Today’s Blog – Wednesday 8th March 2017


Earlier this week the Liberal Party in Victoria (you know, the people who support private enterprise and a hands-off State – or – new motto – “we are slightly less stupid than the other guys”) refined its policy about the moratorium/ban on oil and gas activities in the State.

 Basically, they want: the energy sector & Govt to conduct more “studies”; farmers to have veto on access to the sub-surface rights owned by everybody else; and if any gas is ever found (by magic maybe?) – then it must be reserved for Victorian homes and businesses.

We occasionally make pitches for investment capital for exploration ventures and are sure the following opening summary slide would have the money just rolling in:

  • Invest in Victoria, a State with no on-shore production history.
  • Enjoy the frisson of sovereign risk.
  • Pay for indefinite studies that just re-hash reviews into a ~70 year old industry practice.
  • Have farmers vetoing access to where you want to drill – unless you pay them a bribe.
  • Sell any gas discovered at less than market prices.

Government types often assume that money will just “be there” notwithstanding what they do.  It won’t.

Commodity prices

The oil market currently feels like it is waiting interminably in Rick’s Cafe Americain for a ticket out to come along (hopefully “signed by General De Gaulle himself”).

Last night saw another trading day in London and New York of very low volatility, with Brent falling a few cents to US$55.82 and WTI climbing a few to US$53.64.

All eyes are on the weekly EIA inventory report and “events” such as disruptions in Libya, Venezuela’s slow-motion collapse, etc, are not of interest at present.

Henry Hub closed down ~1.4% to US$2.83.

Company news – FAR

The Senegalese oil joint venture in which FAR is a junior partner continues to kick goals. Their latest delineation well has come up with the goods in terms of flow rates, etc.  The JV are now moving to drill a new well which will both continue the delineation exercise and test a new horizon for the first time. It will then drill yet another delineation well (the sixth).

For those who like deals, legal disputes, etc – FAR are still silent on the long running dispute about pre-emptive rights over Woodside Petroleum coming into this joint venture.

Back in the boom days this project would have been reached sanction with fewer wells – the industry has learnt lessons (at least for just now…..) about rushing to FID in haste and repenting in leisure.

Company news – Senex Energy (SXY)

SXY has just reported that the SPP component of its recent capital raise has been well supported – with an additional A$36M being tipped into its kitty.

Company news – Origin Energy (ORG)

ORG’s CEO gave a wide ranging speech yesterday – mostly on the travails facing the Australian industry market (in which there are two schools of thought – the first being that long term regulatory stability would best be served by an emissions intensity scheme (EIS). Almost everybody – including ORG – supports this.  However, a handful of Federal Liberals (and Andrew Bolt) don’t like an EIS.  Result – an investment strike into new generation, but peace inside the Government – for a few months anyway).

ORG also canvassed the seemingly increasing likelihood that it would sell rather than IPO its “Crapco” of unloved upstream assets.  SXY and Beach Energy have been mentioned a few times in the media recently over this potential deal – and in our experience, these things build a momentum of their own (lubricated by the thought of rich fees in investment banking land).

Quote of the day

Either an extra in Casablanca or an oil trader right now:

“Waiting, waiting, waiting. I’ll never get out of here. I’ll die in Casablanca.”



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