Oil & Gas Daily Flow
Non-Independent Research; Marketing & Sales Commentary - MiFID II exempt information – see disclaimer below
Market Update: Wednesday 3 June 2020
Empyrean Energy (AIM:EME): CNOOC grants one-year contract extension
Energy Prices
Brent Oil US$40.0/bbl vs US$39.3/bbl yesterday
WTI Oil US$37.3/bbl vs US$36.2bbl yesterday
Natural Gas US$1.80/mmbtu vs US$1.76/mmbtu yesterday
Oil Price News
Oil prices have touched US$40/bbl for the first time since March on reports that OPEC+ is set to bring forward its meeting to this Thursday
Whilst US/China tensions continue to weigh on prices, an extension to the cartel’s production cuts will provide short term support
Market consensus suggests the group will extend the current output restrictions for one to three months
As it stands, without an extension the extraordinary cuts agreed upon in April – 9.7MMbopd will expire at the end of June
However, nothing has been agreed yet and there are conflicting signals over how unified the OPEC+ parties are on an extension
Saudi Arabia reportedly wants to extend the cuts until the end of the year, while Russia has characteristically shown reluctance
Russia may not want to extend beyond another month or two, which raises questions about what will occur later this year. At some point, there will be pressure to begin unwinding the production cuts
Gas Price News
Natural gas prices edged higher consolidating its recent decline after hitting a contract low on Monday
Demand was flat last week and despite a decline in the number of active rigs, prices continued to decline
The weather is expected to remain warmer than normal in the US mid-west and east coast for the next two weeks driving up cooling demand
A weaker than expected GDPNow growth forecast could put additional downward pressure on prices in our view
Company News
Empyrean Energy (AIM:EME): CNOOC grants one-year contract extension
Share price: 5p, Market Cap: 24m
Empyrean has confirmed that given the current climate and the resultant global control policies, the Company has proactively engaged with CNNOC and applied for a 12-month extension to the first phase of the exploration period for the petroleum contract for Block 29/11, China.
CNOOC has granted a 12-months extension to the first phase of exploration.
As a result, the first phase of the exploration period for the petroleum contract for Block 29/11 has been extended to 12 June 2022.
CNOOC has informed the company that the existing current contract will be suitably amended in due course.
Our take: The extension, whilst expected, allows Empyrean additional time to de-risk the prospect ahead of drilling what could be a transformational exploration well in a success case. It also highlights a positive relationship with CNOOC, with the Company not having to invoke its force majeure clause given recent unprecedented events.
Research – Oil & Gas
Sam Wahab - 0203 470 0473
sam.wahab@spangel.co.uk
Sales
Richard Parlons – 020 3470 0472
Abigail Wayne – 020 3470 0534
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Sources of commodity prices
Oil Brent, WTI
ICE
Natural Gas
NYMEX
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