Today’s Blog – Wednesday 29th April 2015

Introduction

Just as the British Government has vowed to block any takeover of BP (you know, the company with its main assets in Russia and the US, run by an American and a Swede), the Chinese NOCs Sinopec and PetroChina have said that any rumours about their merger are not true.  This has the vague ring about it of the Chairman of a football team giving his under-performing team coach his unqualified support just before he is sacked.

Maybe we will therefore see NOC mergers before Super-Major mergers?   The NOCs’ current financial woes seem to be worse than the Majors (no doubt caused by factors such as their coming late to the international asset acquisition game and political meddling in their investment decisions, etc).

Commodity prices

Overnight WTI strengthened a tad to US$57.06 whilst Brent retreated very slightly to US$64.64.  Confusion over the apparent Iranian seizure of a cargo ship in the Strats of Hormuz reminded the market that “events” in the Middle East could easily trump any inventory build data in the US.

Henry Hub closed at US$2.53, after trading at its 3 year low point earlier in the day.  The mighty Marcellus in particular keeps on producing very strongly.  My views of higher US gas prices to come will inevitably be true at some point, but in the meantime I’m reminded (again) of J M Keynes’ wise words about how one can go broke being right (to radically paraphrase him).

LNG

The EIA has recently put out a report noting the ongoing and likely further rise of floating LNG receiving terminals in countries around the world. These provide access to a wider range of markets than traditional fixed gasification plants.

Given current expectations for the market price of gas in Australia (~A$9 at Moomba – say A$10.50 in Sydney) versus the current spot price for Pacific LNG (~US$8/mmbtu in Japan) it seems to me that even Australia could host a floating receiving terminal in Sydney and it would make money.  The NSW Government would do doubt prefer to get gas from Pennsylvania than from within its own State – the fracking would be a long way away.  The fact of 3 liquefaction plants just up the East Coast might look a bit strange though.

Company news – Beach Energy Ltd (ASX: BPT)

The AFR today reported comments from BPT’s MD, Rob Cole, following yesterday’s rather gloomy quarterly report, about his pursuit of opportunities to sell Cooper Basin infrastructure.  This is not the first time BPT has raised this under Cole, but as yet there has been no public comment about this from the operator of said infrastructure, Santos.  In theory, placing such assets into the ownership of investor classes seeking yield rather than commodity price exposure would make sense.  However, no doubt there are a few thorny issues to be addressed before this can happen – such as guarantees over throughput, etc.  Watch this space over the coming year.

Company news – AWE Ltd (ASX: AWE)

AWE took its turn to issue a quarterly report today.  Although it couldn’t avoid the same negatives as its peers over declining prices and revenues, its overall tone was far more positive than BPT’s.   Having a new MD like BPT tends to induce negativity over what he has inherited – whilst AWE has what appears to be a great upside asset in terms of its discoveries in the Perth Basin.

Company news – Buru Energy Ltd (ASX: BRU)

BRU seems to be getting its mojo back in the Canning Basin in WA.  After what seem to be interminable native title and other issues, it has just announced a forthcoming multi-well exploration program – for good old conventional crude oil.  The current state of the oil and gas service sector has allowed it to contract 2 rigs on terms that are much better than were available in the good times (a dim and distant past it currently feels like).

Quote of the day

Another one from Tiger Mike:

“I swear, but since I am the owner of this company, that is my privilege, and this privilege is not to be interpreted as the same for any employee. That differentiates me from you, and I want to keep it that way. There will be absolutely no swearing, by any employee, male or female, in this office, ever”.

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