Posted by Malcolm Graham-Wood - Malcy's Blog
WTI $68.49 -47c, Brent $73.21 -24c, Diff -$4.72 +23c, NG $2.85 +3c
A touch of drift on Friday ensured that crude was down on the week especially Brent after expiry. The US/China trade wars aren't helping, Unipec has said that it won't buy any more US crude until at least October and obviously as already announced no LNG. Further news that the Houthi rebels had announced a cease fire, one of many so don't raise your hopes, also pushed prices down a bit.
The Baker Hughes rig count showed an overall fall of 4 units to 1044 and in oil down by 2 at 859. Oil has rallied by around 50 cents this morning as stage 1 of Iranian sanctions loom this week.
Range has announced that RRDSL has won a contract with Touchstone to drill on its WD-8 block in Trinidad. Operations are expected to start in August and the rig is already mobilising for the well, it may lead to further wells for the operator in this field. Having supplied a rig for Shell and now TXP the plan to put a modern fleet of rigs into the country is being justified.
Range is also planning to drill two wells on the Beach Marcelle field this year and thanks to the recent placing will upgrade the BM field to be able to handle more crude and generate more capacity.
Solo has announced this morning that it has raised £2.41m through a firm and conditional placing at 2.25p, a 5% discount. In addition the company may raise a further £1.2m as it has announced an Open Offer for shareholders at the same price on a 1:9 basis. The company say that they need the capital to ‘safeguard our equity positions and negotiate the best deals for shareholders'. They also accept that ‘whilst the raising of that capital is dilutive at the existing shareholder level, it is a necessary function to protect and enhance the inherent value within the portfolio'.
Given the fact that they have put in place an Open Offer for shareholders, combined with the fact that the new board, with decent skin in the game are clearly not hanging around I see no reason why holders should not take up their offer, as I understand it the placings were substantially oversubscribed. Furthermore it is clear that things are going on at Solo, with a new, dynamic leadership and a topped up balance sheet it seems to me that transactions are definitely in the wind. Solo is most definitely growing up, nothing is off the table and at long last this company may start to deliver, it's payback time and I suspect the ride will be fun, one for the pocket book, as they say…
Infrastrata has popped up on the radar screen a bit lately and today announces that the FEED on its Islandmagee gas storage project in County Antrim, Northern Ireland has now over 50% of its pre-established milestones and is on schedule for delivery no later than December 2018. With the commercial side running in parallel with the operational side it obviously means that progress towards FID should be very swift.
The board has been continually strengthened since I first wrote about it some time ago and much has changed, shareholders should be extremely happy at what has gone on so far but there is much more to come. COO John Wood has now a substantial stake in the company where he is driving operationally excellent performance and importantly top quality partners throughout the process. I am meeting with the company next week, it looks like they may just have their ducks in a row.
Kosmos has acquired Deep Gulf Energy for $1.225bn in cash and shares from First Reserve and adds attractively priced GoM assets to its portfolio. The deal is accretive and generates ‘significant free cash flow' so it looks like a smart move and highly profitable diversification on the asset front. The conference call is this afternoon so will add more later in the week.
At a time when the market is waiting to see who the mystery partner might be and more importantly, if it is going to next base, the company slips out a few amendments to the contract of the CEO, unconnected, maybe…His salary is cut to $375/-, his accumulated cash payments have been written off but not the 64m shares he has picked up in lieu. The bottom line is that shareholders won't mind a bit about this if he delivers a financing partner, could this be the precursor to that news? I'm meeting the company next week, the future is definitely hotting up.
Independent Oil & Gas
I spent some more time with Andrew Hockey, CEO and James Chance, CFO last week as news from IOG is coming thick and fast. The news on the pipeline is good, apart from some minor testing there should be no further need for lengthy pigging and the efficient hub strategy that we have heard so much about over the years appears to be nearing significantly.
As a reminder, IOG has the Vulcan Satellites and Blythe hubs which have 248 BCF of 2P gas reserves and 55 BCF respectively and appraisal assets at Harvey and Goddard in the SNS portfolio all 100% owned and operated by the company. The next few months are critical as they bring with them not just the FID target in Q3 but also project funding expected in the same time-frame. First gas is expected in Q4 2019 with a production peak of >200 MMcfd and intended to be a highly cash generative portfolio.
With gas prices at around 50p/therm on the forward NBP curve but with exceptional swings (190p/therm this February) UK gas fundamentals are very much in favour of such a policy and with Vulcan break-even price at 26p/therm and Blythe at 23p/therm there seems to be every opportunity for this strategy to succeed. In terms of financing there will have to be a coordinated package put together unlike anything IOG has done before, up until now they have been strongly supported by the London Group but now they will have to access capital markets which to be honest should be more than possible given such project economics. Andrew Hockey has agreed to be interviewed on Core Finance which I hope to arrange this month, in the meantime all is to play for and it is worth reminding investors that Fiona MacAulay, CEO of Echo Energy has recently joined as a non-executive director.
England won a very exciting test match against India, funny how sometimes the low scoring games are the best? Lords on Thursday will surely bring rain!
The Noisy Neighbours won the Charity Shield and Aguerro looked in frightening form, shame he didnt play much in the World Cup..
The MotoGP in Brno produced another thriller with 6 riders in the hunt for the win.With tyre wear being a major factor, ‘Wunderkind' Marquez struggled to get past the Ducati pairing of Dovizioso and Lorenzo with Dovi eventually holding off his team mate for his first win since Qatar, closely followed by Marquez in 3rd and Rossi stealing 4th place on the last bend from Cal Crutchlow. F1 can only dream of close racing like this.
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