Opinion

Oil price, Bowleven, Falcon Oil & Gas, And finally...

Posted by Malcolm Graham-Wood - Malcy's Blog

15-Feb-2017


Oil price

Same old, same old, as the oil price reacts to various stories all well known to market participants. Yesterday was an up day as it seems to be confirmed by almost all sources that cohesion was over 90% in January led by the Saudis. The various reporting bodies are showing that the oversupply will run out around halfway through the year pretty much whatever the US shale does and so providing that 1) Opec and its partners hold tight and 2) roll over the agreement in June all should be ticketty boo.

Money managers took a little moolah off the table last week but their positions are still incredibly long by historic standards. Finally the API stats which came out after the close showed a bigger than expected crude build at 9.9m barrels and disappointingly also saw a build, although very small in gasoline and slightly bigger in distillates. Tonight's EIA numbers will show more clearly quite how big the inventory situation is.

Bowleven

The company has announced that the circular containing the notice of the General Meeting has been posted along with the resolutions proposed by the activist shareholder Crown Ocean Capital. Their proposals include sacking most of the board and returning ‘excess' capital to the shareholders, at least Dick Turpin had the decency to wear a mask…

Unsurprisingly the board have urged shareholders to reject these proposals, in my view for the waste of the company's time and money that they are. I have never seen this lot around the oil and gas sector before and it looks pretty much like a bunch of ne'er-do-well's on the make but they have bought a substantial stake and are entitled to try and shake things up. Having said that the 16% holding that they have must be pretty close to any cash gains they must hope to make, bringing a touch more beta to the process than they are probably comfortable with.

I have commented a number of times in the last year or two about the fact that the situation in Cameroon has been far from perfect, but in most cases it hasn't been BLVN's fault and that shareholders have been well served by the farm-out that they negotiated. I would also suggest that a combination of unexplained delay by the operator, NewAge, and long and drawn out discussions about the offtake have delayed the Etinde project unnecessarily. It is quite ironic therefore that just when it seems that a solution, or solutions are much closer to being ironed out that an enemy appears at the gate. Another suggestion as I understand it, is to concentrate totally on Etinde at the expense of Bomono, (which I understand is close to farm-out anyway) although that is pretty much what the board are doing anyway, equally,  the company has made it clear that they continue to screen projects and opportunities on a daily basis. Having got this far I do not believe that it is in the interests of anyone but the marauding shareholders, who have already made a few quid as a result of this, but to support the management, as another author once said ‘nothing good can come of this'.

Falcon Oil & Gas

Origin has pretty much confirmed that the results of the extended production test on the Amungee NW-1 indicate the discovery of a ‘material gas resource' in the area. This significant discovery is from the Middle Velkerri B shale formation and amounts to at least  2C resources of 6.6 TCF not including other shale formations. The OGIP number of 496 TCF of gas over the 16,000 km² seems huge even using the company's 16% recovery rate and would not only be as material as but analogous to the Marcellus and Barnett shales in the USA.

The bad news of course remains that the Northern Territories Government have a moratorium on fraccing in the area and so nothing can happen for a while. Initially the worry was that this might take the whole duration of the term of the Chief Minister but now it seems that we might get an interim report by ‘mid summer'. If this gave shareholders any sort of indication that the moratorium might be lifted then the game changes completely. My own feeling is that if work was carried out away from the few densely populated parts of the area and that it would be carried out in a safe and highly regulated manner then it would likely be more than a 50:50 chance of success, after all this is so big that it makes a difference to the whole country, and of course their taxes…Those who are prepared to play the long game will, I suspect, be amply rewarded.

And my Vox Markets podcast from Monday is below…

VOX Markets podcasts: Malcy on SDX Energy, Hurricane Energy and Faroe Petroleum

And finally… 

Last night saw PSG demolish Barca 4-0 in the Champions League, the second leg may or may not be fun to watch… The Gooners are at Bayern Munich tonight…

And Outlander was given top weight by the handicapper yesterday and was promptly withdrawn from the race by trainer Gordon Elliott…

Malcy's BlogBowLevenFalcon Oil & Gas

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