Posted by Malcolm Graham-Wood - Malcy's Blog
WTI $66.36 +26c, Brent $75.88 -58c, Diff -$9.52 -84c, NG $2.94 -1c
Well, you can as they used to say, you pays your money and takes your choice with regard to what might happen in the oil market in the run up too and after, the Opec meeting next Friday. Pretty much all options are still on the table and made more complicated with this week's publication of the three state of the market oil reports. Firstly the facts, or as close to as we can, Opec produced 31.9m b's last month with the KSA still below 10m b/d up only 85/- b/d which is no big deal. Indeed if you remember my old adage about the Saudis having to produce more in the summer to satisfy domestic demand then it could easily go higher with no need to panic.
All the rest are forecasts, even guesses of various types, the EIA STEO has US production of 10.7m b/d in May but only 10.8m b/d for 2018 as a whole and 11.8m in 2019 which is not up from previous forecasts. It has US imports falling, last year was 3.7m b/d this year to 2.5m b/d and next year to a low of 1.6m b/d tough on Venezuela whatever happens…It also has a significant uptick in global consumption in the second half of this year, joining me and others on breaking the world demand figure of 100m b/d. Finally it seems that global stockpiles are now 26m barrels below the five year average, comfortably in line with Opec's targets in their 2016 pact.
Finally the IEA, and usually correctly so as it rarely justifies its existence, they have worries about a ‘supply gap' and have actually also trimmed US production figures for next year to a rise of only 970/- b/d. All this can lead you, as I started with, anywhere you like and it is why the discussions at and pre Opec so delicate. The most important pre meeting is ironically likely to be tomorrow as the opening fixture of the World Cup pitches Russia against Saudi Arabia in a game of both irony and significance. Putin has invited MbS as his guest and Novak has Al Fatih and whatever the outcome of the game, Opec should be stitched up before the game is over. PS, funny how that is the easiest group in the tournament….
Much talk has been that given most of the above draws on the market, combined with the well documented supply problems, could lead to a roll back to output 2016 levels. The feeling with this result has its merits, we know that there is still a tight market which is confirmed by better demand estimates, slowing US expansion and Venezuela and latterly Iran probably missing those numbers. In addition it avoids the worry of the market thinking about $100 and the demand weakness that might cause and the participants know that if needed, reversion to quotas should fix any price weakness.
It seems a long time ago that I started looking at Enteq, at the time the management team assembled was steeped in success and a number of big and influential oil industry names backed them for success. Unfortunately they hit the worst possible time for an oilfield services company and to be frank have done very well to still be here today.
Today's figures are as usual relatively meaningless but give a chance to say that the company has returned to a positive EBITDA and that they are still being careful with the cash which stands at $15.5m. Clearly North American market has been of huge significance as the oil price and the rig count have combined to give NTQ a good shift. Exactly as SLB said at conference yesterday (and suffered a 3% share price fall) although the US is growing other markets are still only ‘promising'. Enteq's shares have doubled since October and although I don't dare look at the five year chart I still think, maybe even more so now, that they are worth keeping on the radar screen.
Upland has raised £3m at 2.5p to continue the funding of Wick where we have been informed by the operator that it will spud 3Q this year and to fund other corporate opportunities. I have spoken on the phone to the CEO but look forward to a meeting before too long.
I met with Paul Haywood, CEO of newcomer Block Energy that started trading on Monday on the Aim market yesterday and got a good look at what the company is about. I understand that the placing went well, was oversubscribed and increased in size as well. Good work from Gneiss Energy and some meaningful institutional holders in there.
Block has an oil and gas portfolio in Georgia which shows some promise, as with other companies nowadays the accent is on workovers, recompletions and reactivations to deliver increased production. And it certainly needs that, at present it is only producing 15-20 b/d but has plans to reach 250 b/d after a 10 well programme (each well takes an average of 15 days) and further down the line 900b/d. The company breaks even at 110 b/d at $70 oil and they receive Brent minus $10 for their light oil. The early oil production will come from the Norio and Satskhenisi fields whilst in the longer term the plan is to find oil and natural gas in the West Rustavi field. It does not go unnoticed that Schlumberger are active ‘on trend' with a substantial work programme this year in the adjacent block and any success for them would undoubtedly have a knock on effect.
It is clearly very early days for Block but Georgia is in my view a very good place to operate and as evidenced by Frontera has scope for substantial progress. In addition to the new shareholders Block has an established local operator on the shareholder list, the management has around 7% of the stock and they have a lively retail presence. It will be a long haul but worth keeping an eye on especially after the workovers and the move to West Rustavi.
It is an interesting time to sack your national coach, two days before your first game in the World Cup and when you are one of the favourites but Spain have done just that. Learning that he was off to Real Madrid after the tournament and without even a by your leave, left the Spanish FA in a quandary apparently! How about this for a scenario, Spanish FA hires Arsene Wenger and he goes and wins the World Cup, don't tell them up Highbury way…
I had an email from North of the border reminding me about their win on Sunday and wishing England well in the World Cup, very kind, thank you and I did write that one up. I have an interesting question though, I noticed that the Scottish team are sponsored by the Parkmead Group and that it must be totally coincidentally that their wicketkeeper/batsman was called Cross…………………………..
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