Today’s Blog – Tuesday 3rd November 2015

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Introduction

A recent story from Bloomberg added a new twist to the old media saw about a man biting a dog being of more interest than a dog biting a man.  This was a claim made against BP over the Macondo disaster – by a dog named Lucy Lu (not the sword wielding Yakuza queen of Kill Bill 1 – that’s Lucy Liu) – for the princely sum of US$46,000.

Headline – Dog bites Super-Major!

This blog occasionally lauds the ability of good-ole American capitalism to deliver the goods in the oil patch – but we acknowledge the system’s drawbacks when this spirit of enterprise spills over into the canine world.

Commodity prices

Yesterday was a lack-lustre day for crude markets, with no real “numbers”, “events” or “technicals” to drive a direction.  We saw a slight fall on the day, with Brent closing at US$48.76 and WTI at US$46.11

In a little reported development, late last week Standard & Poors downgraded the credit rating of Saudi Arabia, from AA- to A+. Like every company and country, ever, when this happens, the Saudis disagreed with the decision.

From a longer term oil market perspective, this development could put more pressure on the KSA to act in concert with key OPEC players to try to drive oil prices back up and puts its budget back on track.  From a simple narrative perspective – will lenders be happier to keep lending to US oil companies more so than to the Saudi’s (not that the latter are short of cash at present – but their pile is depleting faster than a tight oil well).

The Henry Hub price fell a few cents overnight to close at US$2.25.

LNG and international gas markets

At Singapore’s Gastech conference last week, the Qataris (still the No.1 in LNG, if not in World Cup tendering processes) stated their view that LNG markets would continue to grow through the medium/long terms – albeit at the stately pace of 2% per annum.

That is less than expected World GDP growth – which therefore implies that either (or both) increasing energy efficiency – or a declining share of the energy pie for LNG.

As the Wall Street Journal noted last week: whatever happened to the Golden Age of gas?

Some other LNG news – albeit of the less credible variety (to this blog anyway) was ENI’s statement that it was aiming to FID a FLNG project off-shore Mozambique – with a ~70% gearing ratio – by the end of this year.  If that happens, it will signal an appetite for commodity price and sovereign risk in debt markets that is fairly “robust”.

Governments and fracking

The Australian Financial Review’s (AFR’s) Matthew Stephens published a good piece today on the rank hypocrisy and poor government leadership shown in New South Wales over (as we reported yesterday) the A$25M buy-out of Metgasco’s (MEL) assets in the State.

Regular readers of this blog will note the constant examples of how the opponents of gas extraction use distortions of the English language to support their politicking (e.g. “gas mining”, whatever that is) – much more so than does the “sensible party” oil patch side.

Stevens adopted a weapon from this language armoury in his piece – labelling farming as “water mining”.  However, I doubt that APPEA would be brave enough to start to take the offensive like this – but its “softly, softly” approach has arguably failed in the soon-to-be gas-free State of NSW.

Company news – Santos (STO)

The new regulatory regime that apparently applies to STO reporting to shareholders and the market – stories in the AFR rather than formal ASX releases – continued  today.

The AFR reported that STO has entered into an agreement to sell its interests in the offshore Western Australian mature Stag oil-field to a Malaysian company for US$33M.  A company spokesman said this sale was not part of the company’s current strategic review – just normal business.

The fact that the sale prices was much less than a previously leaked expected figure may have assisted the decision not to formally disclose it and make this assertion.

Quote of the day

From BP’s Court papers:

“On or about January 16, 2013 defendant MIKAL C. WATTS submitted or caused to be submitted a ‘Presentment Form’ to BP claiming ‘costs and damages’ in the amount of $45,930.00 in the name of ‘Lucy Lu’ and claiming ‘Lucy Lu’ was a deckhand on a commercial seafood vessel. ‘Lucy Lu’ was a dog.”

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