Today’s Blog – Thursday 3rd December 2015

Please pass this blog on to others who may want to read it

Its a slightly shorter blog today due to other commitments

Introduction

Yesterday saw reports of a “massive cyber attack” on Australia’s Bureau of Meteorology.  Not surprisingly, China was blamed.  Denials from PRC officials sounded as credible as Captain Renaud being “shocked, shocked” that gambling was taking place in Rick’s Cafe American.

This comes just days after a Chinese led consortium failed to win the auction for New South Wales electricity transmission assets on pricing grounds.  If it had come before, then such a bid may well have been ruled out on security grounds.

The attack will make it challenging for Australian regulators not to be subject to public and political pressure over other potential Chinese asset acquisitions across the economy – including in oil and gas.

Meanwhile, over in Santos’s offices, I would be closely monitoring any offers from its new best friend, 10% shareholder (and PRC connected) Hony Capital to “help out” with the company’s IT or other systems……

Commodity prices

It was a shocker for crude markets overnight, with Brent closing down 4% at US$42.49 and WTI breaching the critical US$40 level to close down nearly 5% at US$39.94.

The key driver was another poor inventory report from the US’s EIA. US crude stockpiles increased by 1.2 mmbbls last week (more than expected by analysts) and product (gasoline and distillate) inventories increased by 3.2 mmbbls.

With the “technicals” US$40 level breached, bad news from OPEC on Friday could well see a material further down-side run.

Henry Hub natural gas prices also fell (3%) to close at US$2.16.

LNG and international gas

Bloomberg reported yesterday that LNG prices had fallen harder than crude prices over the last year.  And with a massive lump of new capacity coming on (differing from the much finer nature of oil supply components) in the next few months, this differential could well expand.

Company news – Santos (STO)

STO has announced the results of the retail component of its rights issue.  This closed better than reported yesterday, with a shortfall of ~A$600M.

The stock is trading this morning above the rights price, even in the face of the oil price fall noted above.

Company news – Burleson Energy (BUR)

BUR is a micro-cap oil company that has just announced that it has joined the increasingly swelling ranks of ASX listed E&P companies that are leaving the sector for more fashionable areas such as IT, cloud computing, telecoms, health care, etc.

It is acquiring a business called “Nano Satellite Technology”, which the punters will no doubt consider a cool name (before the almost inevitable loss of their money in a year or so).

By our estimate, around 10% of the number of listed E&P companies on the ASX have now left the sector over the last year or so.

Quote of the day

In the lead up to the OPEC meeting – an understated description of the nearly 1,500 year Sunni/Shia split from an Iranian representative, who alluded to this the split as:

“International conditions”.

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