CNOOC, Caza Oil & Gas, Amec/Kentz/SNC Lavalin, and Fortune Oil

WTI $104.96 -2.14 , Brent $111.67 +1.35 , B/WTI Diff – $6.71 +3.30 , Natural Gas $3.42 -2c

Good morning

All eyes on the Fed this afternoon and many commentators will be trying to read the tealeaves and predict the end of tapering as we know it. Probably likely to be a neutral statement with the possibility of some guidance on tapering, maybe lose $10bn in September?

Oil Price

A big change in the basis yesterday as WTI fell sharply and Brent continued to rise. Explanation a bit of this and that, WTI September contract expired yesterday and a combination of profit taking and Fed worries saw it being hit, in the Brent market it was still pretty tight with the physical remaining well bid.

An interesting survey by WoodMac who predict that China will overtake the US as lead buyer of Middle East Crude before 2020. By then China will be buying 9.2m b/d from the region, up from 2.5m b/d in 2005 and the US will be buying 6.8m b/d down from 10.1m b/d in 2005.

CNOOC

CNOOC reported 2013 Interims yesterday which comfortably beat the market consensus and included a 26% dividend pay-out. Virtually all the good bits in the figures came from organic growth, interestingly the contribution from Nexen was disappointing.

Caza Oil & Gas

I have been out on the road with Caza and I can confirm that the up to date story here is very positive indeed. The company has come along somewhat since last spring as it has concentrated its efforts on oil rather than gas and the Bone Spring play in south east New Mexico. Caza is well funded with a $50m debt deal with Apollo and two Yorkville SEDA and SEDA-backed loans agreements, so the drilling programme, which consists of two phases of twelve wells in the Bone Springs play should keep investors very happy. Discoveries which we confidently expect, pay out very quickly and efficiently add to the company’s value and Caza are operators of most of their wells.

Overall Caza is looking in a very strong position and the share price is totally out of touch with its medium and long term prospects, investors should consider this stock again.

Amec/Kentz/SNC Lavalin

Another slightly spooky appointment has been pointed out to me by Andrew Callus at Reuters. Amec were extremely upset to lose the services of Hisham Mahmoud who resigned as President Growth Regions recently, for ‘personal reasons’. Interesting to note then, following my comments yesterday about Neil Bruce, formerly COO of Amec turning up at SNC Lavalin, that Dr Mahmoud was yesterday appointed as Group President, Infrastructure of, you’ve guessed it-SNC Lavalin………..I feel the hand of Neil Bruce here and Samir Brikho won’t like it one little bit.

Shakes up the sector somewhat though and I reckon SNC should go straight onto the watch list…………….

Fortune Oil – From DFT DY/JS

Fortune’s interim results show that, excluding the Maoming single point mooring business (SPM) and the aviation business, growth has largely been maintained throughout the company. Revenues were up 10% YoY to £372m; however inventory losses meant group profit, excluding gains on disposals, fell 10% to £12.8m.

Other highlights:

-The Natural Gas Supply business completed connections to 32,500 new customers, bringing total customers to 312,500. Sales volumes increased 20% YoY to 287Mcm and operating profits rose 44% to £8.9m, vs £6.2m in H1 2012.

-Profit from the Bluesky aviation business fell to £5.2 (H1 12: £6.0m), despite an 11% increase in sales volumes to 1.6Mt. This primarily owed to inventory stock losses from declining aviation fuel prices.

-The SPM joint venture expired in February 2013 and is currently in the final stages of being renewed by Fortune and Sinopec. The company has treated this as a discontinued operation for the purpose of these results, but expects the renewal to include development of a new terminal and buoy.

-Throughput at the West Zhuhai Products Terminal was up 22% to 1.4Mt, increasing profit by 46% to £0.6m.

-Total field production from the Liulin Gas wells has exceeded 70,000m3/day. First sales are expected H2 2013, subject to completion of the gas gathering system. Chinese Reserve Certification has now been obtained for seams 3,4,5,8 and 9 and estimates c22Bcm total gas in place.

This is a slightly unique set of results for Fortune with the SPM yet to be renewed and some exceptional losses at the Bluesky business. It is clear, however, that the growth profile remains very much intact across the business and continued expansion can be expected in future.

The recent government approval for Fortune’s sale of its interest in Fortune Gas Investment Holdings (FGIH) to China Gas Holdings was a landmark event and has paved the way for completion sometime in Q3.

The company’s decision to pay a special dividend of 2.36p/share, subject to shareholder approval, has also shown that it is serious about returning value to shareholders and once the FGIH transaction completes this growth will be underpinned by a much strengthened balance sheet.

Vitol’s involvement in the recently issued convertible loan note shows that it, too, has expansion plans in China, and this relationship should yield additional growth in due course.

We continue to be of the view that Fortune Oil is a misunderstood company and is undervalued on its CGH interest, alone, with the Fortune portfolio in for “free”.

And finally…

The final test of the ashes series has kicked off at the Oval, actually it kicked off last night when Aussie coach Darren Lehmann accused Stuart Broad of ‘ blatant cheating’ when refusing to walk earlier in the series. He went on to say…………….

“From my point of view I just hope the Australian public give it to him right from the word go for the whole summer and I hope he cries and he goes home,”

The English hockey team have booked a place in the EuroHockey semi-finals after a 2-2 draw with Ireland.

In cycling Pat McQuaid is trying to be the President of the UCI for the third time, he has been rejected by his home federations by birth and residence and is now scratching around in Morocco and Thailand to get a nomination……………………………

Shakhter Karagandy ring any bells? No not me either although they will in Scotland as they beat Celtic 2-0 in the first leg of the Champions League play offs last night, much work to do from here for the hoops….

And the Gooners play ‘banned’ Fenerbahce tonight in their first leg………

Blog is back on Tuesday, enjoy the Bank Holiday and all this hot weather.