Today’s Blog – Tuesday 19th May 2015

Introduction

The second day of the APPEA conference starts today and the AFR and The Australian have reported some comments therefrom which are actually interesting rather than anodyne – from the MD of Woodside Petroleum Ltd (ASX: WPL), Peter Coleman.

Coleman rebutted the view of the head of BHP Petroleum that the current oil price down-turn would be shorter than those seen in the 1980s and 1990s (as summarised in this blog yesterday).  In Coleman’s view, the “new normal” of close to zero interest rates and capital markets kept fuelled by central bank printing presses (my words) will see US tight oil plays still financed even at current oil prices and accordingly a rebound will not be seen soon.

He also noted that the industry suffered from group-think and had not seen things like the “shale gale” coming.

A cynic might see examples of both of these phenomena at WPL.  The printing press appears to be alive and well to fuel WPL’s CEO remuneration (higher than a number of the Super-Majors).  Also, WPL’s strategy of effectively doing nothing for the last 10 years (other than losing shareholder money on Pluto) means it is firmly in the pack of the un-observant….

Commodity prices

Crude was flat overnight, with Brent at US$66.27 and WTI at US$59.56.  “Events” in the Middle East (e.g. escalating fighting in Iraq, Yemen, etc) weren’t enough to push the price up in the face of bearish numbers from various US metrics.

One factor that the bears focus on are reports from US companies of productivity gains being achieved in the likes of spheres of drilling and fracking, etc.  As an example The Economist noted this week of the US tight oil players that  “their productivity has continued to improve in leaps and bounds“.

However, in a separate article, The Economist also made the generic observation that “Companies are well aware of investors’ biases and strive to gratify them“.

As anyone (such as this blogster) who has ever prepared an ASX announcement knows, the role of corporate reporting is to raise a company’s  hare price, not put out data in scientifically rigorous form.  Accordingly, although I have no doubt that some degree of productivity gains are being made in the US, I am sceptical about using corporate presentations as a foundation for concluding that such gains are as material as the companies want share-markets to believe.

Henry Hub was flat overnight at US$3.02.

Governments

Also at APPEA, Federal Minister MacFarlane told the conference that the Feds had pretty much done all they could to deal with the obdurate States of NSW (and Victoria) about dealing with on-shore unconventional gas exploration and development in a rational way.  It was now up to the States.  Good luck!

LNG

The latest monthly Japanese spot LNG price (for April) showed a fall – to US$7.60/mmbtu (from US$8.00 in the previous month).  This no doubt reflected a seasonal fall in demand, as the Northern Spring commenced.

Also on the LNG front, Interfax has reported that the BHP/Exxon Floating LNG project off Western Australian has ben “postponed”.  No real surprise there for a project that few would rank near the top of the class of FID-able LNG projects.

Company news – BP and Shell

Serendipity (but not in a good way) for the two Super-Majors at opposite ends of the world: protests about Shell’s Alaskan drilling (due in a few months) in the port of Seattle and similar protests in South Australia about BP’s Australian Bight drilling (due by late 2016?).  For both Macondo provides a context for green groups to oppose pretty much any form of hydro-carbon activities.

From the former, a great story from the class of what British tabloid reporting would call “you couldn’t make it up”:

“Conrad Ely brought a kayak and canoe with three of his friends from Olympia. He is pursuing a master’s degree in environmental studies program at The Evergreen State College in Olympia and drove (emphasis added) up Saturday to join the demonstration and show his opposition to oil dependency.”

Company news – ASX listed companies

Everyone is too busy nursing a second day hangover at APPEA to put out ASX releases so far today.

The AFR reported some comments from Seven Group’s Ryan Stokes (son of Kerry, and according to recently “retired” Don Voelte, a good hand) at an APPEA function which gave some more colour on the Nexus assets held by Seven.  Apparently Seven plans to sell some gas from Long Tom independently from the existing GSA it has with Santos Ltd (ASX: STO).  No information was given on what gas processing facilities might be used to meet this aim, given STO (and BHP/Exxon) hold the only such assets in the region.

Quote of the day

Continuing the gangster movie theme, the ballsy Peter Coleman no doubt took some inspiration from a quote from Harold Shand (played by Bob Hoskins) in The Long Good Friday, addressed to some lily-livered Mafia types:

“I’m glad I found out in time just what a partnership with a pair of w**kers like you would’ve been. A sleeping partner’s one thing, but you’re in a f**king coma! No wonder you got an energy crisis your side of the water!”

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