Posted by Malcolm Graham-Wood - Malcy's Blog
WTI $69.25 +$1.71, Brent $79.06 +$1.69, Diff -$9.81, NG $2.83 +2c
The oil price continues the rise that started on Monday with all sorts of influences going on. The weather is also back in the frame as hurricane Florence heads menacingly towards the Carolinas. Elsewhere, the Russians have been talking about the market being ‘tight', no surprise there and I have just seen Novak interviewed on CNBC where he was his usual Delphic self.
The API stats last night showed a huge draw of something over 8m barrels which was compared with the forecast of 800/- b's so would rather wait until the EIA numbers later for corroboration, products still built stocks though.On the subject of the EIA the STEO has, albeit modestly, lowered its US crude output for next year to 11.5m barrels, up only 840/- b's from up 1.02m. The EIA has suggested that the supply/demand situation will be easier 1H 2019 with the call on Opec of only 32m b/d which has caused some commentators to go into a bear panic mode. That will be right if Opec+ doesn't act but I continue to believe that if they see oversupply some return to 11/16 levels will be activated, accordingly I remain confident that oil prices will remain steady.
PPC has made proposals for the granting of 10 year exploitation concessions for each of the Puesto Prado and Las Bases areas previously operated by Chevron and given that they have complied with the minimum bonus and work commitments they expect the concessions to be awarded.
The Puesto Prado is interconnected with and borders the north of Estancia Vieja with 57.3 km² and 23 shut-in wells of which 5 are available for reactivation with last recorded production of 150b/d. It also,has a treatment plant capable of 600b/d to truck to a local refinery. At Las Bases, which is 15 km north of and interconnected to PP and covers 153km² they have a gas field with 5 wells, all shut-in. More importantly it has a compression plant (currently out of commission and needing repairs) but was handling 35 MMscf/d from 3/4 wells. It also has a pipeline running to its own tie-in into the regional gas transport to market. President's Estancia Vieja field is already connected in to this pipeline as Puesto Prado has the benefit of its own gas pipeline running from Estancia Vieja through Puesto Prado to link in with the Las Bases pipeline.
This deal not only gives critical mass in the Rio Negro Province for economies of scale and synergies, production upside and subsurface potential but crucially pipeline infrastructure providing a route to market for President's gas. This is the main reason as to why this deal is being done as the reserves, whilst will help additionally, are not ‘material', but the expansion of President's footprint certainly is. When I talked to Peter Levine on Core Finance last week and asked him whether he could monetise Estancia Vieja gas he said ‘wait and see', I waited, now I can see what he has done. This is a good deal for these reasons, it ticks the boxes for these infrastructure reasons alone and is funded from PPC's strongly cash generative position.
Results today from Echo which are meaningless in themselves but do remind us that the company has got off to a flying start in Argentina where 1H sales of oil and gas were worth $2.1m each. With this production and significant upside in the current campaign as well as the recently announced seismic campaign Echo is looking in increasingly good nick. Bring on Tapi Aike….
I don't normally comment on articles in local newspapers but the avalanche of inbound very recently from various sources in Niger leads me to write something. The papers are suggesting that a number of companies may be in discussions with SAVP with regard to farming-in to its Agadem Basin discoveries as well as possibly buying in to the company's Uquo and Stubb Creek fields in Nigeria. These companies include Indian NOC ONGC, who has been linked with the area for a long time and Sinopec as well as Chines companies Sinopec and Zhenhua. Whilst I havent spoken to SAVP it has always been on the agenda for them and it wouldn't surprise me at all if one of these ‘stories' came to fruition, if they did it would prove up the significant value which the market has yet to crystallise, watch this space…
Genel CFO, Esa Ikaheimonen, is speaking today at the Pareto Oil & Offshore conference and I think it is worth noting a few comments he is making as the shares have been an uninspiring performer since joining the bucket list recently. Genel had record payments received in August which totalled circa $30m and free cash flow is currently over $15m per month and the company expects to be net cash positive by the end of this year. They have also submitted the FDP to the KRG for the oil development at Bina Bawi and negotiations are underway on commercial terms.
Interims from IGas where production is 2,300 b/d and with guidance for the year of 2,200-2,300 b/d and opex on budget at $32.50 boe. With the Stockbridge production recovery ongoing and the water injection well is back online. The Albury gas to grid is expected in Q4 as is the appraisal well at Tinker Lane. All eyes in the sub-sector will be on Cuadrilla as they expect to start stimulation very soon.
Chariot Oil & Gas
Just a brief mention of Chariot as looking backwards here is less fun than what may be coming ahead. What I mean is that they are all ready to drill Prospect S in Namibia with a rig booked and on target for a Q4 spud date. Targeting 459 mmbbls of gross mean prospective resources and a total of future potential upside of 2.2bn bbls within other Central Blocks licence it will be another bite at a very substantial cherry for Chariot. With Tullow already drilling ahead in country the many other companies with acreage will be watching intently, along with CHAR shareholders…
Monday saw my regular Podcast, here is the link.
Yesterday I interviewed on Core Finance TV Ed Bowen now of EDR, a dedicated geophysical consultancy, here is the link.
I wasnt expecting the final test match to go on quite so long so those spectators who attended The Oval yesterday got good bang for their bucks. After having seen the Chef retire in style they saw Jimmy Anderson crash the middle stump to win the game and become the best fast bowler of all time….
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