Today’s Blog – Thursday 23rd February 2017

Editorial

Regular readers will be well aware of Origin Energy’s (ORG’s) plans to sell the bulk of its non-LNG upstream business later this year – affectionately dubbed as “Crapco” – by IPO or pre-emptive trade sale.

Last week we reported on positive news emerging from one ORG asset which is not planned to be included in Crapco – an interest in licences in the shale gas prospective Beetaloo Basin in the Northern Territory.  That has led some bankers, etc, to call for this asset to be included in Crapco’s portfolio – to add some upside potential and sex appeal to the potential IPO.

Potential trade buyers – Beach Energy (BPT) presumably foremost amongst this group – would however likely not want to pay for this Beetaloo asset given its immature status.  In particular, the sovereign risk overhanging it from the NT’s current fracking moratorium is hard to assess – and easy to conclude (based on other jurisdictions in Australia) that it might be open ended.

We also consider that one reason why ORG retained the Beetaloo is that it could play a role in back-filling the DLNG plant – operated by ORG’s major partner in APLNG, Conoco.  A similar rationale would appear to be behind ORG retaining its Browse gas asset called Poseidon – which also has some connection with DLNG back-fill as a wild-card option.  ORG’s alliance with Conoco was perhaps the reason for its original ill fated purchase of Poseidon – and the friendship (at least one way, the cynics might add) still seems to endure.

Commodity prices

Crude prices fell more than 1% overnight, with Brent closing at US$55.79 and WTI at US$53.54.  Concerns about inventory builds ruled the days trading. This week’s EIA numbers are a day late due to the public holiday in the US on Monday – lets see what the market makes of them tomorrow.

Henry Hub strengthened a bit after its sharp recent falls, closing up ~1% to US$2.61.

Company news – FAR Ltd

FAR reported that its SNE-5 appraisal well offshore Senegal had reached TD of 2852M. Flow testing will follow – in a timeframe that FAR did not communicate but which should be within 2-3 weeks.

Company news – Carnarvon Petroleum (CVN)

CVN today announced that it would drill (at least have a 20% OBO stake in) an exploration well off North WA – to be called Dorado-1.  This would spud in the second half of this year. CVN noted the mid-case target was ~0.5 Tcf of wet gas – to be added to previous discoveries in the area to hopefully achieve the critical mass to support a development.  Whether even this would be enough remains to be seen.

Quote of the day

We recently quoted ex-BP Head of Exploration David Bamford on the current difficulties of raising money for exploration.  The following from him is equally gloomy:

“As companies, explorers have only ‘worked’ when oil prices were rising so much that equity holders were willing to pump more money in.”

Optimists might however add – but prices are rising now!

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