Posted by Malcolm Graham-Wood - Malcy's Blog
WTI $70.13 +$1.44, Brent $75.55 +79c, Diff -$5.47 -18c, NG $2.80 +1c
Brent expires today so I have used the October contract and for the differential.
On Friday the oil price fell on the back of almost entirely positive news on the geopolitical front and surprise surprise the reverse happened yesterday. All sorts of news of the real and fake variety happened with traders expecting stock draws and even President Trump saying that he would make a meeting with Rouhani if it helped, it obviously won't. With Opec production for July up by 70/- b/d at 32.64m b/d the world should be adequately supplied, at least for the time being.
An update from Far this morning but not containing much that was not covered in my recent catch up with MD, Cath Norman. A rig contract has been executed for the Samo-1 well in The Gambia for later this year and I wouldn't be surprised to see that extended at some stage. Cash and deposits of A$28.9m are more than enough for any current needs especially after such a great farm-out to Petronas in The Gambia.
As I wrote only yesterday progress at Far is very strong and with major league partners and operating in one of the hottest post codes in world energy the company has every opportunity to make great strides in the future.
Today's quarterly activity report from Range goes a long way to explaining the rather mysterious recent raise as the company explains the capacity and sales restraints seen in the last few months. The good news is that production was 663 b/d in Q4 compared to 608 in Q3 and the year end target is still 1/- b/d and looking likely to be met. With lower operating costs and a robust oil price netbacks in Trinidad will increase.
Investment in waterflood at Beach Marcelle is improving operations all the time and helped by water to inject from Petrotrin. Recent problems with production and capacity are being sorted and with targets for two new wells, a large number of workovers the company is going to be very busy in the 2nd half. This all goes some way to explaining the recent raise which correctly concerned some shareholders, it looks like an immediate raise was required to ensure that these operational matters were attended to which were over and above existing committed budgets and this was the only way to do it. The alternative for the company was missing targets which was probably even more unpalatable than raising money at a big discount.
Overall I am prepared to give Range the benefit of the doubt, just. With things going better than expected in Indonesia and Colombia to all extents wrapped up the company have a relatively solid base to work from but need to ensure that what happened last week was a one-off….
Today's news from Soco is not quite what the market wanted to hear with production falling and guidance dropped. 7,772 boe/d was uninspiring and guidance is lowered to 7,400-8,200 with the main reasons being given as ‘delayed start of drilling due to late arrival of a rig and equipment delays'.
With the company doing all it can to make up the difference with 3/4 wells going ahead in the 2nd half it shouldn't make much difference in the longer term and the company correctly point out, as if it needed to, that reserves are not affected. On my recent visit to the company I was impressed by the plans for expansion and acquisitions, it would be very good if something came off in that department, otherwise Soco is pretty much on track.
Its Glorious Goodwood this week and after I have written this I shall be heading to the South Downs with a plan to enjoy the day although less fun without Frankie D…
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