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Australian gas industry optimistic as oil prices rally to highest point in 2015

Oil prices climbed to $US3.48 per barrel (/bbl), or 6.1 per cent to $US53.05/bbl, as of 3 February – their highest closing price this year – as gas companies reported strong results despite the uncertain environment.

Industry commentators say the oil price rally is reportedly on the back of a sharp reduction in US drilling activity, which has balanced the oversupply of oil in the global market. Notwithstanding the jump in oil prices, sustained recovery could be a while off with the global oil market still oversupplied, according to analysts and investors.

Performance of Australian shares and gas companies

Standard & Poor‘s 500 has gained 2.8 per cent over two sessions with the upward surge in oil prices. ExxonMobil shares were up 3 per cent at $US92.25 and Chevron‘s shares were up 3.3 per cent at $US109.53.

Gas companies have in recent weeks reported positive financial outcomes despite the plummeting oil prices, including Santos who delivered record sales revenue in its fourth-quarter report. Santos Managing Director and Chief Executive Officer David Knox said: “Notwithstanding the fall in oil prices, Santos has delivered growth in full-year and quarterly production, and record sales revenue.”?

Santos’s GLNG plant is more than 90 per cent complete, with firing of the first gas turbine generator expected in the next few weeks.

Similarly, oil and gas exploration company Blue Energy expressed an optimism about its upcoming gas exploration activities, which it said was encouraging in the face of dwindling oil prices.

“With the first three LNG trains in Gladstone likely to be in operation by the September quarter and with the already intense upstream gas swap arrangements between the LNG producers on feed gas, Blue Energy’s acreage position in the Bowen, Maryborough and Surat Basins is ideally located to take advantage of the massive gas demand developing in Gladstone,”? Blue Energy Managing Director John Phillips said in a statement on 29 January 2015.

Further, upstream oil and gas exploration and production company AWE‘s Managing Director Bruce Clement said the last six months have been positive for AWE despite the “dramatic fall in global oil prices”?.

At 31 December 2014, the company was in a net cash position of $23 million comprising $81 million in cash and $58 million of drawn debt from a $300 million loan facility.

“We have a portfolio of quality assets that provide good cash flow and valuable growth opportunities and the company remains focused on delivering value to shareholders,”? Mr Clement said.

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