Posted by Malcolm Graham-Wood - Malcy's Blog
WTI $68.69 -92c, Brent $74.29 -25c, Diff -$5.60 +67c, NG $2.82 +4c
Oil prices fell on Friday which was quite strange as most market participants including yours truly thought that most influences were positive. After all the geopolitical news was mixed at best, Kuwait joined the Saudis in saying that it was ‘considering' halting shipments of crude through the Bab Al-Mandeb Straits and the US kept up pressure on Iran. The US growth figure surprised most but can only be hugely positive for local gasoline demand and thus refinery throughput leading to stock draws amid multi year inventory lows.
Counter balancing that was the Baker Hughes rig count which showed an increase overall of 2 units to 1048 and in oil of 3 to 861, nothing heroic though.
I took the opportunity to catch up with Far MD, Cath Norman last week, the shares are finally rewarding faith invested and I believe there is considerably more upside from here. Firstly on the arbitration regarding the situation in Senegal where a good deal of time has been spent preparing and putting forward the company's case. Right now there is nothing that they can do, the powers that be will come to conclusions and make a judgement in due course, in the meantime it's business as usual for Far. Given that the process is no longer in their hands the company are rightly taking the view that nothing is going to change the number of barrels in the ground they have and my own thought is that there is no downside for Far, only a possible chance to add value and that they are taking the correct route.
The next opportunity for Far is in The Gambia where they took a dominant position in offshore blocks A-2 and A-5 which are adjacent to and on trend with the SNE field in Senegal, a world class discovery as rated by Wood Mackenzie. Recently Far farmed out 40% of their 80% to Petronas in one of the best deals I have seen for a long time and whereby the national oil company carry Far in what is a better than 2 for 1 arrangement. The deal is awaiting final ratification by the Government but I am sure that there is no doubt that it will get the go-ahead before long, triggering the A$17m to be paid to Far.
The Samo prospect on block A-2 is expected to start drilling in late 2018 and although not yet mentioned by the company I'm sure that the partners will probably announce a commitment to another well before long. It is worth mentioning that Erin Energy, a company that filed for bankruptcy on April 25th this year, holds 20% of blocks A-2 and A-5 along with Far (and imminently Petronas). This is only speculation on my part but it could be expected that if Erin does not satisfactorily restructure the company, the partners, led by Far, might legally have first rights to that stake. Should Erin have any debts to the Government for example, the partners should be able to come to some sort of agreement as to how the stake is divided. As I said, this is my speculation only but all perfectly possible I would have thought.
So, expect Samo-1 to spud at the end of this year with Petronas carrying Far in this quest for what is a substantial potential prize, Samo has 825m bbls of prospective resources and blocks A-2 and A-5 together, over 1bn barrels. It is fair to say that whilst Far has plenty of barrels in the ground in its SNE field stake, and will inevitably prove highly valuable for management and shareholders, The Gambia is where the real potential upside lies. There is little doubt that the management are indeed keeping a serious eye on this prize about which I am expecting find out a lot more in coming months.
Amerisur has announced that they are farming-in to Gulfsands' 100% interest in the PUT-14 Block in the Putumayo Basin in Colombia. The block is contiguous to the AMER 100% owned Terecay Block and this looks like a low risk addition to the portfolio. Gulfsands is paying AMER $1.25m as well as guaranteeing the phase 1 work programme at a cost of $1.7m which makes it a bit of a steal for AMER.
Currently in Phase 0 in the process of performing a consulta previa it will then go to phase 1 which requires 2D seismic and 1 exploration well. Amerisur was always the likely buyer for this asset which has, to be fair, been on the market for some time. Mr Wardle's patience looks like it has been rewarded…
Savannah has announced that it has spudded the Eridal-1 well in Niger where its primary target is the Eocene Sokor Alternances with the secondary target being the Upper Sokor Interval. The well is expected to take 30-35 days to drill but may be less as the efficiency of the crew is getting better all the time. SAVP has now drilled three successive discoveries so who's to know that this will not provide yet more joy for shareholders.
The news last week of the MOU between Niger and Nigeria for the export of crude from the Agadem Basin brings forward the possibility of an early production system and a monetisation of these valuable assets sooner rather than later.
It was hinted at in the last Genel announcement but today comes confirmation from the Tawke PSC update that a fourth well has been brought onto production at the Peshkabir field pushing total output past the company's previously published target of 30,000 b/d. This well, Peshkabir-5, is producing around 8,000 b/d and both P-6 and P-7 are at TD and will commence production testing in August. The good news continues to come from Genel and it is already justification in the interim bucket list.
Eco (Atlantic) Oil & Gas
Results today from Eco which are as usual history, it's what is happening in the next year which is what makes this company so exciting. In Guyana the final stages of interpreting the 3D seismic are under way and will be presented to Total shortly thus triggering the 120 day period for it to exercise its option over 25% of Eco, I can't imagine this not being done especially since Exxon has put recoverable estimates in the adjacent Stabroek block at 4bn barrels…
In Namibia the company are making preparations for its own blocks, but of as much interest could be from Tullow and Chariot who are drilling adjacent acreage towards the end of the year which would give Eco a free look at their licences in the area.
An update from California from RBD this morning at the Monroe Swell where they have a 50% interest post the Gaelic Resources deal. A four well workover programme at Doud A-1,A-2, A-3 and A-7 is underway with pumping units in all four and intervention in A-3 and A-1 wells giving ‘significant oil shows in both wells'.
As I have mentioned more than once these wells give a very meaningful and swift return, Steve Williams, Co-CEO says, ‘early cash flow and impressive financial return metrics provide much encouragement for the subsequent drilling activity'. RBD offers an invaluable opportunity to partake in a number of high impact wells in diverse locations and with differing betas, enjoy the ride…
Geraint Thomas duly won the Tour de France, another Brit on the rostrum which is good although I still need to be convinced about this sport…
Lewis won the Hungarian GP which Ferrari would have been livid about and the drivers get a month off to spend some time with their money. Max Verstappen's swearing yesterday even knocked Vettel's from last week into a cocked hat…
And both the boxing bouts on Saturday night were of the highest calibre when they might have been a disappointment, good work guys…
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