WTI $60.37 -5c, Brent $66.57 -30c, Diff -$6.20 -25c, NG $3.06 +10c
All sorts of influences on oil and gas prices yesterday. All started well and WTI reached $60.74 and Brent $67.29 before excitement was cooled off.
The early buzz was primarily geopolitical, with sights of rioting in cities across Iran making investors worried about the oil price, but none of these demos are, at least for the time being, going to have any effect on crude oil output.
The other ‘hot’ area at the moment has been in Libya where terrorists blew up a pipeline as recorded here. The bad news for oil bulls is that like at Keystone and Forties, pipeline operators are getting better and quicker at repairing the holes and Libya is also back up and running.
Other positive news came from the exchanges, where long positions held by ‘money managers’ ( a great term for spivs I always think) have increased which for some people seems to make it all ticketty boo.
As I explained yesterday, if the cream of US investment bankers can’t get the oil price right, including the vampire squids, how can assorted ‘money managers’?
Finally, just showing how the continent of America can show so much disparity, after only days ago seeing dreadful pictures of California burning, we are now seeing content of swathes of Central and Eastern America frozen solid.
This has not only pushed the natural gas price higher, but demand for distillates is naturally rising faster than seasonal norms, which will lead to higher refinery run rates and should raise demand for local crude….
There is no doubt that Pantheon Resources (PANR) give us a hard run for shareholders money, indeed CEO Jay Cheatham had to remind them in the statement that the company “has discovered commercial hydrocarbons in each of the six wells drilled so far”.
So why today’s 30% fall in the share price? Not the fact that they have spudded VOBM#5, which is a development well intended to serve as a producer in due course. It is targeting the Eagle Ford/Woodbine sandstone, ironically what they started looking for in what seems like a long time ago.
So it must be the lack of production volumes at the gas plant, at 3,000 million cubic feet per day it is still only at initial testing levels at a time when it should be filling up nicely.
First in the firing line is VOBM#3, which has ‘variability’ issues on production owing to it being on the edge of the reservoir. It looks like an acid job here, so not much hope for a big increase.
The major culprit is the poster boy that is VOBM#1, which is operating at much reduced rates, albeit only through a 12/64″ choke. Pressure here does not appear to be a problem, but reservoir issues need to be managed, as just increasing the choke size is unlikely to give the longer term throughput needed at the gas plant.
The surprise appears to be the lower permeability leading to a decline in production, also ‘slugging’ which is a build of of liquids leading to inconsistent production.
I hear that this is ‘not unusual’, but that two experts in tight reservoirs have been retained to advise on the situation, but similar double A wells have been fracced with good results so that is a likely option.
It should be remembered that they have nearly 70′ of pay here and with fraccing permeability should be improved.
As for VOBM#4, it looks as if they will isolate and test all three Wilcox zones, which are analogous with the nearby Jazz field and where pretty much all are fracced. The size of the prize here looked like a pretty significant reservoir on discovery so is very much worth waiting for.
Every time some IR or operational banana skin appears for PANR, I am asked if I am going to call it a day and probably should have long ago given that it has been like a carry on film in the making.
But Bobby Gray and Jay Cheatham are proper oilmen and what they have found is for real even if the suits haven’t really helped them.
I don’t think the valuation has changed much as a result of this announcement, probably just timing, but if they fail to make the 1 well flow or the Wilcox doesn’t work, or the 5 well isn’t in the heart of the basin, then things change. In the meantime, this mug is still watching Carry on up the Eagle Ford.
No great surprises in last night’s footy, the Noisy Neighbours cruised past the Hornets, when City score after 39 seconds you know its not your night.
The Eagles went to the Saints and came back with all the points, where did Woy hide all that talent managing England eh?
The Hammers took a while but two Andy Carroll goals saw off the Baggies who according to Pards are the only team playing too much football over Christmas, if you watched them last night it wasn’t football they were playing…
And Spurs ventured into the Principality and took away the points from the Swans under new management.
Tonight it’s the Gooners to entertain Chelski which might be worth watching….
And Mason Crane, who sounds like a cake shop, is playing tonight for England in the final Ashes test, replacing Woakes who has a strain, how did he get that?
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.