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Oil market to recover in 2016: Harold Hamm

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Tom DiChristopher, CNBC, Dec 21

Oilman Harold Hamm said Monday the oil market will recover in 2016 as supply and demand come into balance.

“We’ve seen tremendous growth in the market for our supply. It’s up about 3 percent on an annual basis, so it’s quickly correcting,” the Continental Resources chairman and CEO told CNBC’s “Squawk Box.” “2016 will be the year for correction, and we estimate the first half.”

Once market watchers see the supply and demand lines cross, prices will begin to recover, he added.

Global oil markets are estimated to be oversupplied by about 1.5 million barrels of crude a day. Commodity prices have plummeted from highs above $100 per barrel amid a rout that accelerated after OPEC decided to forgo production caps in November 2014.

Globally traded Brent crude oil fell Monday to its lowest level since July 2014, breaking below the $36.20 price level hit during the depths of the financial crisis. U.S. crude threatened to fall below $34.

Hamm said the price of oil will return to $40 to $50 in the first half of 2015. He also expects the gap between Brent and U.S. crude to narrow following the lifting last week of a 40-year-old ban on exporting crude oil from the United States.

Allowing producers to export U.S. crude will help the product find a market in countries with refineries capable of processing it, Hamm said, noting that foreign acquisition of U.S. refineries has reduced capacity for American oil.

Vagit Alekperov, CEO of Russian oil giant Lukoil, told CNBC on Monday the oil market will be able to sustain $40 to $50 per barrel next year.

“The current purchases taking place in the industry do not incentivize the development of new exploration projects. … The volumes of oil output will be going down, and as a result, its price will be climbing back, but that will happen during the mid term,” he said through an interpreter.

 

 

 

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UK Begins Fracking Push As New Onshore Licences Awarded

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17 Dec 2015 14:32

LONDON (Alliance News) – The UK government began offering almost 100 new onshore oil and gas licences to companies on Thursday, with around three quarters of the blocks suitable for fracking.

The 14th onshore licensing round was conducted by the industry regulator, the Oil and Gas Authority, with the 159 blocks on offer being consolidated into 93 licences which have been offered to companies that had successful applications.

The London-listed stocks to report they had won licences were UK Oil and Gas Investments PLC, Solo Oil PLC, Egdon Resources PLC, Union Jack Oil PLC, Europa Oil and Gas (Holdings) PLC, Upland Resources PLC and IGas Energy PLC.

It is likely other London-listed stocks will have applied for licences. Under the licensing round, a total of 95 applications were made by 47 companies.

Importantly, of the 159 blocks that were on offer, around 119 of them hold unconventional shale oil or gas, making them suitable for fracking which has been a hot and controversial topic this week after MP’s approved fracking in certain parts of the UK, including underneath national parks.

“Around 75% of the 159 blocks being offered today relate to unconventional shale oil or gas, and additional regulatory requirements apply to this kind of activity,” said the UK government. “This round enables a significant amount of the UK?s shale prospects to be taken forward to be explored and tested.”

The dishing out of the licences comes only days after MPs voted to allow fracking for shale gas below national parks and other protected sites, bringing the already controversial topic back into the spotlight.

Companies can drill as far down as 1,200 metres under national parks, but will have to drill outside of the parks and then drill horizontally underneath. Although no actual drilling would occur in the parks themselves, the move was criticised as MPs voted for an outright ban on fracking under protected areas earlier this year.

Alongside national parks, companies will also be able to frack underneath areas of outstanding natural beauty, world heritage sites and other protected areas – drawing criticism from environmentalists.

The licences offered to companies Thursday allow them to explore, appraise and extract oil or gas from their respective areas, but does not allow them to begin a full scale operation, meaning any company wishing to progress their licence will need to seek a new licence in the future.

The licence offered to UK Oil and Gas and Solo Oil holds two prospects, the Arreton discovery and the M prospect, with the M prospect extending into the new licence from UK Oil and Gas’ nearby offshore licence.

UK Oil and Gas will operate that licence holding a 65% stake and Solo will hold a 30% interest, with the balance being owned by Angus energy, in which UK Oil and Gas holds a minor stake.

UK Oil and Gas shares were up 6.6% to 1.31 pence on Thursday with Solo shares trading up 18% to 0.278p.

Egdon Resources said it has been offered a total of nine licences through the licensing round, covering a total area of around 1,128 square kilometres, or 278,220 acres, in the East Midlands and over the Cleveland basin.

Egdon will hold a 15% stake in two blocks over the Gainsborough Trough, a 37.5% stake over two blocks over the Humber basin, a 75% stake in one other block over the Humber, a 33.3% stake in three blocks over the Cleveland basin, a 17.5% stake over two more blocks over Cleveland and will also wholly own one other block over Humber.

Union Jack Oil said that Egdon will transfer a 10% interest in one block located in the Humber Basin, under an agreement that it would receive a 10% interest in any new licence block awarded to a joint venture group it holds with Egdon, Terrain Energy Ltd and Nautical Petroleum Ltd.

Egdon shares were trading up 21% to 9.95 pence per share on Thursday, whilst shares in Union Jack were up 0.4% at 0.141 pence.

Europa Oil and Gas secured three new licences. One licence contains two blocks over the Humber Area where it believes there are three conventional (meaning it would not involve fracking) prospects, with Europa operating it with a 50% stake.

Europa will also hold a 16.6% stake in another licence in the East Midlands alongside fellow AIM-listed Upland Resources PLC which will hold a similar stake, and Europa will also hold a 22.5% stake in another licence over the Cleveland basin with partners including Edgon, which will hold a 17.5% stake.

Europa shares were trading up 10.4% to 3.17p on Thursday whilst Upland shares were down 8.9% to 0.820p.

IGas said it has been formally offered ten blocks. In the East Midlands and Yorkshire, IGas’ joint venture with Total and Egdon, has been offered blocks SE31c and SK59b, located in the Gainsborough Trough, close to where it current operates 80 sites. Its joint venture with GDF SUEZ E&P Uk Ltd has been offered four blocks in the North West.

In the South East IGas has been offered four blocks over which it will be the operator with a 100% interest.

Ithaca shares were up 5.5% to 28.75p on Thursday. InfraStrata shares were untraded, having last closed at 1.57p. IGas shares were up 7.4% to 21.89p.

According to the government’s website, other London-listed stocks that have either been offered licences or are involved in ventures that have applied for licences include Ithaca Energy (UK) Ltd and InfraStrata PLC – who are yet to release any statements.

Notably, Cuadrilla Resources, the company that has been spearheading the fracking argument in the UK since 2011, also applied for licences with big players like Total, GDF Suez and Ineos also applying for licences.

The Conservative government has been a big supporter of fracking since winning a majority in the General Election back in May, coming under fire from critics for encouraging the industry whilst cutting renewable energy subsidies.

Notably, the approval for fracking and the licence awards comes only a week after a landmark deal was signed by nations around the world aimed at tackling climate change.

By Joshua Warner; joshuawarner@alliancenews.com; @JoshAlliance

Copyright 2015 Alliance News Limited. All Rights Reserved.

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