Comments Anyone!!

The US is one of the top 3 oil producers in the world along with Russia and Saudi Arabia. The US currently produces about 9.5 Mbpd of oil and about 30% of this comes from on and off shore Texas / Gulf Coast oil rigs which equates to around 3 million barrels of oil per day.

Hurricane Harvey crossed land around Corpus Christi, has passed over San Antonio and Houston and is tracking toward Memphis leaving devastating damage and flooding in its wake. Major oil and gas pipelines and terminals reside in and around Houston and tornados have been predicted to hit these areas as well as over a metre of rain. There are over 800 oil platforms in and around Harvey’s path as well as coastal pipelines and shipping and refining facilities. Eagle Ford production is around 1.2 million barrels of oil per day and Gulf Coast Offshore production is around 1.7 million barrels per day.

Anyone who has experienced flooding as a result of a cyclone or hurricane knows the damage to infrastructure is usually extensive and can take from weeks to months to repair, and the time it takes to restart production at project sites can also take this amount of time depending on the damage to the site as well as the infrastructure.

The US consumes over 19 Million barrels of petroleum products per day and my estimate of the loss of production in Texas due to the shutdown of oil rigs and infrastructure following Harvey is somewhere between 2 and 3 million barrels per day. There have already been huge draw downs in US oil inventories over a number of weeks now, and I imagine over this and the following weeks there will be increasing draw downs in petroleum products as huge rescue efforts get underway in Texas. Given this daily estimated loss of production, and not knowing how long it will take to recommence production due to what could be weeks of further flooding I could easily imagine oil going above $60 / barrel.

With Santos now able to produce oil at $33 / barrel, and raising its guidance on production and sales, along with PNG LNG increasing production and looking to increase sales volume, the announcement by Comet Ridge this morning, that another gas well was spudded in the Mahalo Block near GLNG (and even the possibility of additional gas to GLNG through Arrow Energy) it’s difficult to imagine how high the Santos share price could rise. I’m no expert but I can easily imagine it going between $5.00 and $6.00 near term.

Does anyone here think this is conservative, overly ambitious, or pretty close to the money? I’ve held Santos since they were $13.00. All comments and facts related to US oil rigs, production etc, welcome. MB