Member Info for Boyobach

‘Art of War’ : "When your enemy is in the process of destroying itself, stay out of its way."
An adapted snippet from the excellent Oily Stuff blog (link to full original at the end):

‘OPEC intends to cut it's oil production levels and keep worldwide oil prices 'just' high enough to allow the US shale oil industry to drill itself into almost total depletion while getting deeper and deeper in debt. For those in the world who think OPEC are stupid, that is not true. They see that Permian Basin, itself a desert, will carry the brunt of America's shale oil growth and are stunned at the decline rates of those shale wells and the number of new ones it takes every year just to maintain current production levels. Where is all that water, and all that money coming from? It is totally baffling how Americans cannot control their spending habits and not want to conserve some of their oil resources for the future, like OPEC do.
OPEC will "adjust" [ https://www.oilystuffblog.com/single-post/2019/05/29/Cartoon-Of-the-Week to American shale oil ] until it is mostly all gone.’

https://www.oilystuffblog.com/single-post/2019/07/02/The-Art-Of-War

It may be like watching paint dry but periods this year when G stayed within about a 10p trading range over several days usually only last a couple of weeks max (Brent overlaid in green here):
https://invst.ly/bfvdg
It certainly seems due a shift sometime between now and Aug 7th. Logically, if OP holds and there’s positive but unsurprising news at the H1, it could move into the 210-220p range. 220+ looks unlikely to me unless OP gets back to $67 or the H1 is outstanding….

As we start the week it's interesting to see how closely G has followed Brent during market hours for the last three trading days and at the open this morning - https://invst.ly/bfttw

Boyo 186
Withoutt 198
Broadland 200
Hawkey 210

I wonder what probability factor will ultimately be applied to those unrisked gross resources when they finally become 'risked'?

https://seekingalpha.com/article/4275164-shale-oil-well-productivity-stalls-putting-growth-estimates-risk
extracts:
The logic behind the treadmill analogy is simple.

US shale producers can bring an oil well into production in a short amount of time, but the parabolic decline curve makes it so that year 1 of production declines on average over ~70% from peak to trough.
As US shale oil production grows, the base of the production grows. The faster the growth, the steeper the decline.......
And as US shale continues to grow, more and more capex has to go into replacing the decline. So the speed of the treadmill is the existing decline. Eventually, as the decline curves catch up, almost all of the spending each year will go towards replacing the decline. We estimate the year for that is 2023 for the Permian, 2020 for Bakken, and 2021 for the Eagle Ford......
The issue is that to complete more wells, you need to spend more capex. And to spend more capex, you need to spend outside of your cash flow. This requires shale producers to access the capital market, which is no longer available even for the leanest of producers. In addition, investor pressure on disciplined capex spending means less capex, not more.
This combined with the increasing treadmill effect will be the ultimate drag on US shale production. This doesn't mean US shale production won't grow this year, but it means that when it does stop growing, it will do it in a blink of an eye and catch the world off guard.

I understand that the FTSE All-Share Index consists of about 600 of the 2,000 + companies traded on the London Stock Exchange. So it isn't actually 'all share' index in the strict sense. G isn't in it anyway as far as I can see.

G is not in any of the FTSE Indices according to the LSE official website.

Hi withoutt -
I don't think KSA & Kuwait are wanting neutral prices but there was news this week of them resuming production from the jointly owned neutral zone between the two countries. It's more about Kuwait than KSA, apparently:
From OilPrice.com, link below:
Kuwait has set its sights on increasing its oil production by 4 million barrels per day by 2020, despite the OPEC+ agreement that is currently restricting production. To achieve this higher level of production, Kuwait would need to pump oil from the neutral zone. But that’s not all it will need.

Kuwait is also looking to come to a similar understanding with its other neighbor, Iraq. Those countries share a nuetral zone as well. In June, Kuwait’s oil minister announced that an agreement with Iraq is in the works, according to KUNA.

https://oilprice.com/Latest-Energy-News/World-News/Oil-Dips-On-Renewed-KuwaitSaudi-Neutral-Zone-Oil-Production-Talks.html

The three amigos, G/GKP/DNO, tracked Brent dutifully this week. DNO appears to be slowly making up for its 30% drop from April 23rd to late last week. It has a long way to go. There but for buybacks goes G, which was dropping a similar percentage prior to the company’s action but is currently only about 15% down since the fateful day:
https://invst.ly/bf974
Although G slipped under the 3x ratio by the close, it and Brent are currently in a fairly familiar and unexciting relationship that goes back to last autumn Whether the long-awaited market revaluation is likely to happen at the H1 is anyone’s guess - there’ve been a couple of false calls this year (March and April) but they both ultimately fizzled out with G dropping back to around 2.7x Brent only to be rescued by the buybacks
G of late - quite unexceptional, will it hold above 188?: https://invst.ly/bf9as
All the runners and riders since October, equally boring overall except for DNO which seems to suffer the same over excitement followed by disillusion that sometimes hits G and GKP, and PMO, which looks very like G but on sedatives:
https://invst.ly/bf9b9

I don't expect this initiative will extend to special advisers....if you get my drift.

Is that Sir Nicholas Spades, JL?
I'm totally confused now.

Five weeks on from the start of the two week buybacks, a pretty cheap exercise in hoovering up bargain priced stock from sellers who were effectively suppressing the price and this chart is worth a look: https://invst.ly/bf36t

There’s little doubt about the effectiveness of the resulting boost, which effectively put 8% on the sp. Will there be more to come? I guess that will depend on the ‘value accretive’ criteria - which, in turn, would indicate the company’s own assessment of the current 190p nominal price. Certainly there was cash left in the $10m budget - was it only about 30% used? - Very interesting to see what happens. JL has pointed out that the scheme is effectively in loss at the current sp, however that’s how investments usually work - you don’t see immediate returns. Timing will also be important - if the company foresees OP falling then any buybacks would be best phased to take advantage of anticipated dips in sp.

G/GKP/DNO v Brent since last Friday’s close: https://invst.ly/beuz7

After relaxing the price yesterday, GKP buybacks were apparently pushing that sp back up to around 228 today. G meanwhile has remained pretty reliably above 3.0 x $OP since the buybacks, despite lagging a little behind the others over the week.

Meanwhile, Brent is now trading in what I’ll call the ‘comfort zone’:
https://invst.ly/bev68 that it occupied pre and post the last drop to near $50 in December.

For now, G appears to be levelling off (ie breaking down from the red rising trend here) and quite possibly set to trade broadly in the 180 -195 range (subject to OP in the $60-65 region) https://invst.ly/bevdk , in which case I’d certainly envisage more buybacks in due course, unless the H1 results do the job.

For those who get frustrated with the G v Brent relationship and also don’t realise how the buyback process restored the long term component of that relationship, this chart should clarify. For most of the chart, which is rebased to 3rd October, G’s red line is above that of Brent but it fell below from 21st May (marked). That situation was corrected from 25th June (also marked) when the buybacks started.
https://invst.ly/benzj

Basically: G follows Brent except when it doesn’t - the occasions when it doesn’t don’t much matter unless the divergence is large and/or prolonged.

Crude oil falls sharply as Kuwait and Saudi Arabia look to resume production in Neutral Zone......OP

.....but has inherited the Commons of Mrs May's election, so is in no position to deliver it......
Technically incorrect, I believe. Leaving is the default, so he only needs to deny Parliament the opportunity to vote upon it ad it will happen automatically. A series of procedural ploys, rather than actual votes, is quite possibly what he will seek to engineer. Time and the summer recess are on his side. Even a well timed GE would prevent Parliament from sitting - quite a dilemma for Labour.

Before we get too ecstatic about the 10.8 million barrels draw just let’s remember that it happens to be equivalent to one month’s output from the PES Refinery that was destroyed by fire - er - a month ago. PES has just filed for bankruptcy and about 10 million bbls of light sweet have been looking for a buyer elsewhere…...

NEW YORK/PHILADELPHIA (Reuters) - Philadelphia Energy Solutions filed for Chapter 11 bankruptcy protection, the company said on Monday, its second such filing in less than two years, after a fire last month prompted it to close the largest refinery on the U.S. East Coast.
Following the June 21 explosions and blaze, PES started shutting down the 335,000 barrel-per-day Philadelphia plant without a planned restart. Some 1,000 workers are being laid off.
The company’s lenders agreed to provide up to $100 million in new financing to PES to usher it through the bankruptcy, it said.

Yes- that's good.
https://oilprice.com/Energy/Energy-General/Huge-Crude-Draw-Fuels-Oil-Price-Rally.html

Despite Brent’s overnight gain of about 80c, all three Kurdy’s fell back within an hour of markets opening but made a belated catch-up towards the end of the day. GKP’s buyback programme has effectively been keeping its sp near 225p (a general ratio to $OP of approximately 3.5) but there was little evidence of that today. Meanwhile G remains relatively becalmed around 191 most of the time. DNO, the strongest of the bunch since October, has recently been playing catch-up after a bad few weeks .

5x 24 hr, 15min ticks, comparison G/GKP/DNO v Brent: https://invst.ly/bee0t

In terms of price performance since OP hit $86 last October, Brent has fallen by 25% so, at 22% down, G and GKP are effectively ‘in step’ with it. DNO appears to have given up all of its 2019 gains: it was briefly a stunning 20% up but is now 15% down over the period. Disappointing for its shareholders but, nevertheless, it remains the strongest of the Kurdish trio. PMO is a hefty 43% down - it did go as low as -60% at one point. RDS is only 5% down - predictably and easily the most consistent performer. For all the others, 23rd April has been the highspot so far this year.
https://invst.ly/bee0k