Will Forbes
29 August 2017

Factors in US shale balances - Declines vs DUCs

Negatives of declines in Permian vs increases in DUCs

There have been a number of developments in recent months in US shale.
We examine two key factors to see their effect on market data and sentiment - the levels of inventories and the quantity of drilled, uncompleted wells (DUCs).
Increasing decline rates in the Permian could have significant long-term effects on US shale production expectations, while increasing numbers of DUCs in Permian should give bulls pause for thought on meaningful, near-term increases in oil prices.

Elaine Reynolds
29 August 2017

Korpfjell disappoints in the Barents

One of the most anticipated exploration wells of 2017, Korpfjell, has proven a small non-commercial gas volume in the frontier southeast region of the Barents Sea. The Statoil operated well had been targeting oil in a large structure that was estimated by partner Lundin to be over four times the size of that seen in the giant 1.9 - 3bnbbl Johan Sverdrup field.

Will Forbes
17 August 2017

Made a discovery? What are the odds of another?

Opening sequences

For exploration, and particularly for frontier exploration, it is useful to know how likely exploration may open up further discoveries in the block. We try to quantify how exploration discoveries may lead to further success - and how these results should affect company valuation

Will Forbes
8 August 2017 · 3 min read

Supply/demand rebalancing some time away

US shales can produce enough to supply demand increases

The oil sector is firmly in a new cycle, with a dramatically lower cost profile across the industry. Inventories in the US remain at elevated levels (only just below last year’s record levels). Although demand growth is steady, the production growth from the US shales alone is seen to be enough to provide for this growth from (Q217-Q218), with OPEC playing a role as the swing producer to cover seasonal variation. The market agrees, and the forward curve has progressively lowered and flattened over the last 18 months. We lower our long-term oil price assumption to $70/bbl in 2022 (equivalent to c $60/bbl real in 2016).

The note is here

Will Forbes
8 August 2017

Kosmos searching for more investors

Kosmos coming to London

On 2 August, Kosmos announced that it will be seeking a main-market listing in London during the third quarter in order to access European investors. According to Reuters, the company indicates “There are a number of European investment funds and specialist international oil and gas investors that are currently unable to hold Kosmos’ shares due to their listing outside of a European regulated market”

We also believe it is a function of the differing attitudes the investor bases have towards exploration. Given the multitude of onshore producers, US investors typically place more emphasis on near-term cashflows and production. Especially since the advent of shale fracking, exploration risk is smaller and a greater attention is given to cashflows and financial leverage.

European exchanges tend to see more international explorers focussing on frontier areas, leading to a greater understanding of international exploration and willingness to value it.  European exchanges are more used to taking a risked approach to longer term value ideas such as 2P/3P reserves and exploration.
This may explain why European analysts have higher target prices given Kosmos’ mix of production/ development/exploration assets.

Charles Gibson
26 July 2017 · 4 min read

Killing the goose that laid the golden eggs

Tanzanian resource nationalism - replaying past mistakes

In London, the shares of Acacia Mining (formerly African Barrick Gold, the 62%-owned, listed subsidiary of Barrick Corp) have fallen by almost half in the last 24 hours, after the Tanzania Revenue Authority demanded $190bn ($40bn in alleged back taxes, with the rest in interest and penalty charges).