Today’s Blog – Thursday 12 March 2015

Commodity prices

Both WTI and Brent rose slightly overnight, with the former closing up 14c at US$48.31 and the latter going up slightly more (42c) to US$57.96.

Chevron hosted an investor briefing session on Tuesday and the tone therein on the oil price outlook was fairly bearish, with emphasis made on the industry’s productivity improvements and cost reductions that are currently being implemented driving down the overall oil supply curve.

Henry hub was again flat at US$2.82.

LNG

Chevron also provided an update in its briefing on the timetable for its Australian LNG projects.  The mighty Gorgon should now start delivering cargoes in the last quarter of this year, whilst Wheatstone is still aiming for 2016.  So we should see cargoes simultaneously leaving new LNG projects on Australia’s East and West Coasts by the end of this year.

Naturally, Chevron was keen to emphasise that these projects are still “profitable” even at current low oil-linked LNG prices – a common refrain recently from the leaders of oil and gas companies with new LNG projects.  However, whilst profitable, I would assume that the rate of return on Gorgon, given its massive cost over-runs, would be somewhat less than the cost of capital of its JV partners.

New South Wales and CSG/CBM

In the run up to an imminent State election, we are seeing nearly daily stories about CBM from the Premier State.  The latest politician to adopt the “call for a moratorium while we do more studies” routine was  upper-house independent power-broker, Fred Nile, of the Christian Democrat Party.   Mr Nile has asked for a mere five year moratorium period – come on Fred, why not five thousand years!

Wood Mackenzie – new owner

Respected international oil and gas consultancy firm, Wood Mackenzie, has just been sold to NASDAQ listed company Verisk Analytics, for 1.85 billion pounds.  This price represented an EBITDA multiple of an impressive 17 times – so a great outcome for the previous WoodMack shareholders – and watch out existing WoodkMack subscribers for even more expensive services!

Company news – LNG Ltd (ASX: LNG)

LNG put out a company presentation today.  Although it did not contain much new information, it reminded this reader how hard he finds it to understand the market valuations of some stocks.  With a hefty $1.5B market cap, LNG seems to have little assets other than 3 sites with development potential, some MOUs, some regulatory approvals and a “technology” that it has somehow cornered in advance of everyone else in the LNG industry.

Company news – Galilee Energy Ltd (ASX: GLL)

GLL today reported a commercial gas discovery in Texas in a well in which it has an approximate one third interest.  This was a conventional well, and I therefore assume it is likely to be profitable (although as noted above this is an elastic concept) even at current low US gas prices.

Keen readers will remember yesterday’s thesis that those low prices could see significant upside as Gulf Coast LNG demand and reduced associated gas from tight oil wells combine later this year.

GLL is not a stock that with high liquidity or much apparent interest from brokers.  No doubt its large cash balance means the latter’s lack of interest is down to no perceived chance of any lucrative capital raising fees…..

Quote of the day

A headline from the front page of the New York Post (famous for its 1975 front page: “Ford to City: Drop Dead“) – beside a picture of Hilary Clinton: “Deleter of the Free World” (say it in a New York accent…..)

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