Posted by Malcolm Graham-Wood - Malcy's Blog
Yesterday the oil price went down, Petro something or other counted some tankers and said that within Opec, and from Russia, oil exports were ‘on the rise'. I'm not sure that they are but who knows? After the close the API reported inventory stats which cheered the market as they actually reported an unexpected draw in stocks of a short 900/- and -1.5m at Cushing. This morning the see-saw continues with crude oil up around 80 cents a barrel.
Finally and I write this because all my old readers know how much I enjoy the stat..The US Department of Transportation have announced that last year US motorists drove 3.22 trillion miles which was up 2.8% on 2015 and shows a delightful disregard for their own carbon footprint…
Far has announced a drilling update from SNE-5 which has reached TD and completed wireline logging operations. Right now the DST is underway which will add further to the sum knowledge of the field. These two wells are not exploration wells, more ‘development optimisation wells' intended to fine tune the concept of the field. I am writing a longer piece on Far in the next few days but thought that the update was worth noting and also the Woodside results presentation at which I had a spy.
Given the the whole process is still sub-judice, WPL are acting on an ‘assuming that they succeed' basis which I will address in my next note. At the presentation they said that Senegal was their second highest priority this year and one that ‘has the potential to move the dial' which if is the case for WPL makes Far outstandingly cheap. They have a 2C resource number of 560mmbls which compares with Cairn at 470m and Far at 641m, figures which might all raise if they drill maybe two more exploration wells after the current two, something that is perfectly possible. There are some questions about when first oil will come, i'm currently reading it at between 2021-2023, the nearer number is likely the Government's influence, Far are at 2022 and the latter maybe Cairn's number.The field has a plateau production, where WPL are at 120/- b/d and Far at 140/- currently and with development expenditure of $13-15/bbl and opex of $12-14/bbl breakeven oil price is currently envisaged at $35/bbl.
Given all these numbers and with a number of wells possible this year, I would suggest that pretty much whatever happens in the pre-empt shenanigans Far is in a very strong position especially if you listen to the WPL angle on it. As I have said, I am writing a slightly longer piece which looks at the politics and the significant potential of Senegal and hopefully have that next week.
More bad news for GKP this morning as the MNR have banned Shaikan crude from the Kirkuk-Ceyhan pipeline in order to make room for some ‘better quality crudes' although to be fair they are paying for the trucking and the company say it is a temporary measure. The MNR also say that they will continue to pay $15m to GKP subject to usual caveats, I would say that they should include back pay. GKP say that subject to all the usual ‘ongoing discussions' with the Government that they will be able to contemplate further investment which would push plateau production up from 40/- b/d to 55/-. It's a very long time since I saw GKP but at the moment there are a few signs that things might just be picking up a touch.
Petrofac reported yesterday whilst I was in a rather wet Glasgow but appear to be delivering pretty well under current circumstances. I wrote after my meeting with the new CFO that after all the recent banana skins that things were looking up and I still believe that. They hit pretty much all of my targets and I knew that I was low field on order intake, that was addressed by ‘excellent visibility' and strong bidding activity which I hope will deliver. Back at below 900p I think that the stock is too cheap and with a 10 P/E I would expect the price to be at least 1,100p.
Also yesterday I noticed that Sirius Petroleum raised some money, to be exact it was £2m at 0.75p. With the tantalising sight of a drilling programme there are long lead items to pay for which is why this is good news. Paying off the Calvet convertible is also wise as the company clears the decks for what looks like a highly interesting medium term future.
I have done a number of interviews lately including my regular Monday Podcast, links should be below
Still pretty quiet but the Red Devils won by a goal in St Etienne yesterday and Spurs need a little more tonight as they go into the second leg against Gent a goal behind. Talk of Wayne Rooney leaving for China is still rife, going from £275/- a week to a million a week seems pretty senseless to me but then I dont have those calls to make.
Subject to news and my Ipad tomorrow there may, or may not be a blog as I travel back up north to the infamous Scottish Oil Clubs Dinner in Edinburgh….
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