WTI (Aug) $71.80 +1c, Brent (Sep) $76.52 -13c, Diff -$4.72 +7c
USNG (Aug) $2.60 -5c, UKNG (Aug) 80.1p -3.3p, TTF (Aug) €33.35 -€0.51

Oil price

Markets in general were hit hard yesterday by the private sector jobs data which came in at twice the whisper and with the Non-Farm-Payroll expected later today ensured that it is the precursor to higher rates in the US and beyond.

The EIA inventory stats rescued the day somewhat for oil markets, crude drew some 1,504m barrels but more importantly gasoline drew 2.549m which pushed product prices a fair bit higher.

At the Opec Seminar the speakers tried to explain that Governments cannot change fossil fuel usage by altering supply and that it will not be physically possible to generate the  amount of renewables needed, indeed pursuing the demand side of the equation, at least in the short to medium term. I suspect that they have been reading the recent JP Morgan research on the subject which is about the best piece I have seen on the subject.

Beacon Energy

I recently visited Germany with Beacon Energy who are a relatively new kid on the block with assets that have come as a result of the acquisition of Rhein Petroleum. Management will be familiar, Larry Bottomley is the CEO and Stewart MacDonald CFO and it also has a powerful Non-Executive board one of whom is Leo Koot also well known. 

Having resurfaced as Beacon the company has made this acquisition which owns an existing if small oilfield onshore Germany, however although current production is very modest it has capability of some 4,000 b/d with all the kit onsite and very sophisticated. 

The company comes with 2P net reserves of 3.85m barrels and a 2C net contingent resource of 22.96 mmbbl on the four assets in the company. As with all onshore discoveries, particularly one like this, it has the usual benefits of cost efficiencies and being very close to markets.

The company spudded the Schwarzbach-2, SCHB-2, development well within the Erfelden Field, onshore South West Germany on the 19th June and drilling operations are expected to take in the region of 25 days to reach the prognosed TD drilling depth of 2255m (1709m True Vertical Depth), with an additional 12 days scheduled for testing.

SCHB-2 is a big bet on the company’s future and wisely, particularly as it is described as a development well, carries no chance of success number to hinder its potential. Should the well come in, its biggest claim to fame will be that once completed, the SCHB-2 well will be tied-in to existing production facilities at the Schwarzbach site and put into production and be a good platform for further development. 

The recent site visit if nothing else provided a good opportunity to see what is clearly world class kit, what else would one expect to find in Germany? The drilling rig was so shiny as to be spotless and even had an automatic pipe-loading system which I have never seen onshore before. 

The drilling team were clearly best in class and if this doesn’t come in it won’t be lack of decent kit that stopped a good result. For example the facilities for handling crude are not only on site and ready to go but are safely in use for the modest amount of oil already being processed. 

The company has raised enough money in order to be self-funding and with a success here will generate enough cash to ensure value enhancing growth so all eyes will be on the SCHB-2 well in upcoming days. With spud on 19th June, expect TD on 14th July and then twelve days of testing so it’s not far away.