Posted by Malcolm Graham-Wood - Malcy's Blog
Sometimes the market wants to go in a certain direction, a few weeks ago no amount of good news could trigger a rally, at the moment it is the other way around. Yesterday, news that the uprising in the control room at the Sharara field in Libya had been put down and production was back up, pushed crude down sharply but the subsequent rally left oil well off the lows.
There were three pieces of good news in the market, firstly the Saudis acted on their recent words regarding non-adherence and announced that they were cutting supplies to Asian customers in September by 10%, agencies reported that next month over 500/- b/d would be coming off the market. Further good news was supplied by the CFTC as last week's data showed a significant increase in money managers long exposure to WTI and Brent crude, indeed NSL was over 100m barrels and to the tune of $32.8bn, twice what it was in June. Finally, further unrest in Venezuela including first reports of military unease, has increased geopolitical risk and the likelihood of further sanctions on their oil, particularly to the USA.
Range has announced the acquisition of oil and gas assets in Indonesia with the signing of an SPA with Hengtai to buy 23%, rising to 42%, on completion of a minimum work programme in the Perlak field. The cost is $3.2m which will be paid from cash resources and brings RRL 500m bbls of total reserves and resources left in place. The low risk, low cost work programme is not dissimilar to the Caribbean or South America, with workovers and re-initiating existing wells to increase production.
The programme will consist of four workovers which should up production by 120 b/d and the minimal commitment to drill one well within three years should be easily achieved. Indeed the company are looking to expedite it and go beyond these minimum targets. The company have a put option in place to ensure milestones are passed which include include, achieving minimum production of 800 bopd from the Perlak field over a continuous 90-day period, as well as proving up independently audited 1P reserves of at least 10 mmbbl within a three-year period.
This seems like an eminently sensible deal to me, RRL get a reserves addition, low cost production and diversifies them from their existing asset base. They have kept their commitment to make further acquisitions in and outside Trinidad so this is not a change of strategy in any way. Unfortunately the shares are still suspended but should return to the market next month when the RTO document is published, patient investors will be pleased to see that management continue to deliver with smart deals like this one.
I rarely get in more trouble than when I write about Tower Resources and over so many years, indeed that they are still here, albeit still suspended, is something I would never have anticipated. Today they announce that the open offer has been wildly successful or in their words ‘substantially oversubscribed' and that they have raised £187,900 to put towards running the business. This huge amount will allow them to ‘refocus our attention on our work programme in Cameroon' and of course its financing to which this raise will not add much in the way of heavy lifting. They say that this is time of ‘principal uncertainties' but also ‘great potential opportunities', I have to say that someone else's name should be above the door in the Thali block to whom it may be a ‘great opportunity' as this will take some getting out of…
Yesterday's Voxmarkets Podcast concentrated on Providence Resources, President Energy, Amerisur and Genel, the link is here should you want to listen in.
England won the 4th test against the Proteas and the series 3-1, star of the show was Moeen Ali with ball and bat, the team played well but positions 2,3 and 5 are still up for grabs. The selectors minds must be in a weird place, Jennings continues to bat badly, Westley isnt yet showing positive signs and why pick Malam from the one day game when you could choose Hales? Dawid even turned up with one of those Mickey Mouse bats until he got yorked where the missing bit should have been.
Tonight is the Super Cup between Real Madrid and the Red Devils, still only a practice match although worth watching Bale, assuming he gets a game…
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