WTI $60.42 +58c, Brent $66.60 -12c, Diff -$6.18, NG $2.95 +4c
A very Happy New Year to everybody, fully refreshed (?) I’m back on deck and looking forward to whatever 2018 brings to us. The prices above are effectively the end-of-year record prices. There was modest trade yesterday in which WTI rallied at 58 cents and the new March Brent contract opened at $66.87.
Way back in June, with Brent at sub $45, it took not inconsiderable willpower to abandon my $60 year-end target for Brent as discussed in an interview with Jeremy Naylor at IGTV at the time. To end the year at $66.60, with even WTI ending up over 60 bucks, was probably at the time little more than a dream.
However, there are a number of lessons that can be learned from this performance, not the least that in terms of the first half/second half split, 2018 may be a repeat performance. I suspect that provided that the OPEC/Non-OPEC deal holds, the more difficult first half for supply and demand should be weathered and further progress can be made later in the year.
I am not changing my $65 mid-year target for Brent, nor my $70 full year number, but, as ever, external factors will warrant constant monitoring.
Another lesson to learn is that the world’s leading investment banks, usually led by the vampire squids, have been wrong most of the last year. It would be pleasing if their commodity trading desks had taken their own internal guesswork on the oil price.
Back to the present, the year did indeed close at the year’s highs. The last two weeks have seen pipelines such as Forties (scheduled back fully by now) and the blowing up by terrorists of a pipeline in Libya last week keeping a bit of production off the markets. The same was thus of the Keystone problem showing how vulnerable we are with the delivery routes.
Also, inventory stats last week were particularly positive, the EIA reporting crude drawing 4.6 million barrels with refinery utilisation up at 95.7%, the highest since August. Total stocks were therefore down more than the analysts guesses and totalled 8.7m including a healthy 1.6 million draw at Cushing.
This year will not be easy. I am already seeing plenty of valedictory remarks by the stale bears and the first half will be hard going indeed. Political influences will be substantial, as ever, and with elections in Russia, Nigeria and Iraq amongst others, key oil producing states will potentially see change.
A trading update from Range (RRL) who have had a busy year, and I would imagine are planning to settle down and deliver on promises made in the past. Today’s trading update is very much a step in the right direction as they reveal that the recent well at Beach Marcelle is on production at a stabilised rate of 120 barrels per day on a restricted choke of 5/32″.
They also say that the waterflood programme is showing a ‘positive trend’ with 40% of current production coming from it at 240 barrels per day. Average production in the last quarter was 629 barrels per day with peak at the end of December of 703 barrels per day.
With an active programme planned this year and increased opportunities from the RRDSL rig acquisition, as well as from Indonesia, Range looks in a much more stable position than for some time.
President Energy (PPC) has announced the sale of its non-operated ‘non-core’ beneficial interest in the East White Lake field in Louisiana to Alpha Imperial Corp for $525,000 (£387,000). This releases funds and gives PPC more scope to concentrate on its core assets in Argentina, which have already showed a significant increase in production and a substantial work programme for this year.
Victoria Oil & Gas
Victoria Oil (VOG) has announced an update on the Bomono farm-out agreement signed in March 2017 and confirm that they and Bowleven are working with the Government of Cameroon to expedite the deal. SNH has a lot on its plate at the moment but I see nothing sinister in this delay and will be hugely helpful for VOG in the future.
As predicted by the company, Premier Oil (PMO) was able to announce first oil from Catcher on December 23rd, which beat my forecast by a day-and-a-half. This is an excellent performance by PMO and Tony Durrant and his team should be congratulated in bringing it in ahead of schedule and nearly 30% under budget.
The company has said that it will produce at 10,000 barrels per day for now ramping up to 60,000 barrels per day (50% PMO) by the end of the first half of this year.
Providence Resources (PVR) issued a trading update last week which contained some interesting nuggets of information. Clearly, last year was one of disappointment with the drill bit, but there is still plenty to do and 2018 looks interesting.
Total (TTA) has exercised its option to farm-in to FEL 2/14 for a 35% interest and the operatorship, which is of significant interest. Total also farmed-in to 50% of the Avalon prospect in June, but Cairn (CNE), who had an option have let that lapse. Finally, re Barryroe, the company announce that they are gearing up for drilling an appraisal well at some stage and that a tender for a rig will be issued soon.
The company also say that a farminee has been identified and has been given a period of exclusivity to conclude the negotiations which, if concluded, would lead to a “multi-well programme at Barryroe”.
Now, I’m sure that readers of this blog for many years will understand if I don’t right now break out the champagne and cigars until the ink is dry on the contract. Neither will I be standing on one leg waiting for it to happen, too many broken hearts on this one, but closure would demand drinks from TOR…
I don’t have time for all the footy, but the Noisy Neighbours have dropped their first points against the Eagles, whilst Chelski and the HubCap Stealers have been on cracking form over the festive season. The Red Devils have struggled to find the net, but got back to winning form last night against the Toffees.
Another set of fixtures tonight as aforementioned Noisy Neighbours host the Hornets, the Hammers welcome the Baggies, Spurs are at the Swans and the Eagles go to the Saints.
Muzza has broken down again just before appearing in Brisbane and now very unlikely for the Australian Open. Will we see him again I ask?
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.