Today’s Blog – Wednesday 21st December 2016

Blogs may be short and/or sporadic this week – its Christmas!

Editorial

Total has just made an investment in US LNG potential exporter, Tellurian Investments, of US$207M for a 23% stake.  This values this company at US$900M.  Company assets: its experienced team and plans to export LNG.  Tangible assets are somewhat slimmer.

That’s a fantastic valuation – and indicates that the company’s mainstay, Charif Souki ,previously of Cheniere Energy, remains an unrivalled company promoter and fund raiser.

From Total’s point of view it is a vote of confidence in the ongoing globally strong competitive position of US gas prices – and the undoubted ability of the US to construct liquefaction facilities much more cheaply than anyone else can.

Readers may recall that Tellurian was back-door listed into long time Australian main-stay Magellan Petroleum.  Long term shareholders in that company when it was in the E&P space would not be familiar with valuations approaching anywhere near US$900M.

Commodity prices

Crude trading this week seems to be bearing the strains of pre-Xmas lassitudes and full on market action will now likely wait until the New Year (unless tomorrow’s inventory numbers really surprise).  Brent was up ~1% to US$55.39 and WTI had an even healthier climb to US$53.30.  The spread between London and New York seems to be tightening again post the recent OPEC meeting’s initial widening.

Henry Hub was down to close at US$3.31.

LNG and international gas

Speaking of matters Cheniere Energy, in the last few days Spanish utility Gas Natural Fenosa has loaded its first LNG cargo from the company’s Sabine Pass facility.  The destination clauses that are causing much angst over in the Pacific LNG market don’t apply here and the destination of the cargo could be any number of global re-gas facilities.

Disruption

The EIA has just reported that in 2016, additions to the US’s generator fleet were led by large scale solar – with an impressive ~10 GW of capacity added.  Household roof-top solar (which for various reasons – very unusually – is more expensive than in Australia) would have added another ~ 2 GW to this.

Gas came second – even with its much cheaper commodity and haulage prices than in Australia.  Wind came third.  Coal came last – with zero.

Company news – Santos (STO) and Central Petroleum (CTP)

News from Magellan Petroleum’s old stamping ground – the Mereenie oil and gas field in the South of the Northern Territory.  CTP announced yesterday that STO had sold its 50% non-operated stake in this field to Macquarie Bank.

For some reason STO decided it did not need to disclose this transaction.  CTP did not disclose the price – but the Australian Financial Review (AFR) indicated it was in the region of A$50M.  The AFR presumably got this number from someone in the know – one of the three parties noted above.

STO’s stake in Mereenie was recently put into the company’s non-core “Crapco” business – this transaction must have been very pregnant then.  STO have retained exploration acreage around this producing field, which seems tactically strange.

CTP remains the target of a takeover approach from Macquarie – who are currently undertaking due diligence on the company.  We continue to think that Macquarie will privatise CTP – but use its Management team to prosecute the development of now 100% of Mereenie in a less capital constrained environment than an ASX listed junior.

Quote of the day

Another quote from Black Adder – with a festive theme:

Edmund Blackadder, Esq.: Shall I begin the Christmas story?

George, the Prince Regent: Absolutely, as long as it’s not that terribly depressing one about the chap who gets born on Christmas Day, shoots his mouth off about everything under the sun, and then comes a cropper with a couple of rum coves on top of a hill in Johnny Arab land.

Edmund Blackadder, Esq.: You mean “Jesus”, Sire…?

George, the Prince Regent: Yes, that’s the fellow! Keep him out of it. He always spoils the X-mas atmos!

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