WTI $56.74 -$1.64, Brent $63.21 -$1.38, Diff -$6.47 +22c, NG $1.90 +1c
Competing forces on the oil price this week, yesterday the downward pressures won. Of most concern is the Corona virus in China which is not only spreading but inconveniently has come at Lunar New Year. This will cause disruption and grief to travel as well as demand. Along with that the usually ‘inconsistent’ IEA forecast a market surplus of a million b/d in H1 2020, which on the basics of usual supply and demand and of course Opec cutbacks should be acceptable to the market.
The API reported a 1.6m crude build when a modest draw was expected, let’s see what the EIA say tonight, products will remain important, with no cold weather in the US, distillate stocks are high. There is also news from Libya saying that it is still of almost totally restricted and unlikely to change much in the short term. Pay your money, take your choice…
Diversified Gas & Oil
DGO has announced that lenders have completed their semi-annual re-determination of its senior secured credit facility and affirm a $650m borrowing base following the recent $200m securitisation financing completed in November. DGO has added Credit Suisse, G Sachs and Morgan Stanley to the syndicate now formed of 17 banks lending at LIBOR +2-3% with maturity 2023 with next re-determination in the Spring of 2020.
With borrowings under the Company’s senior secured credit facility as at 31 December 2019 approximately $437 million, resulting in liquidity of approximately $213 million DGO is well placed to take advantage of the market place and I expect it to continue its strong and profitable growth. The shares, below 100p are remarkably good value and of course carry a yield of over 10% making it an extraordinary opportunity.
Delayed from yesterday but SDX in a detailed statement updated the market on production, capex and added some guidance for this year. 2019 production was 4,020 boe/d, up 12% and at the upper end of guidance. 2020 guidance is 6,750-7000 boe/d obviously not like for like particularly after the delayed South Disouq came onstream and also includes 1,000-1,050 from NW Gemsa which is potentially for sale.
2019 capex was $40.7m, $4.5m higher due to two extra wells in Morocco whilst for 2020 the number falls to $25.5m as the 12 well program in Morocco completes but with 2 in Egypt and up to 3 appraisal/development wells in the West Gharb concession. The company is fully funded from cash internally generated from operations, in the balance sheet and the EBRD facility which could be increased. Finally the company has warned about non-cash impairments of some $18m at the final stage.
Hunting plc-Peter Rose
I was sad to read today that Peter Rose is leaving as CFO of Hunting plc. Over the years Peter has been one of the finest in what is a difficult sector and keeping Hunting fit for purpose across North America, in the UK and elsewhere around the world. He played a magnificent straight man to the incorrigible Dennis Proctor but as a team they were unbeatable, quite how he ever got a word in at Hunting results presentations remains a mystery, a really top bloke who will be sorely missed at Hunting.
Last night the Foxes beat the Hammers and Spurs beat the Canaries, with the Red Devils losing again at home it surely is the time for Ed Woodward to open the phone at the contacts page and press the number marked Pochettino…