Opinion

Oil Price, Hurricane, Echo, Zenith, President, Columbus, and Finally…


WTI $71.34 +37c, Brent $80.43 +17c, Diff -$9.09 -20c, NG $3.16 -6c

Oil Price

I'm not sure that I can add much to what I have already opined on the oil price. It went up preparing for US sanctions on Iran but that was pretty much in the price when it peaked at around $85, Opec+had met but had already decided to produce more, at least those that could do. So when the Saudis told Mr Trump, and anyone else who was listening, that there was crude for anyone who wanted cargoes they were probably right.

Combine that with seasonal stock-build and last week became a shake out, nothing more, nothing less. This quarter is going to be a bit tight but in the absence of an unknown unknown the market will cope, it's next year you should be worrying about. If you, like me, believe that Opec+ will work in all market conditions then expect them to cut back when the 1Q starts to look oversupplied, which it will. If you don't believe that their discipline will hold then you should be having a look at the shorts available in the market.

Hurricane Energy

News that the Aoka Mizu FPSO has sailed-away from Dubai and is headed to the Lancaster EPS via Rotterdam is almost the final piece in the jigsaw that Hurricane can announce before hook-up and then hopefully first oil in H1 2019. There is now no reason to believe that the hooking up of the wells and final commissioning will not be in place on time allowing several months for production to fully get under way.

Echo Energy

Two pieces of news from Echo this morning, from Argentina and from Bolivia. In Argentina the rig has been used to perforate the EMS well prior to the rigless mechanical stimulation and the results show no moveable formation water which is a very good sign. They will now proceed to frac both this well and the ELM gas well, which seems to be in good condition, consecutively.

In Bolivia the company has signed a TEA with YPFB on the Rio Salado Block which compliments their existing stake in the Huayco block which management consider  have a potential of 1.75 TCF mean for the whole structure over both blocks. There are two not insignificant fringe benefits to this deal, firstly for about $30/- they get access to the very expensive 2D seismic data shot by BG not long ago and rumoured to have cost a lot of dough and secondly that the acreage is between two wells being drilled by Shell and Repsol in the  region, if either of them came in…..

Zenith Energy

Zenith announces that operations are under way to prepare to drill the C-37 well in the Jafarli field in Azerbaijan where they are aiming for a highly prospective, unexploited structure of Upper Cretaceous carbonates formations. The well will initially test the Middle Eocene formation which also has the opportunity to hold significant oil reserves.

Following that the company are planning to drill the Z-21 well on the Zardab block which has become the second well in the programme as it will involve a certain amount of fishing out of tubing from the wellbore. This is an important time for Zenith as it returns to the drilling programme but as it brings on new kit, and another new drilling manager the opportunities are very much still there.

President Energy

President has added a 20% stake in a 693 acre block at Jefferson Island to its Louisiana acreage at a cost of $175/-. The area has ‘significant undrained low risk potential' and a four well programme will commence towards the end of Q2 2019. The acquisition compliments the existing asset base in Louisiana and the wells cost around $2m completed or a net $400/- to PPC who will pay out of existing resources. Whilst there are no working wells there at present, the old ones had ‘compelling economics' and with modern techniques being able to extract more efficiently and with good routes to market it looks like substantial upside could be proved.

Columbus Energy Resources

Columbus has raised £2.5m in a placing at 3.5p (a 6.8% discount) with new and existing shareholders. Half of the proceeds will be used to repay the North Energy Capital facility ($1.25m)  and the rest to establish a multi-well drilling campaign on the Steeldrum assets and in the south-west peninsular facilities. The raise has been brought on by existing shareholders who approached the company asking it to use the money for an ‘accelerated growth strategy', rather than be paying back monthly debt repayments.

The raise is a good thing and with CERP's problem being one of how to ‘bulk up' the business is a reasonable start in that process. I have written many times about how ambitious Leo Koot is and clearly his shareholders want to participate in that which is admirable, maybe once this bulks up a bit more there might be an M&A opportunity available for the next stage…

Link

I wrote an article for Master Investor magazine last month, it is very broad brush on recent oil price history and some company stuff, here it is.

Master Investor magazine article: “Black Gold Shines Again”

And Finally...

As international week continues with yet another Mickey Mouse Cup England B are in Spain with a somewhat less than slim chance. Northern Ireland travel to Bosnia-Herzegovina for their night out.

The racing was good at the weekend, might we have seen another wonder horse in Too Darn Hot?

In the baseball, the Red Sox won at Fenway last night but they lost the first game in Boston over the weekend. They now head to Houston having given up home-field advantage. The same is true of the Brewers who lost game 2 to the Dodgers on Saturday night. A repeat of last years World Series is now very possible…



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