Today’s Blog – Friday 8th May 2015

Introduction

One of my (unofficial, but iron) rules of ASX reporting is that no-one puts out anything interesting on a Friday (keen readers will recall some of my other ASX reporting maxims, such as “good news is always material, bad news rarely so”, “report bad news in the afternoon”, etc).

Today’s blog, typically for a Friday, is accordingly is a bit light on with respect to new ASX announcements.

Commodity prices

What seemed to be a not unexpected retracement of the recent sharp run-up in crude oil prices occurred overnight, with Brent falling to US$65.54 and WTI to US$58.94.

Although in my view this was largely a profit-taking fall, the market also reacted to an increased likelihood that an Iranian nuclear deal could be closed, hence releasing the Islamic Republic’s shut-in crude production capacity, possibly by as soon as later this year.  The US Senate yesterday voted overwhelmingly to pass a law requiring a sensible rather than silly degree of congressional oversight of any deal struck by the executive.

Henry Hub fell a touch to US$2.74, as US weather returned to a more normal “goldilocks” type for the time of year, which requires extra gas neither for heating or cooling.

Government actions

Reuters reported that the Indonesian Energy Minister would seek Presidential permission to apply to re-join OPEC (that’s the Organisation of Oil Exporting Countries).  Indonesia is of course an oil importer and there is virtually no chance that will change.

What the Energy Minister is trying to do is obscure – perhaps signal politically to voters rather than commercially to OPEC that the country will somehow significantly increase its oil production?

This bizarre action might resonate with an Australian audience who recently came up against the large cultural dissonance between its “outcome focused” view of the world versus the Indonesian “so be it” attitude (to simplify, of course).

LNG

The FT reported this week that the Russian Government had asked the Chinese to increase their stake in the far North Siberian Yamal LNG project.  Given Yamal is arguably the worst LNG project in the world, not surprisingly the Chinese gave the request a cool reception.  This demonstrates yet again that Russia needs “other people’s money” to support its upstream businesses.  In my view, the Chinese will be far keener to invest in the Eastern Siberian gas fields and pipeline assets that will deliver gas to the PRC next decade.

Also on the LNG front, but this time here in Australia, local media has reported that the Origin Energy/Conoco APLNG project in Queensland appears to have slightly slipped its timing of first deliveries. Although this small delay would have only a minor value affect, the market did not like it and sold down Origin yesterday.

Company news – Woodside Petroleum Ltd (ASX: WPL)

The normally tight buttoned image of WPL was loosened somewhat by yesterday’s reporting of a presentation by the Company’s EVP Business Development and Growth, who likened the recent rapid pull-back of US companies from international operations to focus on US shale oil/gas to the legendary chase scene in the Benny Hill Show.

Hey Apache – that’s you he’s talking about!

He also said: “be very careful about short-termism versus long-termism, [and avoid] “knee-jerk reactions” [to investor activism]”. 
Some unkind people might say that WPL’s own current focus on being a high dividend-paying utility rather than a risk-taking E&P company might have something to do with focusing on short term investor wants…..

Company news – Santos Ltd (ASX: STO)

STO’s MD was quoted as saying at an investor conference earlier this week that the company’s plans to sell its gas transmission asset in Queensland was now looking at a timetable of a sale occuring next year – which appears to signal some slippage from prior communications to the market.  Given the four party JV asset ownership structure, two members of which are controlled by Governments, the sale process has no doubt been more complex than anticipated (and who could possibly have planned such a thing ahead….).

The MD also seemed to open up other possible infrastructure sales, echoing recent comments from its Cooper Basin JV partner, Beach Energy Ltd (ASX: BPT).

Quote of the day

From the Benny Hill show, a typical joke from the golden era of British saucy comedy:

Blanche: Drink and sex. That’s what killed your uncle – drink and sex!

Harry: Yeah. He couldn’t get either, so he shot himself.

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