Posted by Malcolm Graham-Wood - Malcy's Blog
Just as I said that the inventory stats would remain helpful we got one that rather unsettled the market. With the EIA showing a build of 2.3m barrels after an API draw and forecasts of a draw of around 2.4m the market was flummoxed especially as refinery rates were up. It turns out that imports had a big week and indeed adding to the confusion there were substantial draws in gasoline and distillates. Finally Libya announced the gradual opening up of pipelines but nothing that can really rock the Opec ship at the moment.
I had a very useful update with Sam and Fiona at RKH yesterday, following their recent update I wanted to find out how things were going. It is easy to use the debt trouble that Premier are in to write off the Sea Lion development but that would be far too broad brush an attitude. Of course it is true to say that PMO have their minds on other things at the moment but that doesn't mean that RKH cant get on with the day to day work in progressing the FEED requirements and with continually updated economics it is genuinely still getting cheaper with life of field costs of $35 pb and a phase 1 break even cost of $45. I get the strong impression that there are potential partners out there and with such excitement around Exxon's Liza development in Guyana and the Cairn find offshore Senegal it would be odd if this billion barrel prospect with capex to first oil of $1.5bn didnt attract industry interest.
But RKH has diversified into the Greater Mediterranean and from Italy and Egypt is now producing around 1,350 boe/d which with increased gas prices makes a meaningful contribution to G&A costs. Indeed costs across the board are falling and with the merger of the Salisbury and London offices will fall further next year. RKH is continuing to look at other opportunities in the Greater Med and I wouldnt be surprised if they did another deal in the area, indeed North Africa has proved to be of significant industry interest lately with high value production and exploration upsides. There are always some worries about payments in Egypt but given the recent IMF loan and floating of the Egyptian Pound it looks like the payment situation in Egypt should improve in 2017. The Ombrina Mare case continues with the company attempting to get compensation and damages from the Italian Government.
Rockhopper still has a valuable asset in Sea Lion and with the significant cut back in capex in the last two years has a project that stacks up every bit as well as other international ones and probably better. With production from the Greater Med and cash of $80m at the upper end of guidance, RKH looks decidedly attractive with a market cap of £103m.
Cape has announced a five year contract extension with EDF for support on its coal and gas portfolio which is a useful win at this time.
RockRose Energy has announced that it has signed an agreement with Maersk Oil for non-operating interests in Wytch Farm (7.43%), Scott (5.16%) and Telford (2.36%). The shares will remain suspended until final conditions have been satisfied.
Falcon has announced that the final results from the extended production test at the Amungee NW-1H well were very good coming in at 1.11 mmcf/d over the 57 days and will be a useful determinant for commerciality. Hanging over Falcon of course is the moratorium on unconventional hydrocarbons but if one can assume some sort of settlement Falcon is as cheap as it gets.
And Aminex along with Solo has spudded the Ntorya-2 well in Tanzania, an appraisal one should get the results early in 2017.
I did a podcast on Vox Markets on Monday talking about the latest find by Hurricane, its in here
VOX Markets podcast: includes Malcy on Hurricane Energy
After the rather disappointing test series in India captain Cook is looking a tad isolated in his position. With many months before the next test match there is no reason to do anything silly right now so I would see how things look in the spring.
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