BP crying wolf?, Hess, Worley Parsons, Lamprell, Kentz, Fortune

WTI $95.14 +84c; Brent $103.88 +35c ; Natural Gas $3.93 -14c

Good morning

The BP ‘we are running out of money’ story was a top item on the BBC last night as top man Rob Peston explained that BP was suggesting that the financial burden of paying fictitious and inflated claims could harm them in a big way. I was on the BBC as well yesterday, answering questions about BP following on from Rob Peston on the radio and I had to say that if this is to try and get the US courts to feel sorry and reduce the pay-outs then it is the wrong way to do it. I suggested that if BP really does have a cash flow problem, and I don’t think it does, then buying in $8 billion worth of shares over the next year or so is at best unprofessional, stop this and you will have a bit of money left for the fines in a US court. Of more importance to BP would probably be a sharp fall in the oil price which just may be on the cards as the Iranian election is not far away……..

Oil Price

A quiet market yesterday and today with weak undertones. Economic data in the US was disappointing with both factory activity and home construction and the Brent contract rolled over with little support. With the US dollar remaining strong and little news around a narrow range will likely remain.

Gas inventories were slightly higher than forecast and the natural gas price drifted off accordingly.

Hess

Finally, with a day to go, the investor activism has ended at Hess as the new slate of directors from the company and three of the five suggestions from Elliott Management have been appointed. Interestingly two of the’ rebel’ directors will be known to UK investors as Rodney Chase is Chairman of Genel and David McManus is on the board of Caza and Rockhopper having been on the Cape board until recently. Rodney Chase needs no introduction and has been legendary in UK boardrooms for many years.

Worley Parsons Ltd

Just for those of you that might follow WP an aussie service company with a good international reputation in oil and gas, mining and chemicals, has had a profit warning this forming. The warning about infrastructure spend in Western Australia comes as no surprise, even mooted here recently but the second part of the warning mentions a ‘softening of construction activity in the Canadian oil sands market and that growth targets will not be met’. Some concerns about Weir or Amec may appear from this news, watch this space.

Lamprell

Lamprell has issued an IMS this morning and performance is ‘in-line with management expectations and an encouraging start to 2013’. The key area of restructuring the debt is well under way and expected to be complete by the end of June 2013. The order book is $1.2bn and with a bid pipeline of $4bn the prospects are good and guidance for this year is reiterated.

Lamprell is one of our favourite stocks and has been an excellent performer as a genuine recovery play. We see no reason why, with a new management team across the board and a strong order book, the shares will not continue to rise.

Kentz Corp

An AGM statement today from Kentz but after only two weeks since its most recent IMS little has changed. The Chairman states that the first four months have shown a strong operational performance with ‘significant new contract awards and natural growth on existing projects’. Backlog is up 9% to 2.8bn and we expect double digit earnings per share growth to underpin what is surely a far-too-low multiple of around 10x.

Fortune Oil

Fortune’s Q1 IMS is out this morning and operations continue to demonstrate solid growth:

-New gas supply connections are up 57.6% YoY to 7,689, bringing connected customers to over 280,000.

-Natural gas sales volumes increased 21% to 151.3mcm

-Bluesky jet fuel sales volumes increased 9.4% to 770,000 tonnes

-Reserves update at the Liulin block of 21.8bcm gas in place. First sales are expected this year.

On the corporate side, the China Gas Group JV between Fortune and Mr Liu Minghui acquired all the 208m China Gas Holdings (CGH) previously purchased by Fortune Max, meaning it now holds 15.36% of CGH total issued shares. The disposal of Fortune’s natural gas business to CGH for a consideration of US$400m (in cash and CGH shares) has been approved by both sets of shareholders and is now awaiting regulatory approval in the coming months.

Taken together this is a decent set of results from a fundamentally undervalued company and we now look forward to a strengthened balance sheet from the middle of this year. The company should be able to use these funds to accelerate this recent growth as China continues to increase its gas consumption, with government plans to increase gas usage to 8% of the energy mix from 5% currently as part of the new five year plan.

And finally…

Somewhere out there is a mickey mouser whose third wish has come true, David Beckham has retired and can no longer torment the Kop.

Last day of the season in the Premiership on Sunday but virtually nothing to play for, the Gooners need to win to guarantee Champions League footy next season.

Sir Bradley Wiggins has pulled out of the Giro d’Italia suffering from a chest infection.

The cricket at Lords yesterday was dire, like watching Geoff Boycott and Chris ‘Rowdy’ Tavare in your worst nightmares……………..

And occasionally we have to bring terribly sad news, it was confirmed to me this morning that Matthew Tyler, a good friend and former colleague at James Capel died last weekend. His funeral is on Thursday 23rd of May at 2.30pm at Ashdon Church, Ashdon, Essex with a memorial service in London in late September.

Kind regards and enjoy the weekend

Malcolm