Today’s Blog – Friday 13 March 2015

Commodity prices

As at the time of this blog, both WTI and Brent were down from yesterday’s numbers, at US$47.10 and $57.31 respectively.  Crude storage levels have gone up again (with 52 million barrels at Cushing alone) and this appeared to be the key weight on the market.

Goldman Sachs reiterated its bearish view on oil prices, making a call that WTI will fall to US$40 later this year.  The conspiracy theorists amongst us will ask “whats in it for them” when Goldmans makes a market call…..

Henry Hub was down slightly to US$2.75.  The US has emerged from a second very cold winter in a row with robust gas storage levels (certainly quite a bit higher than last year) and the market does not yet appear to be looking ahead to the LNG export draws that will come on-line later this year.

LNG

The East Timorese Government has apparently offered to buy out parties in the Sunrise joint venture (such as Woodside) who it perceives as being recalcitrant in moving this asset forward.  However, it is not clear as to whether this is an official position, and it is certainly not clear that the East Timorese would have the funds and expertise to purchase, develop and market a complex LNG project.

The numerous West Coast Canadian LNG projects, which compete directly with Australia for Asian LNG markets, appear to be making no real progress in the current challenging commodity price environment.  The most advanced project, Pacific Northwest LNG, led by Petronas (and crucially, with LNG buyers in the JV), deferred FID from late last year to mid this year and is now facing another delay from environmental regulators (in this instance it is salmon – but there are plenty of other things that could emerge).

In my view, all of these Canadian projects, although well located from a market and resource perspective, will struggle to reach FID in the short term.

Global anti-fracking moves

The oil and gas production power-house that is Germany recently joined the long ranks of those concerned about fracking, with the Environment Ministry putting in place significant restrictions on matters such as depths (fracking only allowed below 9,800 feet, which seems random – and deep).

Also, in the rather more genuine oil and gas powerhouse of Alberta, the energy regulator is investigating tremors that may have been caused by sub-surface activities such as fracking.

In a rather rare instance of common sense, the Northern Territory Government has released an independent report that has found that fracking can take place safely.  Who knew!  No doubt the Fred Niles of the world will read this and change their calls for practically eternal moratoriums….

Company news – Beach Energy Ltd (ASX: BPT)

The Australian today drew some Cooper Basin inferences from the Chevron analyst briefing that I mentioned yesterday, namely that Chevron appeared to view the Cooper Basin as an exploration area for 2015.  The Chevron and Beach joint venture in the Cooper Basin contains terms under which the former have until the end of this month to elect to proceed to another round of exploration expenditure.

My view is that Chevron is in a strong position to re-negotiate any aspects of the deal that it now does not like, as Beach would be very keen for it not to walk.  If Chevron want to defer expenditure, go slow, etc, then Beach should accept that.  The South Australian part of the JV is now held by long term retention licences.  So I expect Beach to announce in coming weeks that Chevron is still in – but under different terms.

Company news – Senex Energy Ltd (SXY)

Another minor bit of news from the Cooper Basin today – namely the purchase by SXY of minority interests in some of its joint ventures held by micro-cap Orca Energy Ltd (ASX: OGY) for $2M.  Although not material in itself, this deal reflects the ongoing concentration of ownership of the Cooper Basin, with only a handful of the small juniors still remaining in the area.

Quote(s) of the day

From the archive of “heard in the lift at Goldman Sachs”:

“If you can’t dazzle them with brilliance, baffle them with bullshit.”

“If I could chose between world peace and a reasonable fortune, my first Lambo would be orange.”

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