A low oil price is unlikely to be good for TS either in the short term. Whilst it potentially kills off the US competition and gives some type of buffer for already established Australian producers (or those who have already committed such as Gorgon) it impacts all new onshore proposed LNG developments. If oil prices remain stuck at low levels it essentially means the next wave of LNG developments are LNG floating production systems, but the economic viable capacity of such developments is less than 4 million tonnes per annum currently (Prelude, which is a Shell project is essentially the first such Australian type project but Shell is seeking to offload its ES share, and ENI is not that well devloped in the floating production area so TS a much longer term option at low oil prices) - floating technology still not essentially proven for larger scale LNG developments hence why Wheatstone (due for development in 2018/19) is still looking at an onshore development. Essentially for TS to be a viable option in the short term requires a number of floating LNG production system developments for an aggregation project such as TS to be viable in the short term, as unlikely to see any new LNG proposed onshore developments been announced for some time (i.e to those ones already committed). It is probably best TS deals with one major supplier - ENI - if floating production systems become the only viable option for developing gas into LNG in the vicinity of TS, but then again I think under these circumstanes you will find a takeover offer by ENI (rather than dealing with MEO - so in short could be some time before ENI shows its hand, and Meo doesn't have that amount of time available to it to wait for an ENI decision).
MEO future strategy must be to get cash quickly and then aim to become a producer of some sort (whether a small scale development or otherwise). Becoming a viable producer then means you have your own cash/access to capital markets to develop more strategic projects such as TS. It also means you have more muscle in negotiations around TS when it does become a viable option, rather than what we have now - a company trading with a whiff of death around it or at best having a total general lack of direction by managment of where this company is going - that is why the share price has tanked). Going for the big fish straight away (getting TS up without really thinking of doing other things is the way MEO has been run to date) has been a failed strategy and I doubt falling oil prices are going to help TS in the short term either.
Meo needs to go for and develop the lower hanging fruit first (or look at more actively seeking farm ins to any prospective tenements it holds, assuming there is interest in those, or at least sell one of these to get access to cash). All quiet around the Beehive development of late does not help, and what actually is the MEO plan for Cuba by the way (Meo has little cash to really entertain a Cuba development so who has it been talking to or is this another Meo managment decision where it has enterred a new venture without a plan or even a whiff of a potential private sector partner). Bring on the new management fast please - and lets hope that the new management puts their money where there mouth is and actually own some shares in Meo they have bought with their own money - that way they will work for there Meo money unlike this incompetent lot we currently have running the show).
MEO Price at posting:
1.9¢ Sentiment: None Disclosure: Held
