Oil price, Coro/Empyrean, IGas/Egdon, Reabold, Cairn And finally…
WTI $56.07 -59c, Brent $65.74 -56c, Diff -$9.67 +3c, NG $2.87 n/c
Oil price
Traders tell me that whilst the oil price didn’t close the week with any bells and whistles (WTI up 27c, Brent up 67c) there were some fairly manic trading days, not least of all on Friday when a good number of us were in Edinburgh at the Scottish Oil Clubs. After a big fall early doors, crude rallied when Saudi Minister Khalid al-Falih made a statement suggesting that Opec+ will unlikely change production at the April meeting as they are seeing ‘healthy global demand’ at the moment.
Given that part of the fall during the week was on Chinese demand worries and even on Friday due to very poor US payroll numbers, the market certainly gave the benefit of the doubt on global GDP concerns. The second reason for confidence was the rig count, on Friday afternoon Baker Hughes announced a fall of 11 rigs overall to 1027 units and down 9 in oil to 834.
/
Coro and Empyrean have announced that the Plan of Development (POD) for the Mako Field, offshore Indonesia has been approved by the Minister which given that Coro only announced purchase of the stake on February 11th is pretty quick by any standards. Obviously this is very good news for both companies as it is a key step towards a Gas Sales Agreement and thus monetisation of Mako gas to thirsty Singapore markets. I still believe that Coro with its top quality management making excellent quality deals, sensibly financed, is way too cheap and readers know that my view on Empyrean is of a similar nature.
/
IGas has announced in an operational update that the Springs Road well, SR-01 has encountered a hydrocarbon bearing shale sequence of over 250 metres including the upper and lower Bowland Shale. In addition to that the company says that ‘significant gas indications were observed throughout the shale section and additionally within sands in the Millstone Grit sequence’. (The company has provided footage of the gas effervescing into water which is a very good sign)
A good deal of analysis is now required and when completed the company will have further insight into reserves potential and shale characterisation, in the meantime the company is drilling the tertiary target. IGas CEO Steve Bowler has rightly said that a discovery of this size in the UK could ‘contribute materially to UK energy needs’ and that it is important not least as 80% of UK homes are heated by natural gas. With other recent potential discoveries by this team and by Cuadrilla there are areas in the country that could benefit significantly at a local level from potential revenues and of course at a National level could improve the balance of payments, even for local or national politicians this is indeed a gift horse which should not be looked in the mouth…
It has been a roller coaster ride for RBD lately, what with the first Colter well going too far South but still making a discovery and then on Friday finding out that the side-track well headed north was sub-commercial. To me the best explanation was that the well wasn’t drilled in the wrong place it was the fault that was in a different place… As a result the North side has shrunk whilst the South side, subject to more work by Corallian the operator on the extensive South Terrace might just have got bigger. It will take a while to decide what to do from here, if it is a commercial project and thus a reasonable success how to develop it from here, maybe Perenco might have some input…
The better news for Reabold came this morning when they announced that the Monroe Swell well at Burnett 2A in California has come in with ‘significant oil and gas shows seen in the targeted Burnett and lower B sands’. Wireline logging here indicates in excess of 60 metres which is in excess of pre-drill estimates. RBD are paying the full cost of two wells here to earn a 50% WI and will complete that after the second well. The best thing about these wells is the speed in which they progress, with production coming on stream quickly payback on the wells is very fast and return exceptional making the economics as good as any that can be seen.
Cairn has announced that the India arbitration has been delayed, so no surprise there then. Indeed the fact that they have given us a date, ‘unlikely to be before late 2019’ is in my view over optimistic. Whilst this should not be meaningful ( after all Cairn has been out of the money for some years already) to the company as a whole it is a right royal pain and a reminder to others who might consider doing business in the country.
And finally…
A big weekend of sport again and with Cheltenham imminent another world class event is about to unfold.
In the football, the Noisy Neighbours and Liverpool both won whilst Spurs lost and the Gooners beat the Red Devils, meantime Chelski getting a late point have made positions 3,4,5,6 in the Premiership most interesting.
The last weekend of the Six Nations rugby will be critical as any of Ireland, Wales or England can still win and with the fixtures coming consecutively on Saturday afternoon, finishing with England v Scotland the Grand Slam may have already been decided.
In the third T20 international England again comprehensively beat the Windies in the last match of the tour in St Kitts.
Disclaimer & Declaration of Interest
The information, investment views and recommendations in this article are provided for general information purposes only. Nothing in this article should be construed as a solicitation to buy or sell any financial product relating to any companies under discussion or to engage in or refrain from doing so or engaging in any other transaction. Any opinions or comments are made to the best of the knowledge and belief of the writer but no responsibility is accepted for actions based on such opinions or comments. Vox Markets may receive payment from companies mentioned for enhanced profiling or publication presence. The writer may or may not hold investments in the companies under discussion.