Posted by Malcolm Graham-Wood - Malcy's Blog
WTI $65.46 +45c, Brent $71.43 +67c, Diff -$5.97 +22c, NG $2.91 -3c
Another up and down day yesterday which finished in the black even though President Trump made another virtue of the strong dollar. News that some Iranian clients such as India, South Korea and Japan are already making moves to trim purchases from the country offset that $ strength.
SDX has announced a successful production test at its SD-3X well at South Disouq in Egypt. The well flowed 16.1 MMscfd with no pressure decline and then at varying rates with other choke sizes. After completion the well will be connected to local production facilities.
This well has exceeded the company's internal expectations and they are now sure that South Disouq can achieve peak rates of 60 MMscfd with their current well stock. I believe that these rates could well be conservative and in due course SDX might exceed them and indeed resource expectations for South Disouq, accordingly the shares are still cheap as chips…
Victoria Oil & Gas
Whilst there is no resolution yet in the ENEO situation it seems that the company remains confident that an agreement can be reached. This means that gas sales in the quarter remained the same as in Q1 although in August production rose to 4.4 mmscf/d from 3.3 mmscf/d. The company gained two new customers in the period, one in thermal and one in retail power and are adding gas to power availability to existing customers who are suffering power interruptions.
With the partnership with Naturelgaz in CNG announced recently and the likelihood of higher margin power supply to existing customers VOG is well set to, if slowly, make up for at least part of the ENEO shortfall and if their confidence in a resolution is justified could end up being more profitable than before. This would be an ideal scenario and why the shares remain in the bucket list but patience is going to be very much a virtue in this regard.
Faroe announced yesterday that DNO has requested two board positions which is very much akin to putting up a fox for the night in the chicken run. FPM rightly say that these two DNO executives would be conflicted and as I see it as the company (DNO) is trying to make a farce of the idea of independent directors.
As I said when this whole process started I think that DNO, a major competitor of FPM, is trying to take over the company on the cheap. By trying to weasel its way onto the board and become a sort of oily Trojan Horse, DNO has shown its hand even quicker than I thought and hopefully will be repelled at the meeting. Faroe has a very blue chip institutional shareholder register and a good number of retail investors, it is time for them all to stand up and be counted or the industry will see yet another company be sold on the cheap to a foreign company trying to take over possibly the best E&P company in the sector by the back door. YHBW…
Independent Oil & Gas
IOG has announced that it has agreed a £15m non-convertible loan facility with London Oil & Gas at Libor +9% in order to fund the Harvey appraisal well and other needs such as paying off the Skipper liabilities. They have also issued 20m warrants at 32.18p. If successful the Harvey well would significantly transform the company, the board say that it would double high case proven reserves to 286 BCF which would be a ‘reasonably likely outcome'.
With that positive COS I'm not surprised that they have done another deal with London, although I wasn't expecting the forward funding of IOG to again be restricted to them it is good to have such a munificent backer that enables the well on Harvey to be spudded before the year end. IOG appears to be getting itself into position to go forward with its SNS expansion and although will need further funding in both debt and equity this shows that they are confident and keen to get on with the development.
Upland Resources - Erratum
I'm in hot water with Upland and the IR firm have been breathing down my neck for an apology…In my piece after my excellent chat with CEO Steve Staley I wrote, having checked the website that the deal in Sarawak was being completed. The confusion is that they indicate that the deal is ‘potentially being completed' whilst I indicated that the deal was actually completed. Happy to put the record straight….
With the third test match of five starting at Trent Bridge tomorrow India go into the match 0-2 with some thinking to do. England have the luxury of a returning Ben Stokes and the decision as to whom to leave out will be a tricky one…
On the subject of Ben Stokes, Danny Cipriani who could start a fight in an empty room has been given a lifeline by his club in Jersey, will his country do the same?
On to footy, Burnley scored in extra time to beat Istanbul Basaksehir and Rangers went through but Hibs did not.
In the Prem the Gooners must wonder what they did to get such a harsh start to the season, after last week's visit of the Noisy Neighbours they have to visit Chelski this weekend. Another London derby is Spurs v the Cottagers whilst aforementioned Noisy Neighbours host the Terriers and the Red Devils are at the Seagulls.
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