After the turmoil late last year and in January, crude oil made a strong comeback in February with oil prices registering one of their highest monthly gains ever in February. At last check on Monday, Brent crude was trading around $61.40 a barrel and WTI crude was trading around $49 a barrel.
The rebound in February was driven by a number of oil companies, both major and independent, announcing production cuts in the wake of a sharp pullback in prices. The near-term outlook for oil market still remains weak. Supply will continue to outstrip demand for a while. However, there is also growing pressure on OPEC and its most important member Saudi Arabia to cut production.
Saudi Arabia has so far resisted a production cut, saying the price of oil should be decided by market forces. Saudi Arabia has one of the cheapest extraction costs. Therefore even as lower oil prices hurt its margins, it can make a decent profit. However, oil revenue is finally taking a toll on the country’s fiscal situation. Analysts expect Saudi Arabia to possibly announce a production cut in July.
The production cuts will help oil market’s fundamentals to improve. The longer-term outlook for oil demand remains robust due to growth in emerging economies like China and India. The U.S. economic recovery also remains on track.
In this backdrop, Crown Point Energy Inc. (TSX-Venture:CWV), a Calgary, Canada-based oil and gas exploration and development company is raising $15 million. This morning the company said that it partially completed the second tranche of its $15-million financing with Liminar Energy SA and GORC SA.
Under the terms of the financing agreement, CWV has issued 3,210,640 common shares to Liminar at an issue price of $0.25 per share. The balance of the second tranche financing will be completed in one or more closings in due course.
The company plans to use the net proceeds from this closing to fund its exploration and development program in Argentina, as well as, for general corporate purposes.
CWV is currently focusing its exploration activities in the Austral and Neuquen basins in Argentina.
Austral and Neuquen basins are two of the largest producing basins in Argentina.
While the near-term outlook for oil prices remains weak, longer-term prices should start to head higher as supply and demand align. This augurs well for CWV, which is currently in an exploration stage. The tranche financing should boost the company’s balance sheet and help it in meeting exploration costs.
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