The Oil Man: Ophir, SDX, Cabot, Sound Energy

WTI $58.55 +53c, Brent $63.55 +23c, Diff -$5.00 -74c, NG $2.97 -5c

The news this week on the oil price has been as much, if not more, than a fairly slim number of company announcements, With the OPEC meeting next week, this may continue to be the case.

Spending some time in the true home of oil this week was inspirational and, as is often the case, somewhere where workovers and recompletions of in some cases fairly old wells can prove highly profitable.

This week has been another good one for the oil market and, whilst there is normally a dose of the jitters ahead of the OPEC meeting (think Nov 14 and 16…), the main reasons for the price increases have been to do with outages, this time in North America.

With WTI heading for $59 and at a two-year high, things are looking good over there, even the differential has narrowed sharply to $5, but this may be temporary. The Keystone pipeline, which carries 590,000 barrels per day of crude from Alberta a long way south, has been 85% closed due to a leak in South Dakota.

Now, while this may be back up and running by the end of this month it has created a bigger than expected inventory drawdown as far away as Cushing, a spike in WTI and increased feedstock costs may draw refinery demand down a touch.

The rig count, out early this week due to Thanksgiving, has showed another 9 oil units in place taking the current total to 747. Given that rigs are now more efficient than ever it is an important number, but still unlikely to change the dial that much.

As for OPEC, the market is expecting an extension of the deal with a likely nine-month increase to the end of next year.

Whilst there have been some concerns about Russia which I wrote about recently, I suspect the camaraderie between Riyadh and Moscow will overcome greed of the Russian oil barons.

However, it is important to highlight the new clout that Putin has, although a recent report from RBC, usually fairly moderate, suggesting that he is “the new world energy Czar” is probably a touch racy…

Ophir Energy

Whilst away I noticed that Ophir (OPHR) announced that financing discussions with Chinese banks has been taking longer than expected, which has led to the opening up of alternative funding sources which are now “at an advanced stage”.

The company state that they will select one of the options by mid December 2017, and proceed to FID in the first quarter of 2018, which may be slightly delayed but not quite the trauma that the headline in today’s Times suggests.

Indeed, the Ophir share price has pretty weak in recent months, but maybe now that this announcement has cleared the air it is picking up. Whilst I have been a little concerned about such financing concerns I am not at all worried about Fortuna going ahead, comfort would be obtained by a swift closure here which is what I expect. I am having a meeting with Nick Cooper before long and hope to add more after that.

SDX Energy

SDX Energy (SDX) has announced that its KSR-16 well has spudded and will drill for around 20-25 days. Should it be successful it will tie into local infrastructure within 21 days of the rig moving off. This is what has happened to the 15 well and it is now only 10 days away from tie-up.

Cabot Energy

I am sometimes not sure if I am imagining yet another announcement from Cabot (CAB), they sometimes seem to come almost weekly! However, on the basis that it is better to get too much news and not too little, you won’t find me complaining.

Indeed, as the work that Keith Bush and his team have been doing has transformed the company from an almost impossible situation, it is good to see production from Canada increasing regularly.

Today, the update talks about 750-850 barrels per day in Canada (75% WI), and the 16-05 well sidetrack is delivering 200 barrels per day on pump. Well stimulation from Blue Spark Energy is being used to enhance production and will be used more.

The company also says that further activities before the year end could add another 150 barrels per day, which would be no mean feat. So, onwards and upwards for Cabot and I look forward to commenting on next week’s update….

Sound Energy

Whilst writing today’s blog I have been watching the ‘fireside chat’ that Sound Energy (SOU) have been holding so that their shareholders can be kept up to speed with what their company is up to.

Another new development by James Parsons and team who have revolutionised relationships with retail investors in recent years.

Unlike a conference call, the website opens up to shareholders who have been typing in questions for some time and with CEO, Exploration Director and CFO answering their pretty much every request, a bit like a giant whatsApp chat.

With well over 600 participants and nearly 200 questions to get through they may be sending out for supplies before long, but watching it they seem to have many happy shareholders. Another first #explorersquestiontime.

And finally…

Another big weekend of sport ahead of us if you haven’t been tired out by Black Friday…

Football sees the Hammers v the Foxes tonight, whilst the big weekend fixture is tomorrow and sees Chelski travel to Anfield, after a gruelling trip with me to Azerbaijan on Wednesday they might be a little tired…

Other fixtures tomorrow see the Seagulls travelling to the Theatre of Dreams and Spurs hosting managerless Baggies. Sunday sees Burnley hosting the Gooners and the Terriers entertaining the Noisy Neighbours.

The autumn rugby internationals finish with England playing Samoa but more interesting may be Wales v the All Blacks and after last week can Scotland beat Australia? Ireland host the Pumas which shouldn’t be a problem.

Racing is first rate from Haydock Park and Ascot where Michael Owen is riding today…

The Ashes is now under way and after day two looks fairly even, England need a couple of wickets or it could run away from them.

And F1 closes the season in Abu Dhabi where Vettel has been fastest so far in practice…

Malcolm Graham-Wood is an independent oil industry expert and freelance contributor, not a direct employee of Interactive Investor.

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.