Oil price, Primeline, Northern, Sundry-Soco-Afren-Thalassa-Weir- And finally…

WTI $60.14 +$2.00, Brent $64.88 +$2.19, Diff $4.74 +19c, NG $2.85 +14c

Oil price

The rally in the oil price was impressive yesterday and continued overnight and in London this morning. Whilst there were a number of bullish factors at work such as the API stats (albeit they came after the US close) and the strong dollar it was also very much the case of believing what you want to as negative factors were brushed under the carpet.

So, the API inventory numbers were indeed positive with crude stocks falling by 6.7m barrels vs forecasts of less than 2m but in line with my comments yesterday where I expected a catch-up with last week’s EIA stats. Even more surprising, at least to the dim-witted aforementioned analysts, was the situation in gasoline where stocks fell another whopping 3.87m barrels versus their expectations of a rise…

The EIA are busy this week, yesterday I reported that they put US supply at 9.6m b/d and the rest of that report fed the bulls as they forecast falling US tight oil production of 93/- b/d in July making a possible cut of 209/- b/d on the quarter. In their STEO they actually dropped their price targets for this year and next due to non-Opec supply and the uncertainty of Iranian production. Elsewhere the Saudi Oil Ministry took the unusual step of justifying recent production numbers by saying that ‘ the increase in the Kingdom’s production over the past three months is a result of market conditions, specifically increasing global demand and the needs of the KSA’s permanent clients, it is not designed to compensate for lower prices’.

Overall one must go with the market which has firmed again this morning by adding over a dollar to WTI and Brent. The bulls have the upper hand but the bears, who correctly point out that Opec is still, and will be for some time, producing so much that worldwide stocks are rising despite increased demand, will surely have their day in the sun before long. Finally the NOAA (National Oceanic and Atmospheric Administration in case you didnt know) have put out their prediction for the summer weather in the USA, a warmer time is predicted for the Shermans after a mild one last year and accordingly families will spend 4.8% more on electricity bills, mainly on air-conditioning.

Primeline Energy Holdings

For those of you brave enough to go with one of my strongest recommendations, the news that Primeline has cut a deal with Singapore based Loyz Energy (SGX:594) will be music to your ears. Up over 20% yesterday in Toronto I expect further gains today and in coming weeks as the market assimilates the good news and what an interesting this new merged entity will become.

For PEH this deal diversifies out of solely China exploration into a much more wide-ranging portfolio across South-East Asia, for Loyz it means a sorting out of its debt and the ability to access the strengths of its new partner in China. The Loyz project in Thailand is a ‘cracking good operation’ according to sources and will provide balance to the PEH exploration programme about which I wrote recently and will be under way soon. I dont expect many changes in personnel as both companies are run on a ‘lean’ basis and country teams running projects will very much stay in place.

For shareholders I expect the major ones on both sides to stick around with Victor Hwang ending up the largest as well as some good quality institutions led by Fidelity. The new company will have a Singapore quote and will no longer be on the TSX but they will maintain a Canadian register and investors need not worry about the quality of the exchange they are joining, it is probably stricter than their own…

With Primeline having recently completed a good funding with GEMS, sorting out the PPC situation and Loyz also tidying up its balance sheet ahead of the deal, I am confident that this vehicle will be an attractive, strong and exciting Asian play, ambitious to do deals and accordingly remain very optimistic for the future.

Northern Petroleum

The news from Italy for Northern keeps getting better which is good news as elsewhere positive stories have been hard to find. Today the company announce that its EIA for the 3D seismic on the Giove and Cygnus fields has been approved as have two exploration permits. Following on from the Shell farm-in this means that Northern can more confidently call Italy a ‘core’ area again and as I have been recently, am finding progress in the country to be speeding up, albeit slowly. Northern has been paring back costs lately, I see a couple of fewer names at the bottom of the press release, although along with some still pricey brokers, and the cutback in G&A costs is to be lauded and may in due course mean that the sub £8m market cap starts to look interesting, watch this space…

Sundry

Soco has a trading update today and reports that production from January to May has been 11,888 boe/d down from 13,605 in 2014. Guidance for this year stays at 10.5-12/- boe/d and with the H5 platform due to come onstream later this year further progress should be made.

Afren has missed yet another debt payment and are in default-again. Months later than previously expected the recapitalisation is now due next week where rape and pillage will be on view. Surely one for the business school handbooks of just how quickly a management can destroy a company in such a limited time frame with all the ingredients that one normally comes to expect when looking at organisations like FIFA.

Thalassa Holdings has had in its own words ‘an annus horribilus’ last year but the bad news definitely contained some silver linings according to the company. Now ‘quietly confident’ of life of field projects they consider themselves to be ‘in rude health’ and well positioned to capitalise on improving market conditions and increased demand in its core areas of operation. Thalassa did have a truly horrible year last year and will be glad to be in slightly calmer waters now, a big fan of the company like others we have had to weather the storm but I am hardly going to lose my belief now when the dawn appears to have overtaken the darkest hour as they say…

And over to the Weir Group Capital Markets day where I am now well and truly off the invitation list despite being a big fan…The company are finding that the 2nd quarter is ‘continuing very challenging in the Oil & Gas division’ which wont come as a surprise but that the minerals division is ‘resilient’. As I have said before about Weir and others, as a general rule the lag effect from bad trading until the market works out that the worst is past is usually about 6 months so the recent rally in the stock will likely continue and belie the naysayers, well off the lows Weir is still attractive long-term.

And finally…

One may well say ‘and finally’ about the cricket as at long last and finally the armchair critics have been proved right, at least with regard to the one day ‘New England’ team. With most of the dire, boring players and coach out of the way it was a pure joy just to see uncomplicated attractive exciting cricket from a bunch of players allowed to express themselves for once. We really dont mind losing if they play like that, we dont want hunkering down just to see out the overs. The test performance of Adam Lyth and yesterday of  Adil Rashid just proved that having them warming the bench in the West Indies was indeed a farce..

England’s women just lost their first game to France yesterday but can still qualify and indeed it may turn out to give them a better run on the other side of the draw, Mexico next…

Its rather nice that when you resign from THIFA your departure date is sometime after an election now set for late December this year, at least the largesse will keep on coming to $epp…

In the domestic game the Hammers have appointed old boy Slaven Bilic as their new coach for what is going to be an exciting three years as the club move to the Olympic stadium. And sad to see the self-appointed ‘best coach in the Premiership’ relieved of his position at the Magpies, if things go to form they will appoint another failure in the wally with the brolly…

 

 

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