waiver about as me running a marathon. Finally, the API stats showed a draw in crude of 1.3m barrels plus a draw at Cushing of 822/- barrels, tonights EIA numbers will be interesting.
I recently mentioned that BP are working on an oil price of $50-65 when crunching their models which seems to me to be admirable but perhaps a tad cautious. I have read the full interview that Reuters did with Bo Diddely and there are some other interesting reveals to be spotted.
The BP CEO says that he is interesting in ‘boosting the dividend and making acquisitions' which seems to me to not quite fit with the oil price forecast. Apart from the fact that he should have the words ‘I will not, ever, increase the divvi' tattooed somewhere and be reminded of the -very recent- hard times if I was guessing $50-65 I wouldnt have thought that that screamed ‘hike the payment' out loud either. In fact if he is working on acquisitions at such an oil price then he may find the hurdle rate just a touch out of kilter with the oppo.
Faroe has announced that it is committed to drilling the Brasse East exploration well which will be drilled back to back with the Rungne exploration well. Any success at Brasse East would provide yet more upside as would any at the Brasse extension to the North East.
Whilst everything in the Faroe garden looks incredibly lovely and even at 144p I am a rock solid fan, it should be noted that DNO have completed their roadshow and announced an oversubscribed $400m 5 year bond with a coupon of 8.75%. Just good friends I think DNO said but their wallet is full and they have the first tranche of Faroe stock very much on the cheap thanks to the short term nature of some investors….
Cabot have announced that they are deferring the summer work programme to ‘maximise medium to long term oil recovery' and to ‘manage group capital requirements'. As a result of this the company are withdrawing current guidance indicating a reduction in previous production forecasts and will reissue some time in the future.
Normally a profits warning like this which has come as quite a surprise to investors and analysts would have cratered the share price but Cabot has genuine reasons for this action and should be able to explain away the reasons for it. Slightly more unnerving is the comment ‘manage group capital requirements' which would normally indicate a shortage of funds with which to continue the autumn and winter programme.
The good news is that I am meeting with the Cabot team tomorrow so in Friday's blog all should be a lot clearer, at least I hope so…..
Whilst on the subject of cratering,the EME share price was off as much as 30% first thing this morning as they announced a higher than expected production of gas of 1,200 mcf/d from the Dempsey well. After chatting to Tom Kelly last week this was very much as expected and I am at a bit of a loss as to why the market is taking the news so badly, I am sure someone will tell me before long. The JV are also intent on connecting four idle wells nearby which should be a cheap add to production and revenues.
Also as expected the JV is seeking approval to re-enter the Alvares well, either to log through the casing or to drill a side track which given its potential could be very exciting. This bringing on of Dempsey gas is good news, it will add to cash flow ‘very shortly' and maybe in due course much more into the bargain. Finally, the fall this morning as far as I am aware does not take into account imminent good news from Indonesia and further out potential significant value add from the position in China all of which should push the share price a lot higher, what do I know eh?
When your shares go up by 375% in less than a month and you have no money in the bank the temptation to visit the ducks when they are quacking is not only too much to resist but eminently sensible. Raising £1.1m at 2.5p is hardly company changing, indeed having just appointed Macquarie bank it will probably just about cover the fees, but with recent good news of a suitor checking over the books and paying a quarter of a bar a month to do so things are looking up for BPC. Shareholders should not get overexcited, if the super major involved comes good it will be game changing but there are also downside risks to be aware of, at present though they are enjoying their days in the sun…
The 30th round awards have been imminent for weeks so today's announcement from i3 Energy that they have successfully applied for and received its targeted block 13/23 on a 100% basis is about as quick out of the blocks as is possible. This gives them 100% of the Liberator project with the addition known as Liberator West. The acquisition adds 22 MMBO Mid-case 2C Contingent Resources and 47 MMBO Mid-case Prospective Resources to the Company's currently held 11 MMBO of 2P Reserves. There will be an appraisal well on this prospect later this year which should firm up the numbers even more.
In a recent chat I had with CFO Graham Heath the clear indication was that this would be a game changer on both a medium and long term basis and that preparations are already in place for all eventualities. This would clearly include a farm-out in order to proceed and the company announced way back in March that such discussions were underway, this announcement should hurry that process. As I understand it there are at least two firm offers on the table for financing for i3 both of which are incredibly supportive and involve little or no dilution to the company.
Accordingly today's price rise of around 20% is just the beginning, this news is confirmation that shareholders have been waiting for and if it doesnt go up a long way soon it will slide into the imminent bucket list interim changes…
Although the announcement was swiftly remover from his website it looks like ‘Dick' Emery has actually been appointed as the new manager of the Gooners. I suspect the english language tapes have been ordered so that he can say in several tongues that he never saw the incident, nevertheless this is a brave if slightly left-field appointment.
And Harry Kane has said that England are capable of winning the upcoming World Cup, keep taking the pills Hazza…
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