Petrofac, Europa Oil, and Plexus Holdings

WTI $96.65 +64c; Brent $104.52 -12c, Natural Gas $4.10 +4c

Good morning

The EU probe into oil price fixing has moved to the trading houses but only as in asking for information and this comes as no surprise, as one leading trader said, everyone will be receiving requests for information before long. At the moment the focus is on the companies that were raided, they include BP, Shell, Statoil and Platts the price reporting agency.

Oil Price

Another day of quiet trading on oil markets, economic data has been less than inspiring and geopolitically, whilst Syria is becoming more tense it has not yet infected neighbouring oil producing states. The Brent/WTI differential has moved below $8 again as analysts expect to see crude inventories falling this week.

Petrofac

We had a good meeting in our offices yesterday with Petrofac dropping by for a general catch up. The shares fell sharply after the figures as analysts, in my view mistakenly, felt that Petrofac would be investing a substantial amount in the deep-water market place and therefore competing against the European big ‘poissons’. There is no likelihood of this happening although one deep-water vessel will be commissioned this summer for work, already designated in three years’ time. The recent rally was stubbed out when last week’s IMS detailed how the Algerian situation was affecting profitability, realistically it has pushed back the numbers rather than lost them and the partners, BP and Statoil are compensating Petrofac for ongoing contracting costs. But this has taken around $40m off this year’s number and consensus should be around $650m now.

Overall all is going well and although it may require some more patience I think that the size of the order book and the opportunities available in IES will deliver long term.

Europa Oil

Europa has relinquished licences in Romania and in the SADR neither of which should lead to any material write downs. We recently met with EOG and accordingly this comes as no surprise, CEO Hugh Mackay is determined to prune non-core assets and concentrate his resources on the current programme. This is onshore UK at the Wressle project, offshore Ireland in the South Porcupine Basin and onshore France in the Bearn des Gaves deep gas appraisal project.

Plexus Holdings

We had Plexus Holdings in a few days ago, Plexus is an old favourite of mine and I wanted to see how things were getting on, also unusually for the company the share price, whilst still up a pound a share year on year has come 70p off the top.

The company’s main technology is POS-GRIP, a unique and proprietary method of engineering using friction grip application to effect gripping and sealing in oil and gas wellheads and connectors. The company subcontract the manufacture and as it is reusable can be rented out for exploration wells and sold for production wells. The main advantage of this technology is in its safety application, its simplicity and reduced costs with fewer components ensure that the risks of a blow-out are significantly reduced. In addition to its existing technology Plexus has started a 18-24 month project to develop the POS-GRIP HGSS design and a number of leading companies have joined the Joint Industry Project more than one of whom are bound to be experimenting with the new kit.

Plexus client list is as blue chip as it gets and after Macondo with safety not just important but mandatory in some specific areas, I expect the company to drive forward and especially with the new project be able to be at the forefront of friction grip technology with all the associated financial benefits.

With a very narrow free float (28%), buying these shares is tricky work and in the past the price has given the impression of being extravagant as the rating always seems to be high but the founder, Ben van Bilderbeek is not selling any stock on the cheap and the outlook is incredibly positive. Add to that the recent fall and I take this as an opportunity not often presented to the market and consequently should be fully taken advantage of, fyb.

And finally…

With the black caps short of fit players word is that Daniel Vettori, en route to the UK for another tournament will step in at Headingly on Friday, not a bad replacement eh?

So part one of the next Chelsea manager story is intact as the chosen one is chosen to leave Real Madrid, expect him and his dog in London soon.

Warren Gatland on the radio this morning defending his absurd decision not to call on Jonny W, the welsh lions will remain just that for as long as possible, turn of your mobile Wilko……………………………….

And as more and more Godolphin horses are found to be drugged up to the eyeballs this time it includes St Leger winner Encke, no way of finding out but the Camelot team must be v upset after he took the triple crown off them…………………..

And the story of Andrew ‘Benners’ Benbow gets better, the mad baggies fan who has spent many hours travelling and watching them this season was apparently so gripped with the cricket that he almost missed the match altogether, his colleagues are not sure how many of the ten goals he actually saw……………………!

Kind regards

Malcolm