NYHEDSBREV AUGUST 2010

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1 Despite an already high price level, a number of factors suggests a major risk that oil prices may sky-rocket later this year, according to the Societe Generale in a new analysis of the oil market. Eilif Thomasen in Økonomisk Ugebrev March 25th Table of contents Oil price burden back Projects for sale ROI history Project news Frac-team on oil project Page NYHEDSBREV AUGUST 2010 Oil price burden back on pre-crisis level? Despite an already high price level, a number of factors suggests a major risk that oil prices may sky-rocket later this year. This is the assessment of the Societe Generale in a new analysis of the oil market. Oil stocks are at the lowest level in five years, and in addition to that a very low spare capacity in the OPEC-area. The OPEC countries' reserve capacity was, according to the Societe Generale, in February of this year down to 1.9 million barrels per day, of which Saudi Arabia possesses the vast majority. This should be seen in relation to a daily global consumption of crude oil of almost 90 million barrels. On this background the Socitete Generale assesses an average crude oil price for Brent oil of USD per barrel for Worst case scenario in the analysis is concentrated around the Iran crisis. Societe Generale estimates in the analysis that the risk of this scenario is modest, but on the other hand, it would have dramatic consequences for the price. A worst case scenario could for example be that Israel attacks Iranian installations, or there will be a military intervention by the US - Iran consequently decides to close Hormuz and the price of crude would sky-rocket to between 150 and 200 USD per barrel. Oil price burden back on pre-crisis level? Price of oil and natural gas 6 Societe Generale operates with an interesting concept in its analysis: The Oil Burden-calculated as global oil demand times the price of Brent oil, expressed as a percentage of the global GDP. In the period 1990 to 2004 the burden has largely remained within the range 1-2%, But then increased dramatically when the global economy boomed before the financial crisis set in. The oil burden index increased in 2008 to exceed 5 percent and then dropped back to 2% in The index now seems to close in on the pre-financial crisis level, and is currently close to 4.5 percent and rising. This means, according to the analysis, that the price of oil now constitutes a significant obstacle to economic growth. Projects for sale by KRIS KON HAGEN RANCH NO. 5 1-well project with horizontal oil well. Expected production start first half of KRIS KON HOUSTON COUNTY WOODBINE 1-well project with vertical oil well. Expected production start first half of

2 project portfolio. The project portfolio, we currently have for sale, is very attractive. Projects with imminent production start from several operators and many different types of wells. Several of the projects are 1-well projects, and we of course recommend our customers to put together an investment portfolio consisting of 2 or more projects. Projects for sale KRIS KON HOUSTON COUNTY LUNDY NO. 1 1-well project with vertical oil well. Expected production start first half of KRIS KON WOODFORD 3-well project with vertical oil wells. Expected production start second half of ROI history on oil projects Project Production start ROI in % to date Average per month since production start West Ranch lll November ,4 1,20 Revenue 4. Quarter 2011 West Ranch V Xtreme no. 1 West Ranch lv October ,3 2,43 October ,2 0,07 September ,9 2,23 See your revenue statement for 4. quarter 2011 on My Page at. The annual payment of Ad Valorem taxes in December may affect the 4. quarter revenue on some projects. by West Ranch ll Woodbine 26 Woodbine 15 Woodbine April ,4 0,49 October ,4 2,16 August ,6 4,41 May ,2 5,06 Edwards 5 September ,7 1,25 Woodbine 4 June ,2 2,65 East Texas 20 February ,9 0,99 Edwards 4 February ,3 0,54 Edwards 2 October ,4 0,30 Edwards 3 July ,9 0,58 Edwards 1 September ,5 0,48 Kennedy January ,0 4,65 SE Breckenridge June ,0 5,45 Shell January ,5 4,72 2

3 Project news East Voss Field (Redder Lease) Several wells in the project are now in production, and there is a smaller revenue for 4. quarter Optimization of all wells in the project continues, and it is the operator's expectation to reach min 50 barrels of oil per day from the East Voss Field wells. Xtreme No. 1 Initial production from the 3 production wells in the 5-Star unit. Flooding of the formation is going on and as the pressure increases, the production of the wells will increase. It is still the operator's expectation to reach + 50 barrels of oil per day. West Ranch projects Visit USA together with! It is a good experience to see the wells, meet and talk with the operators "on location". We are planning the next investor trip to Texas and Oklahoma: October 2012 WR 2: The Operator is still working to optimize production on the project. Currently the 2 wells produce low volumes. We expect a solution during the spring. WR 3: Stable gas production from 1 well. Well No. 2 is expected to produce before the end of the month. WR 4: Total production from the 3 wells in the project: barrels of oil and cubic feet of gas per day. WR 5: Production from 1 well: 25 barrels of oil per day. The 2 other wells are expected to be in production during the spring. WR 7: The first well is currently being prepared for production. Completion of the well no. 2 is imminent. WR 8: The first well is drilled to 8,000 feet (Target depth approx ft). Completion and production expected early May. Smoky Hill The Hoffman well has finished drilling and is awaiting testing and final completion. Problems with power has meant a slight delay. The operator expects production within 14 days. Hagen Ranch projects by HR 4: Impressive production of more than 7,000 barrels of oil in February and continued stable production. HR 5: Drill start imminent. Project is expected to be in production during May. The well is estimated to have the same potential as the HR 4 well. Woodbine projects WB 4: After almost 3 years of production the production has now settled at a level where it is expected to be for several years. The project still delivers good returns. 3

4 Woodbine projects continued. Project news WB 7-8-9: Per the project has accumulated a gross rate of return before admin. fee of 101,2%! After only 2 years of production and the 3 wells in the project continue to deliver good returns. WB 15: Stable production from the 3 wells in the project and continued good return. WB 26: All the 7 wells are now in full production, securing increasing returns in coming quarters. Woodbine Lease 10 During the 2. quarter of 2012 will receive the first spud fees from the Woodbine Lease 10. These are paid to Lease-partners in connection with the returns for the 2. quarter Below: Rig on Houston County Lundy No. 1 Houston County Lundy No. 1 The well is now drilled to feet and is very close to reach target depth. Lodgepole As previously announced, 3 operators are now ready to drill wells on the Lodgepole lease. We are awaiting information on the drilling start. Hardeman County It has once again been confirmed that there is oil in the 2 wells in the project. It is, however, not yet been possible to get the wells to produce commercial quantities. At present the operator shall evaluate various options/actions that could bring the wells in commercial production. Edwards - Homer St. Peter - Homer Rome projekterne As this newsletter goes to print, we have unfortunately no current news/ updates on these projects. We will inform Working Interest owners as soon as relevant news are available. ONE Energy/Petron Energy by The merger between ONE Energy and Petron Energy is now in the final stage. Letter from ONE Energy has been sent out to shareholders in ONE Energy. ICYou ICYou will provide a detailed review of the company's activities, time-frames for the launch of products etc. at the general assembly in June Until then please refer to the news letter from ICYou of 16. March

5 FRAC team on one of KRIS KON S oil projects. Latest FRAC technology is required on some types of wells in order to achieve optimal production. As shown in the image above, it is connected with a lot of vehicles and other equipment. Everything is monitored from a mobile control unit (White truck in the center of the picture). by 5

6 KRIS KON HOUSTON COUNTY LUNDY NO. 1 The price of oil and natural gas by As described earlier in this newsletter, it is expected that oil prices will rise further during 2012, mainly driven by geopolitical turmoil, and not driven by economic growth, as we would wish it. Right now a barrel of WTI crude oil trades at almost 104 USD, and it is in our optics a good price, both for our customers and the world economy. Somewhat different is the situation with the price of natural gas, which right now is "in the basement"- and trades at about 2 USD for 1000 cubic feet. It is close to the point where the operation of gas wells is no longer profitable, and a majority of Texas ' operators have choked back the production on their gas wells. The reason for the low price is mainly due to huge reserves of natural gas and a demand, which, although it is increasing, cannot keep up with the supply. Many experts expect, however, an increase in demand during we hope that they are right. We wish all a happy spring! KRIS KON A/S 6