Roundtable Discussion; The Future of Mineral Sands. Watch the video here.
Just one other point RE Delaware shale to add to the excellent ones already made, it is a super light grade which, due to the US refiners preference for medium and heavy, trades at a discount to WTI currently at around $3-3.5 Pb (it will be a replacement for some Iranian production but obvs costs a lot to ship to India and China). Given that the info I have suggests that all-in break even for Delaware is about $55bbl there really isn’t much margin in it at the moment. The new pipelines will provide more capacity, which will narrow the discount to Brent and enable current production to get out more cheaply but given the incentive margin for western superlight isn’t huge it’s hard to imagine at these prices there will be much growth to fill them from this source until the majors really get going and consolidate the acreage effectively. My view is that to really bring these barrels on in any quantity the benchmark prices have to rise back over $80 Brent and the rig count doesn’t suggest that the industry is front running in anticipation of this. It’s all very speculative and inferring rather than hard data but then you’ve got to have a thesis to base your investment decisions on. Buying back into enq was always a trade for me and my plan was that exit would be at the end of Q2/19 when Saudi cuts would be fully in the system but if bullish factors keep driving POO up, I’ll be in for longer. $100 Brent could see us troubling £1 SP in my view at in the current environment there is certainly a risk of that happening. One other wildcard I’m watching closely is Libya. There is a chance that their production will surprise to the upside to the tune of 4-500k bbls. That would put a dampener on things.
RE majors buying into shale. Don’t forget also that not all acreage is created equal. The patches that have been consolidated into large chunks by the big players have a high %age of tier 1 locations. In addition, the cost of capital for majors is waaaaay lower than for the smaller operators who have to raise capital either through the junk bond market or equity raises both of which are closing doors now. By my reckoning the plateau of US shale production is already happening and coupled with their conventional production declines we will see total US production flatten as soon as early H2. Thing is though If there is a $100 spike in H2, with the new pipeline capacity coming onstream many more crappy tier 2 locations will be drilled but the production lag means that it would be mid-late 2020 before that starts to show up in the numbers.
Yesterday's #crude pullback moved back up off the 200dma. It was only broken to the upside on April 5th. https://twitter.com/FibLines/status/1121847231454294017 Crude is correctly priced to the mid-cycle price according to the current comparative inventory (a relative measure of total historic inventories). https://twitter.com/aeberman12/status/1121076611846234112
Productivity growth is a widely circulated metric. During the big expansionary phase from 2016 onwards there were 25%+ productivity gains per annum. That has now flatlined at around 5% which means that the treadmill e121 described so well will need to work even harder as the low hanging fruit has been picked. Annoying that I cant post a graph here but if you google shale productivity it should be relatively easy to find the data.
Wait, so it will never produce or it will produce but in 2020? At least be consistent with your wittering.
Wow, that’s some nice initial intercepts.
Ok, the sell has ticked up now so either the speculative order was removed or They’ve got buyers and need to get some volume going. One of these days I won’t be so tight and get L2 so it’s easier to see what’s going on.
Spread is really wide. 6.7p has been paid so I’m guessing this is so that they can hoover up any big sells. Right now they will take 500k for 6.06 so there is demand,prob in anticipation of the SP taking off with any volume.
Disappointing volume today. Hoping that poor sentiment was all about consolidation and EIA numbers. Inventory figures were not bullish but over 4 weeks total liquids were only slightly up just before big consumption resumes, so expecting some big draws before the end of the month. + China have a couple of refineries coming online before the end of q2. Will be interesting to see if those Permian pipelines are commissioned to schedule, I’m hearing that there is a chance they will be delayed a bit. USD in breakout. Looking good for poo when FED start easing.
Antofagasta on course to increase production by 9% this year. https://uk.reuters.com/article/uk-antofagasta-output/antofagasta-copper-output-rises-as-centinela-mine-shines-idUKKCN1S00MQ
On the face of it a nasty set of numbers but the market mostly shrugged it off. Hopefully it is just seasonal funnies otherwise my thesis has a hole and will be leaking cash. Cushing draw was still bullish though.
More clarity from tomorrow's figures.
Greenfool, yes. I just took the net number from the reporting RNS dated 05/02/19. I didn’t dig further into the balance sheet to pull out any other nasties that could be considered debt, the obligations under finance leases I’ve left out as this should be part of opex number so accounted for in free cash flow calculation when using the company’s headline figure of $23/bbl. Trades payable are tiny as are tax liabilities so not worth bothering with.