Today’s Blog – Monday 23rd March 2015

Introduction

Although hordes of zombies have yet to start spreading in Adelaide (or at least, not that one would notice more than usual), your blogger is still toiling under the influence of a virus.  Hopefully things will start getting better soon.  Even more caustic comment than usual could otherwise follow!

Commodity prices

Brent (currently US$54.75) didn’t change much at the end of last week, whilst WTI (US$46.01) showed a healthy up-tick in response to the ongoing fall in the Baker Hughes rig count (down 41 week on week).

A psychological milestone was passed in North Dakota, with the rig count there (the effective proxy for the overall Bakken) falling below 100 rigs – a level often said to the be the minimum required to maintain production at current levels.

Henry Hub closed down at US$2.74.

LNG

I noted last week that total Australian petroleum production should, by 2016, exceed total UK North Sea production, with greater than 1mmboe/day being reached.

However, the profiles of that production will be very different:

  • Nearly all gas in Australia (most for LNG projects) – but still a majority of oil in the UK.
  • In Australia – >95% held by Super-Majors and LNG buyers (plus the handful of Aussie independents, BHP WPL, STO and ORG) – all of whom are likely to be long term asset holders.  Asset liquidity is therefore very low.
  • In the UK – a much wider mix of owners (with Super-Majors being on balance sellers) and a reasonable degree of asset liquidity.
  • Employment in the sector in the UK being > 300,000 – in Australia it is more like 10% of this.

International – US fracking rules

The US Federal Government announced some recent changes to the regulation of fracking at the end of last week, which gained some media attention.  However, the mainstream media has missed one of the key points here – this rule change applies to Federal lands only.  The vast majority of shale oil and shale gas is produced from private (and State) lands and this rule change will therefore have only very limited direct application.  Indeed, its likely affect is to layer on yet another reason why Federal lands will be seen as unattractive in the US oil patch.

New South Wales – coal seam gas “mining”

With only one week to go to the NSW election next weekend, the side of sanity appears to be thankfully prevailing in the opinion polls, with the “anti any CSG production in NSW” Labor party well behind in the polls.  However, whatever happens, the ALP’s stance will have given long term succour to the zealots who oppose CBM “mining” (Arrrghh!) in the State and who want it replaced with “err, hmm, err, maybe something else, somewhere else?“.

Company news – Linc Energy Ltd (SGX: TI6)

A Manager (someone called Bond who is not the MD) from ex ASX listed Linc Energy Ltd made a presentation in Adelaide on Friday on the company’s South Australian “shale oil” assets.  The ridiculous hype previously promoted by Bond pere was thankfully retreated from, but Bond fils did seem to put his foot in it a bit: the Advertiser quoted him as saying the regulator was “essentially uneducated”!  I doubt the rest of the international oil patch would agree with that – and also it could make for an interesting phone call in the future: “Hi Barry, we were looking to call FM on our permit due to floods and get an extension…..click….hello? hello?”!

Company news – Cue Energy Ltd (ASX: CUE)

CUE is currently the subject of an on-market takeover from New Zealand Oil and Gas Ltd (ASX: NZOG).  This not often used, but arguably effective, takeover mechanism seems to be delivering today, with 93M shares changing hands and likely giving NZOG a position from which it should be able to win without much opposition or risk.

Quote of the day

Thinking about the worthy opponents of CBM, fracking, etc, in NSW (and most of the rest of the World?) use of the dishonest phrase “coal seam gas mining” brought the following to mind:

It would not be impossible to prove with sufficient repetition and a psychological understanding of the people concerned that a square is in fact a circle. They are mere words, and words can be molded until they clothe ideas and disguise.”

Joseph Goebbels

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