Posted by Malcolm Graham-Wood - Malcy's Blog
WTI $66.81 -13c, Brent $72.07 -21c, Diff -$5.26 +8c, NG $2.95 +1c
I suppose it could have been worse, after a perky start crude oil trended down and this morning that trend has continued. As usual a combination of factors had oil on the run late in the day, a stronger dollar didn't help neither did weaker Chinese demand which the US should get used to. Further consideration of the inventory stats, deemed to be worse than expected also pushed oil down as did conflicting reports of Saudi production. Traders who look at charts for direction also saw continued weakness, certainly my guy is still short…
What started in the morning with a rally based on further military action in the Yemen, Houthi rebels attacked the Saudi City of Jizal on Tuesday which required retaliation yesterday, had run out of steam by midday in the US.
Finally it is worth looking out a really interesting report published yesterday by the EIA, it is a most interesting very long term analysis of energy use in Africa which concludes that if GDP were higher than current forecasts, which is entirely possible, then current forecasts may be conservative.
Diversified Gas & Oil
DGO has released a trading statement that says that all is going to plan and that numbers are in line with their own and market estimates. There is some slight confusion with regard to decommissioning of wells in Pennsylvania where they say that they ‘hope to reach a mutually agreeable resolution in the near future' and that they are appealing a recent consent order from the State. I have to say that I hadn't realised that this was the case and must have missed the RNS when it came out but I have been satisfied that there is every likelihood of an agreement and that there will be no increase in decommissioning costs within the business. A bit of a storm in a teacup and as the company is already agreed in Ohio and nearly so in West Virginia It is not something to worry about.
I have commented variously on my recent meeting with WRL but have been asked to add to those comments here which I am happy to do, it was an excellent meeting. I met with new CEO Eskil Jersing and CFO Katherine Roe who represent the face of Wentworth going forward and who are evaluating the prospects in the portfolio.
At Mnazi Bay the prospects, whilst always challenging in country are good, payments from TPDC and Tanesco are being made and indeed catching up with arrears and with strong local demand and only two local suppliers means that current production of 90 MMscfd is profitable. For the future the prospects are equally as good with a GSA potentially available, an extension of capacity and also a pipeline extension that could lead to a big upgrade whilst all the time keeping security over the asset.
In the Ruvuma Basin, primarily onshore in North Eastern Mozambique WRL have been considering how to develop the successful gas discovery at Tembo-1 and have been assessing commercial options for the block. With the country desperately short of domestic gas and the exciting economics, there has been significant interest in the farm-out process and as many as 80 companies have been through the data room I understand. WRL like the country, they like the basin and with little or no competition are in a strong position to determine their future at Ruvuma and will not need to spend any money until terms are right and tensions on the ground are ended.
Wentworth are still clearly looking at ‘a third leg of the stool' and one which I suspect might address any possible revenue risk, a production deal in a good environment would be a perfect way of reducing the company beta whilst also backing up profitability.
In the meantime all the corporate issues are being addressed, a new domicile, likely de-listing from Oslo and a strengthening of the non-executive side of the board should demonstrate that the board is moving conspicuously towards the next step in its journey. With a sound balance sheet and debt reductions planned, WRL are in a good position to address the challenges and I was very impressed by Mr Jersing having not met him before.
I didn't comment on the Empyrean results a few days ago as they are even more irrelevant than usual especially as the company is in serious transition but always happy to make a mention.
With a three pronged attack the company are now looking at the USA, China and Indonesia for growth and each has its own merits and timescale. In the US the Dempsey discovery has come onto production but I am still of the view that production is a touch disappointing, I understand that some fraccing is likely in the tight reservoir but look forward to hearing what TK thinks about it.
In Indonesia the company announced recently that in tandem with partner Conrad Energy, EME have put together a development plan for their Mako gas discovery in the Duyung PSC and with 2C resources of 373 bcf a profitable JV should emerge. In China we heard some time ago that very promising early work on block 29/11 could mean another significant amount of upside.
EME shares have under-performed lately, mainly I imagine as Dempsey is proving somewhat disappointing compared to the excitement whilst drilling, having said that the sp is in no way an accurate representation of the portfolio that Tom Kelly has put together, it may just need some patience.
The second test at Lords had the whole first day washed out yesterday and this morning England won the toss and inserted India who are 11-2 after already going off for rain today.
The US PGA started yesterday at Bellerive, Missouri and is lead by Gary Woodland with many of the usual faces right behind him.
And of course, how could you forget that the Premiership football starts again this weekend? Tonight sees the Foxes travel to Old Trafford and there are some very interesting fixtures including the Noisy Neighbours at the Gooners on Sunday. Also on Sunday the HubCap Stealers entertain the Happy Hammers whilst elsewhere Chelski visit the Terriers tomorrow. The newly promoted sides make their debuts, the Cottagers host the Eagles, Wolves entertain the Toffees and Cardiff visit the Cherries.
MotoGp moves to the Red Bull Ring in Austria this weekend. Historically Ducati have been strong here whilst Yamaha have struggled since 2016 but in the closest season for years the form book could be obsolete
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