Today’s Blog – Monday 6th June 2016

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Editorial

The biggest annual conference hosted for the Australian oil and gas industry – APPEA – formally starts in Brisbane today (our blurry recollection of previous APPEAs is that it would have informally commenced last night and indeed for some of the more old fashioned boozy types who still lurk in the dark non-safety officer recesses of our sector – may have continued through until this morning).

Unfortunately your blogster is too busy counting the vast riches generated by this blog to attend this year, so our reporting will be second hand and media derived only.

Some companies have used the forum of the conference to update the market on their strategy and assets and we comment on some of these below.  Government and international bodies will also use APPEA to get media messages across – again see below.

However, all up we expect the conference to have a much reduced attendance from previous years – and total delegates from actual Australian oil and gas companies could be exceeded by those from the likes of the currently booming energy infrastructure sector (“bubble, what bubble?”), etc.

Commodity prices

Crude prices slipped somewhat during Friday’s trading, with Brent down ~1% to US$49.64 and WTI fell a similar percentage to close at US$48.62.  These prices pretty much reflected where the week had started – so no change notwithstanding the OPEC meeting held during the week.

The key driver on Friday was the weekly BHI rig report – which showed an increase of oil rigs of a fairly hefty 9  rigs (with gas rigs declining by 5).  If that starts to set a trend, it would indicate that bullish comments by US E&P company CEOs about making money at US$50 would actually be followed by their actions.

Henry Hub was flat on Friday at US$2.40 – but rose a meaningful 10% over the week.

LNG and international gas

A reader has just alerted us that the Chairman of Shell in Australian has stolen one of our ideas!    Shell’s Andrew Smith, speaking at APPEA, has agreed with our oft-expressed view that international versus domestic gas pricing dynamics indicate that there is a market opening for a floating re-gasification and storage unit (FSRU) on Australia’s East Coast.

He also echoed the view that this would make much more sense than piping Browse gas all the way to the East Coast – a concept recently floated by Browse player Inpex Corporation.

Divert your crowd-sourcing cheques to our litigation fund.

Governments, fracking, etc

One APPEA speaker today will be a Queensland Government representative explaining the thinking behind the State’s new “Clive Palmer” legislation designed to spread the litigation net very widely with respect to failed ventures with environmental, rehabilitation, etc, liabilities.

We have noted before that one outcome of this new law will be reduce the ability to transact on assets in the State – and reduced liquidity will lead to less investment. That aspect may not be mentioned.

Company news – AWE

AWE announced last week a nearly doubling in the reserves booked in its Waitsia gas field in the on-shore Perth Basin – and is following up that well received news with a fulsome presentation at APPEA today.

Origin Energy’s (ORG’s) current marketing of its 50% interest in this asset should come to closure in the next month or so and its outcome will provide a handy look through valuation of what is the bulk of AWE’s current market value.

Company news – Beach Energy (BPT)

BPT’s relatively new CEO has taken the opportunity to present on corporate strategy at APPEA today.  Nothing particularly new has emerged therefrom – his hands were arguably tied on the strategy front by his Board before he started.  The ability of the company to make acquisitions (“A$0.5B of liquidity”) was emphasised.

We understand that BPT is a participant in the ORG marketing process for Waitsia.  If however, buying a non-operated asset in an area with no synergies with existing operations is the best deal that BPT can find at present, that would support our general thesis that the current widespread view that low risk assets are available cheaply at present is an optimistic one.

Quote of the day

Boards at the likes of BPT (and Santos, AWE, etc) who have managed CEO succession plans recently would look jealously at the freedom of action over at Sonangol in Angola – where the company’s President (no doubt after an exhaustive world-wide search) has just appointed the best candidate for the job – his daughter, Ms Isabel dos Santos.

Ms dos Santos achieved some notoriety recently for hiring rapper Nicki Minaj (no, I haven’t heard of her either) for US$2M to sing at an event Angola.  Ms Minaj succinctly expressed her enthusiasm for her well qualified patron with:

“She’s just the 8th richest woman in the world. (At least that’s what I was told by someone b4 we took this photo) Lol. Yikes!!!!! GIRL POWER!!!!! This motivates me soooooooooo much!!!!”

 

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