Today’s Blog – Thursday 21st May 2015

Introduction

The annual APPEA conference drew to a close yesterday and in addition to the public reporting some anecdotes are trickling back to your blogster.  Numbers of attendees were considerably down and apparently the overall “vibe” was pretty down beat.

The cost cutting meme du jour was illustrated by a reduction in the number of free pens and USB sticks on offer!  In my view, there is a lot of tokenism in large E&P companies at present around cost cutting – “if we reduce the number of free pens, make people fly economy class, no more biscuits, etc, then we can keep our current above-market salaries intact!”

Commodity prices

Wile E Coyote has not yet looked down.  The price of crude bounced back around US$1 last night, with Brent at US$65.03 and WTI at US$58.76.  The inventory numbers in the US were positive again, with the EIA reporting a draw of 2.7 mmbbls.

Internationally, better than expected economic numbers from the likes of Japan boosted the likelihood of demand-side increases above consensus.

Henry Hub dropped a few points to US$2.94.

LNG

Some better news for the Petronas led Pacific Northwest LNG project in British Columbia was reported by Reuters yesterday, following the recent re-buff from a key indigenous group over siting issues.  This was the reaching of various interim deals with the Province of BC over issues such as tax stability, infrastructure, etc.  FID is still apparently targeted for later this year, although that still seems optimistic.

Woodside Petroleum Ltd (WPL) issued an investor presentation pack today which also provided some colour on its BC based LNG project (Kitimat LNG).  The upstream tight gas assets which are intended to supply this project appear to be coming on well, with hefty per well recovery rates quoted of 20-40 BCF.  In BC, the downstream issues of liquefaction costs, procuring sales contracts, dealing with indigenous groups, etc, are more significant issues than the upstream.

And that is before the equivalent of the Seattle kayakers currently opposing Shell’s use of the Seattle Port as a base for Alaskan exploration (in their kayaks made from oil, etc……) get started.

Company news – WPL

WPL’s investor deck included a few interesting snippets on its move down the LNG value chain.  As noted in this blog before, WPL is acting as a pioneer in this area amongst the Australian listed LNG companies.  These included:

  • 10% of the company’s LNG production in 2016 will be traded on spot markets.
  • No proprietary trading is planned.
  • The company may seek to purchase equity in receiving terminals.
  • LNG demand in Japan was expected to decrease substantially in the long term, but overall the market outlook was healthy (naturally) and most of the expected increase in demand would come from developing nations, with India a stand-out.

Company news – Beach Energy Ltd (BPT) and Real Energy Ltd (RLE)

The AFR reported today that BPT was mulling a takeover of ~$30M market cap RLE.  The latter has a large acreage position in the Queensland portion of the Cooper Basin and recent wells have established a contingent resource of tight gas there.

BPT does not exactly lack contingent resources of tight gas in the Cooper Basin, so to my mind this report likely reflects a desire by RLE to start an auction rather than a current intention of BPT’s.  RLE’s Board has a lot of experience in promoting stocks – not that there is anything wrong with that.

Quote of the day

Another one from Henry Hill at the end of Goodfellas – with the tone reminiscent of the downbeat vibe of the current oil industry as just seen at APPEA:

“And that’s the hardest part. Today everything is different; there’s no action… have to wait around like everyone else. Can’t even get decent food – right after I got here, I ordered some spaghetti with marinara sauce, and I got egg noodles and ketchup. I’m an average nobody… get to live the rest of my life like a schnook.”

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