WTI $98.46 -1.93 ; Brent $109.53 -1.35 ; Natural Gas $2.34 +2c
Good morning although likely good afternoon the way this is going!
Let’s do the easy bit first, the oil price above is Friday’s close and today is about 50 cents higher for both crudes and the natural gas price has drifted another 7 cents. With big meetings in Europe today to discuss the Greek restructuring and the Iran sanctions the direction for oil is probably marginally up but, since both subjects have been drifting on, the chance of a definitive decision is pretty remote. One interesting thing regarding the oil price, if such a thing can be said, is that the WTI/Brent differential is widening again and will probably do so some more. The news that EPP, the operator of the Seaway pipeline has delayed the reversal of the direction of the oil until June means that for the time being there may be some clogging if certain conditions exist. By then though the line will be able to carry at least 400,000 b/d with new pumping stations and facilities.
The Baker Hughes Rig Count was out on Friday and week on week the number was up 21 in the US with the year on year rise being 295. After a couple of weeks of falling, the upward trend is resumed and although there have been some ‘worried traders’ suggesting that capital expenditure in the industry is falling along with the natural gas price, I’m not buying that.
In international company news Halliburton has reported fourth quarter net income of $906m or 98c clean a share and declared that 2011 was a ‘challenging year for the company. The best news for UK comparables was that the best part of the results were strong results in North America in particular in unconventional drilling. Also as above that there would be a continuing of the trend away from gas and towards oil rig counts in 2012 with an overall increase in demand for Halliburton’s services. Stock plummets after beating consensus forecasts by 1 cent!
BP had plenty of column inches over the weekend and mainly down to the upcoming court case in Houston. Suggestions that the company would settle for a one off fine of $25bn abound and you don’t need to be a rocket scientist to say that they would accept that. With a combination of fines and penalties of $50bn hanging over them they would take your hand off at less than $30bn.
More interestingly the Sunday Times said that BP were in the race to buy Cove Energy which at least means that the company will go out at a top dollar price and if not will be sold on to a higher bidder, we still have around 175p in our minds.
How many times have I said this, I go away for one day and all sorts of hell breaks loose in my stocks on the bourse? I am referring to falls on Friday in Petrofac and Weir Group in particular. I rarely mention other brokers’ stories but when the house broker reduces a forecast and a recommendation one has to consider all options, in this case why JPM/CAZ should worry so much about PFC’s order book that they stop being a buyer. Sometimes this is the company sharing the news, sometimes a broker seeing a short term opportunity, my guess is that after a good run an analyst feels forecasts are too demanding, for what it’s worth my long term top of the range numbers are very achievable but if the house broker is right on the 5th March then there may be a stewards enquiry……
As for Weir, I commented last week when the share price was up and down like mad that I was confident that quality would out and the recent acquisition would be sound. The market are concentrating wholly on the current gas price and its knock-on effect for capital expenditure in the pumps and valves business, nothing is being put in for the oil shale market place which is jumping and more traditional wells. Weir are currently not taking calls even to discuss what day it is which is understandable ahead of their figures on February 29th, but that does leave five weeks of market misbehaviour so it is quite possible that Weir will produce figures earlier than expected or at the very least put out a trading statement of some sort, at least that’s what the blog suspects!
And now to Hunting which has today delivered its trading update ahead of figures due on the 8th March. For one of our favourite stocks the company has more than delivered the goods with a statement saying that the company had exceeded market expectations and will be higher than the top end of the expected range of profit forecasts. Geographically the company did well in the USA and Asia-Pacific with strong demand seen in manufacturing and connections. There are two things worth bearing in mind here and one has been alluded to earlier, viz the significant increase in drilling in shale oil, the other is that Hunting have delivered this from existing businesses which leaves the 2011 acquisitions very much to come through. Hunting needed to deliver a good update today as it is a premium stock but this has clearly exceeded expectations, we remain happy to be buyers and the figures in March.
Ophir Energy has announced that it has signed a rig contract to drill three, possibly four wells in Equatorial Guinea, starting in April. Also in the statement that agreement has been reached to go ahead with the second LNG train.
Cairn has announced a farm out to Statoil for one of its Greenland blocks, we hope that this is the start of much farming out and a lot of carrying in the region.
Gulf Keystone has announced that Shaikan- 4 has produced better than any other well results in Kurdistan with 5 and 6 still drilling.
Finally on today’s company news Ithaca Energy has announced that it has received a bid approach that is preliminary, non-binding and confidential.
For tomorrow, Kentz, following Fridays shock announcement regarding St Hugh and Rockhopper after the Anadarko jet was again seen at Stanley airport, good thing there was a Sunday Times journalist down there to capture the moment……Shares are up 6% today after nearly 20% last week, it’s still a hot blog favourite. Also a report back from the Afren Capital markets day.
And finally, as Brit Andy Murray powers through the Australian Open tennis another Brit, Wayne Romney managed to be in South Carolina and at the Emirates stadium, only one did he win……..