Posted by Malcolm Graham-Wood - Malcy's Blog
WTI $69.36 +8c, Brent $79.83 +5c, Diff -$10.47 -19c, NG $3.14 -11c
Dangerous times we live in especially when one of the hands on the wheel of international diplomacy is President Erdogan, let alone MbS and Mr Trump. despite all this turmoil the oil price is weak for choice, down another dollar this morning following Khalid Al-Falih's comments to TASS yesterday where he said that he could raise output to 11m b/d in the near future and 12m b/d would not be a problem. Indeed in the winter when exports grow as a proportion of production a shortage of oil is unlikely.
Far has announced that its Samo-1 well offshore The Gambia commenced drilling on block A2 yesterday. The Samo prospect has two key reservoir intervals and is assessed to contain a combined prospective resource of 825m barrels of oil. Any success here would not just be transformational for Far, who own 40% of block 2 as well as the same in the adjacent southerly block 5, but pour oil on the fire of what is already a very hot region in West Africa.
RRE has announced a tender offer to buy in 20% of the issued share capital at 560p which is a 20% premium to the 60 day VWAP. The management are absolutely clear that the shares are seriously undervalued and that by hopefully taking out as many sellers around these levels as they can they can achieve a re-rating of the stock.
This does indeed provide a very decent liquidity event for shareholders and it is worth looking at the process from two angles. For someone with say, for arguments sake, 3.1m shares to sell this year they would have had to start on May 23rd, do 50% of the daily volume every day for the five months and would have received an average price of 434p. (Also bearing in mind that companies can only deal in 25% of the VWAP) The other angle is that for the company, who's last cargo of oil went out at $88, would only have to part with four months worth of cashflow above budget to come up with the £17m needed to buy the shares in.
This is the sign of an aggressive management team that has done deals in the last two years or so that have significantly increased the value of the company to a level that they believe is not appreciated in the market. They are saying that they will offer a liquidity event to those who may not be able to sell in large numbers and then see how the value settles. If it remains too low then this may prompt the directors to take further action, one could not rule out the company going private in a move to capture value…
Over in Western Mongolia Petro Matad have spudded the Wild Horse-1 well in the Baatsagaan Basin in block IV of the country. The target is substantial prospective resources of 480m barrels of oil and the rig has been modified to enhance its operability in the low temperatures expected as the 30-45 days needed to drill and log the well will take them into December. Just like the last well, should this come in it will be a game changer for MATD with a current market cap of just £44m….
The Gooners beat the Foxes 3-1 last night winning their 10th game in a row and going above Spurs in the table…
Tonight the Noisy Neighbours travel to Shakhtar Donetsk whilst the Red Devils welcome what is probably the best Juventus side ever, just what they needed…
England are playing the dead rubber in the ODI series against Sri Lanka and have started badly as is often the case when there's nothing to gain, SL are 132-0 after 18 overs.
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