The Oil Man: Sound Energy, UK Shale Wealth Fund
8th August 2016 14:14
Share on
WTI $41.80 -13c, Brent $44.27 -2c, Diff $2.47 +11c, NG $2.77 -6c
Friday saw the oil price falling as soon as the better-than-expected non-farm payroll numbers came out and boosted the greenback. With the end of the week and the price all over the place, short-covering lifted the price so that the end of the day was back to opening levels.
The rig count showed a rise of one unit overall to 464 and in oil was up seven at 381, which showed the highest number of oil rigs since March.
UK Government Shale Wealth Fund - IGas/Egdon
The UK prime minister has announced that the Government intends to reward householders directly, rather than through councils etc., thus ensuring success by local energy companies can specifically target residents.
This fresh and direct approach has given impetus to and , which are natural winners should the UK onshore unconventional industry scale up and start to deliver meaningful quantities of gas.
This is still far from certain at this stage, although activity is picking up thanks to Ineos, Egdon and IGas, the latter of which I am seeing next week.
Sound Energy- A potential super giant discovery in Morocco
has released the final results from TE-6 at Tendrara in Morocco and confirms a "significant gas discovery and a potential single gas column", which in my view means that this is a significant structure which will be proved up after a couple more wells. The stabilised gas flow rate, post stimulation, of 17 million standard cubic feet a day is "significantly above expectations" and represents a highly commercial rate.
The scale of this discovery could be really huge; the company says it is a material "regional" scale and meaningful for the Moroccan gas industry, which probably answers most questions about the size of the find.
It is worth noting that the pressures here are very positive, with flowing wellhead pressure of 207 bars and a reservoir bottom hole pressure of 420 bars, making it an over-pressured reservoir by any matter of means.
With the reservoir flowing naturally, (flow rate was three times expectations), there will be no need for compression equipment for some time and they havent even gone to the secondary target in the Paleozoic…
The next well, TE-7, which will be a horizontal one and might well provide much higher flow rates, is scheduled for spudding towards the end of August, after which the "outpost" well, designed to delineate the structure, should go down before the end of the year.
The conference call which took over an hour and a half,(700+ on the line) gave the company the chance to expand on the announcement and of course jubilant retail shareholders to try and work out just how big this could be for the share price.
The company, whilst being understandably chipper, were clearly unable to answer the many questions about valuation, but they have laid down some helpful yardsticks.
The most interesting is that they feel that this discovery is worth around £1 per share for every trillion cubic feet (TCF) on a net basis and, given that previous guidance of 5-10 TCF should this be a large, connected discovery may even be light, this sent the shareholders scurrying for their calculators - then the holiday brochures.
Whatever the numbers bring, it looks to me as if Sound has made a truly transformational discovery here, both to them and a country that is gas-short and which has been incredibly helpful in facilitating all the aspects of licencing, permitting and drilling.
Indeed, given how much has happened in such a short space of time, it might be a lesson for other countries. When such wells are drilled it is customary to suggest that it is better to travel than to arrive, as, even with success, holders feel the need to take some profits whilst the future is contemplated; on this occasion the upside might be so substantial that this is not appropriate.
Having said that, CEO James Parsons did say that there is no such thing as a risk-free drilling programme - although without much conviction; this to me looks like the real deal.
Ithaca Energy
announced on Friday that the FPF-1 had finished its trials and was headed for Stella, where it will be producing oil, and revenue in three months time.
The extra 16/- barrels per day (b/d) will further strengthen Ithaca's position within the UK independent oil companies and, in my view, a market cap of less than £250 million is ludicrous for such a well-run, well-financed and profitable company.
Sundry
There is a double / whammy with thrown in this morning.
It seems that Eni has sold 25% of its interest in area four in Mozambique to Exxon as it scales down its exposure there and brings in experience and muscle.
At the same time, Exxon has withdrawn from licence FEL 3/04 offshore Ireland and Eni has taken over the operatorship and others, including Providence and , have upped their stakes in the block. The block contains the drilled Dunquin North and undrilled Dunquin South prospects.
has announced that is has spudded the first of a three-well programme of development wells in Argentina, where the aim is to up production by around 1/- b/d in total. It is also drilling a well in Louisiana aiming for 250 b/d.
A blog favourite, it looks like President is rewarding shareholders, albeit slowly, and the stock has more-than-doubled so far this year.
Going the other way is , whose shares have nearly halved since the peak of 53p back in February. Today it has announced advisor changes which may indicate concern about a potential takeover - which, with a market cap of only £35 million, wouldn't surprise me one bit (see previous blogs re: ).
Removing its broker, replacing it with two new ones and keeping its Nomad is probably overkill, but a belt-and-braces approach at this stage could be wise, as the shares are too cheap.
And the residents of the Isle of Lewis got a nasty surprise this morning when they woke up. The Transocean Winner (indeed!) has broken away from its tugboat and run aground on the island.
Whiskey Galore it is not, but the grounding may trigger the semi's demise as, although it was earning $439/- a day up until last month, it is old (1983) and due a five-year MOT.
And finally…
Team GB has won its first medals in Rio as Adam Peaty takes gold - and another world record - and Jazz Carlin gets a silver; this puts us in eighth place in the medals table.
Elsewhere, Muzza wins in the first round but Djoko goes out to Del Potro…
Elsewhere again, England staged a remarkable team effort to beat Pakistan at Edgbaston after having been over 100 behind on first innings - something commentators repeatedly told us only happened 3% of the time…
The Championship (or whatever it is called now) started at the weekend and proved those right who said the relegated teams would find life hard going (Andy), as Villa and the Magpies both lost - although the Canaries started on the right foot by putting four past Blackburn Rovers.
At Wembley the Foxes had a bad start to the season, losing the Community Shield to the Red Devils - although it is only a glorified friendly…
This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.