Kentz Corp – initiation of coverage, Wood Group, Tullow, and Premier

WTI $106.91 -1.14, Brent $108.50 -21c; B/WTI Diff – $1.59 , Natural Gas $3.69 -10c

Good morning

A short blog today as we are on the road with Kentz (see below) and also have other meetings.

Oil Price

The oil price continues to drift as the recent run-up is seen to be unjustified on fundamentals, all might change when we get the inventory figures tonight and tomorrow. The consensus from analysts is for a draw of 2.4m barrels last week, a draw of more than that would rally prices again I guess.

Kentz Corp

We have initiated coverage of Kentz today to coincide with a two day roadshow we are doing with Christian Brown, CEO.

Kentz has an excellent record of delivering on projects worldwide, as a result the blue-chip clients base comes back to them with new contracts time and time again. Kentz has a strong backlog of $2.8bn and a far bigger pipeline of prospects valued at $14bn. The company’s ability to convert pipeline to contracts and contracts to revenue and cash is exceptional and a model for a company of its size. Leading clients such as Fluor,ExxonMobil,Chevron,Sasol,Qatar Petroleum, Royal Dutch Shell and Vale are only part of an impressive line-up of blue chip oil, gas, mining and construction companies who keep going back to Kentz.

We initiate coverage with a target price of 590p and a BUY recommendation. As usual as the blog goes to areas we can’t send research to if you haven’t seen a copy please reply to me and I will forward it to you if I can.

Wood Group

Wood has won a contract in Papua New Guinea to work with ExxonMobil on its LNG operations. This is very good news for Wood as although they haven’t revealed the contract’s value it cements their position in the Asia Pacific LNG market and in both of Exxon plants in the highlands and outside Port Moresby.

Another great contract for Wood Group and despite the run I think one should stay positive on the company, I show the 2 year chart to give an idea of the run it has had and that it is again breaking into new territory.

Tullow Oil – From DFT –

Tullow has announced two unsuccessful well results this morning. The Cachlote-1 deep water exploration well in Area 2 offshore Mozambique has discovered a 38m gas bearing reservoir in the Upper Cretaceous, but this is unlikely to be commercial on a standalone basis. Deeper targets and a sidetrack were also unsuccessful although wet gas shows were observed. The Discoverer Americas drill ship will now move to drill the Buzio-1 wildcat well in the east of the licence.

In French Guiana, the GM-ES-4 wildcat exploration well was drilled to 6,292m on the Cebus prospect and also failed to observe hydrocarbons. The well will now be plugged and abandoned and the Stena ICEMax drillship will move to drill the GM-ES-5 well, the final well of a four-well programme following the Zaedyus-1 oil discovery.

This now marks eight dry or uncommercial holes in a row for Tullow and the company’s historic exploration premium will be tested again this morning. Our model had factored c5p (risked) for the two holes, but we anticipate the stock could weaken more than this due to the ongoing trend in 2013.

Premier Oil – From DFT

The 121-CV-1X exploration well in Block 121 offshore Vietnam has been plugged and abandoned with gas shows and was found to be water wet. The well results will be used in conjunction with existing seismic in order to identify future exploration plans for the block in future.

After a good start to the year on the exploration front, Premier’s exploration has fallen away of late. We would expect the share price to be weaker today.

And finally…

After all the excitement yesterday we are now waiting for the names to be revealed, Prince Malcy of Cambridge does have a ring to it…………….

With the news that Aussie bowler James Pattinson has to go home with an injury, the selectors were heard asking, ‘who’s going to score the runs now then?’

The heat wave may just be petering out, yesterday in Wisley in Surrey the temperature reached 36.5⁰c today its muggy with thunderstorms around and we may just be going back to normal for the time of year.