Today’s Blog – Thursday 7th July 2016

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Editorial

A recent personal anecdote that illustrates the rather story state of our industry at present.

An update from Linked-In recently advised us that one of our “friends” had changed jobs – ceasing a career in oil and gas drilling to join McKinsey, of all places.

Our supposition from this – there is not a lot of drilling taking place just now – but there is a lot of money being spent on consultants to advise the industry how to spend less on drilling.

(Aside – if that McKinsey advice was capitalised into well costs – they would not be cheap…).

Commodity prices

Crude bounced back overnight – continuing the oscillation around the US$50 mark – with Brent closing up ~2% at US$49.27 and WTI up ~2% at US$47.43.

The EIA’s weekly inventory report is a day late this week due to the 4th of July holiday on Monday.  The market reacted positively to the pre-EIA numbers from the API, which indicated a potential 6.7 mmbbl draw.  The predictive power of this source has not been great so we will see what the actual EIA figures say tomorrow.

Henry Hub stabilised after a couple of days’ declines, closing up ~1% to US$2.79.

LNG and international gas

An interesting story from gas importer France (not that horrible fracked gas, thank you very much!) – the successful IPO on the French exchange of coal-bed methane focused company Francaise de l’Energie.

This company plans to develop CBM in France’s old coal-fields in its East – to replace primarily Russian imports – but with no fracking, of course.

Amazingly, the company managed to raise >US$40M for this venture – with a vend of multiples of this.

Aussie E&P companies can only watch and weep to see the French exchange supporting a risk-on activity for which the traditional punters on the ASX have very low appetite for at present.

Local Boards should be pondering a new venue for a dual listing – and maybe a study trip would be in order.  Contact us on the comments bar below if valuable assistance is required.

Governments, fracking, etc

We have now checked and confirmed that Pauline Hanson’s One Nation Party is, surprise, surprise, against CBM “Mining” (argh!).  This is because:

  • People in Tara are fleeing their homes! (to go to the bank to deposit their cheques from the industry).
  • Evil multinationals control the industry and pay no tax! (they make no profits at current LNG prices).
  • The Great Artesian Basin will be lowered by hundreds of metres! (that’s a lot of water).
  • Etc!

In addition to its Federal success, One Nation may well gain a bunch of seats in the next Queensland election, so watch out Producers in that State.

Company news – AGL

AGL issued a profit warning this morning – advising the market that it had taken a hit of a painful A$35M from its wholesale gas market operations.

Although the causes of the hit are multi-dimensional, we have recently noted the spike in domestic gas prices and this announcement from AGL could be seen as a real demonstration of this in dollar terms.

Company news – MEO

The share price of minnow MEO has leapt 200% this morning (take that French exchange!) on news that the company considers its on-shore Cuba block has ~400M bbls of prospective resources.

A sign of some animal spirits (say we optimistically?) in the market.

Quote of the day

Readers with good memories may recall this warning from Pauline Hanson – delivered by video in 1997.  This may come in useful if the likes of Shell, Conoco, Santos, etc decide to take out an inconvenient opponent.

“Fellow Australians, if you are seeing me now, it means that I have been murdered. Do not let my passing distract you for even a moment… you must fight on”.

 

 

 

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