Today’s Blog – Wednesday 18th March 2015

Introduction

Although still carrying some sort of cold following some international flying on the weekend, your correspondent has dragged himself back into the blogging booth for another daily blog.  This is in part a rebuttal to my partner’s proposal that I go to the Doctor in case I have swine flu or ebola!

Commodity prices

The downwards trend in both WTI and Brent continued overnight, with the former settling at US$42.51 and the latter at US$53.44.  The former is now at 6 year lows – and the previous low was of course at the bottom of the “v-shaped” dip we saw during the GFC.

Amongst the many factors the market is weighing up appears to be some increasing confidence in an Iranian nuclear deal which would allow the Islamic Republic to bring back on ~1mbopd.  The market clearly could not physically absorb this sort of volume at present, given the current inventory build-ups reaching constrained levels, so the downside pricing required to bring some sort of balance to an even more over-supplied market could be large.  Closely connected in Iran watcher’s minds is the political situation in Israel – and it seems likely that a close election (results due soon) will require a period of coalition building and likely ongoing instability.

Henry Hub closed at US$2.85, which again was pretty flat, reflecting the spring “shoulder” period the US market is in.

LNG

British Columbia has recently entered into a number of “project development agreements” promising fiscal, etc, stability for LNG projects in the Province (although this does not cover taxes at the Federal level).  One of the parties who has obtained this political insurance policy is the leading project – the Petronas led Pacific Northwest LNG project.

It is interesting to compare this to the Australian LNG projects which have gone ahead in recent years – none of which obtained (or to my knowledge sought) such a fiscal stability arrangement.  This no doubt reflects the perception of heightened political risk in BC (native groups, greenies, political power of Vancouver over the regions, etc) – and the increased power of the LNG project proponents in a world which is “long” LNG projects.

Gas producers in the Montney in BC have recently affirmed that they are making money at sub US$3/mcf gas prices.  This is a very high quality unconventional gas resource – and I would expect public companies to say nothing else!

Company news – Woodside Petroleum Ltd (ASX: WPL)

The well paid executive team at WPL over at Perth must be excited this week about having to do other than calculate the next dividend payment, with production at Pluto now coming back on line following the recent shut-down over a drifting rig.

Company news – Beach Petroleum Ltd (ASX: BPT)

Unfortunately, the WPL boredom factor seems to have crept East to BPT, with the company making an exciting announcement this morning that its dividend will be 1c per share.  Oh for the halycon days when investors were more interested in oil and gas discoveries than what pitiful yield is on offer!

Company news – Karoon Gas Ltd (ASX: KAR)

KAR has recently spudded its Kangaroo West-1 exploration well off Brazil and will be hoping to follow up on the success of the recent delineation drilling.  Notwithstanding the high cost of its offshore drilling campaign, the company appears to still be well funded following the exceptional result it obtained last year in selling what in my view was a low class contingent gas resource to Origin Energy Ltd for a very hefty price.

Company news – Sunbird Energy Ltd (ASX: SNY)

ASX micro-cap SNY today announced that it had entered into a GSA term sheet with respect to its offshore South African gas field – for a hefty (gross) 450 bcf of total sales.  Unfortunately, price was not mentioned.  The market’s reaction – precisely nothing.  Given the company’s market cap of less than $14M, this to me indicates that this market is just plain not interested in small oil and gas stocks.

Quote of the day

Inspired by the KAR story above:

Napoleon: “I know he’s a good general, but is he lucky”

Lefty Gomez: “I’d rather be lucky than good.”

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s