WTI $95.84 +46c; Brent $102.95 +83c; Natural Gas $3.77 +5c
Good morning
Another short blog as last day on the road with Primeline, if you haven’t seen them look them up on the TSX ( TSXV:PEH) and I can talk you through the story, very, very cheap stock.
Watch these bond markets as well, the bubble may be bursting in front of your eyes as investors worry about the Fed easing programme being wound down and an end to loose policy that the markets had got used to.
Oil Price
A modest rally overnight after the IEA said that the oil market would experience a larger-than-usual seasonal demand hike this summer as new refineries in the Middle East and Asia step up their demand for crude.
The inventory figures again foxed the slumbering massed ranks of analysts as they forecast a draw when it came out as a build, sign wrong again fellas. Interestingly gasoline stocks are very high indeed, no sign at all yet of the driving season getting underway, watch out for refining margins in the 2nd quarter.
The Iranian elections are tomorrow, anything could happen but it will probably go at least one more week.
Centrica/Cuadrilla
– Remember where you heard it first…………………
I have attached the blog from 8th January where I trotted out my views that Centrica should participate in the UK unconventional sector, it would be criminal if Centrica (and maybe other energy suppliers) did not have access to the potential of natural gas in the UK.
So, Centrica has today confirmed that it has bought a 25% WI in the Bowland shale licence PEDL 165 from Cuadrilla and AJ Lucas for a potential of £160m or $250m, exactly in line with my estimate of a value of $1bn for the asset. As a result of this Cuadrilla will have 56.25% and retain operatorship with Lucas on 18.75%.
IGas
– A bad day for such good news…………
The value of this transaction has so far been missed by the market place albeit happening on a bad day for equities. The similar Bowland shale acreage in the IGas portfolio, without Point of Ayr, is adjacent to this asset and we must consider that it should be valued on the same basis and IGas has 100% of its acreage. With a market cap of £200m and £40m of EBITDA one has to put a value for IGas of a minimum of £400m even after subtracting its debt which means that a target price of 250p is not just not unreasonable but eminently achievable. Add to this that Centrica may be only the first mover in the area and the scarcity of credible alternatives to buy in the play mean that although it’s a long term thang, it’s still cheap stock, don’t get caught out, the risk here is not having a ticket to the party. Don’t forget that CNOOC has a 25% stake in IGas…………………
Faroe Petroleum – From DFT – DY
Faroe has picked up a new Barents Sea licence in the 22nd Norwegian licencing round. It is called PL716 and contains the Dazzler prospect, which lies in 450m water about 90km to the north west of the recent Skrugard and Havis discoveries. At least one well will now be drilled up to 3,500m or 50m into the Triassic Snadd formation. Faroe has a 20% interest and is partnered by Eni Norway AS (40%, operator), Bayerngas Norge AS (20%) and Petoro AS (20%).
Faroe will drill three potentially high impact wells in Norway in H2: Snilehorn, Novus and Butch. All of which have could help drive the share price late this year. Faroe is trading close to our production and cash valuation so any exploration success could be value accretive very quickly. Today’s share price therefore represents an attractive entry point for investors.
And finally…
Man in the news, David Warner has been handed a one match ban (i.e. until the Ashes series) and fined £7,000 to go with his other fines. After the surprise that Joe Root was actually let into the bar, Warner did the usual thing and caught the outside edge of Root’s face, at least he got his strike rate up. Apparently when Cook won the toss and said to George Bailey ” you lads can bat” Bailey replied “no we can’t”.
In today’s cricket England are taking on Sri Lanka and have been put into bat.
The US Open golf starts today although with forecast heavy rain, thunderstorms and even possible tornados there must be chance of considerable delays.
And Andy Murray is on court at Queens in a rain delayed match from yesterday.
In Scotland, Hearts have put their entire squad up for sale and hope to raise a ‘significant six figure sum’. So around £9,999.50 then…………………
And just to recap the sad news it is the funeral tomorrow of both Tom Hall and Mark Worpole.
Kind regards
Malcolm
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