WTI $109.49 +48c , Brent $117.77 +1.50 , B/WTI Diff – $8.18 +1.28 , Natural Gas $3.57 +3c
Good afternoon
A very quick blog this afternoon, it’s been one of those days for meetings, more later. I will comment briefly or use the Daily Flow Test for early views and tomorrow will add on the meetings I have been to today.
Oil Price
The oil price has taken a breather, albeit at the higher levels, my traders tell me there was much short covering in the market which doesn’t help and markets are very thin which adds volatility. The differential today is up at $8.18, we did say that below $2 was not sustainable but proves that in a crisis only Brent will do. The Lex column rightly echoes our view that the Libyan shortage (along with Nigeria, Iraq and North Sea shortages we have also mentioned) in production is as important as geopolitical worries, we shall see.
Hunting
The figures were deemed to be disappointing after minus numbers were unexpectedly seen, Canada, Electronics and US pipes were responsible and action has been taken. With an increase in capital investment and the dividend, confidence at Hunting remains high so I am happy to remain very positive on the shares. The second half is always the much stronger period and we stick with our 940p target for the time being. More tomorrow.
Lamprell
Again, more meat from the meeting with the management tomorrow but the 2013 figures are going to be better than expected whilst 2014 expectations at the moment are likely to be sub-par. This doesn’t mean that next year won’t come good, at the moment we have about mid 50’s% covered by order book and with a bid pipeline of $4.6bn the next three months might well cover it, let’s take a better view in, say, November.
The shares rallied today and I will happily reinstate my buy call, however the whole results situation has been a nightmare, changing dates at the end of the season, coming out on a day when two other services companies did the same and clashing with other meetings will not help matters either. Again, more tomorrow.
Cape
Although Cape came in roughly in line Asia Pacific was very disappointing which affected the order book at £239m. Success or otherwise in bidding for AsiaPac contracts will probably determine whether Cape stays in the region, they are bidding on Wheatstone and Ichthys which may be make or break contracts. 2H looks pretty similar to H1 and therefore may well be a quiet time for the company, again Asia will determine to a large extent growth from these levels over the year.
Heritage Oil – DFT – DY/JS
A solid set of interims from Heritage today, reflective of the acquisition of a 45% stake in OML 30 in Nigeria. There had been concerns that Heritage did not necessarily have the skills to develop and bring on large scale production. Despite a weak first half (gross production: 15,327bbl/d), production reached 44,000bbl/d in August. Whilst the company will not meet original guidance of 35,000bbl/d it will produce at a revised average rate of 30,000bbl/d. Production in 2014 is expected to be 60-65,000bbl/d.
Heritage is seeing strong revenue and cash flow generation which will increase substantially in line with production. The company is well funded with a US$500m debt facility.
The company is starting to look interesting again and if it can meet its guidance in Nigeria should see considerable appreciation in in share price. One to watch.
SOCO International – DFT
SOCO’s interims include a proposed 40p/share cash return to shareholders. The company reports that the Te Giac Trang-10X exploration/appraisal well in Vietnam has tested 6,179bbl/d over a 190m interval. The Lideka East Marine 1 well in the Republic of Congo has also intercepted 50m of net pay and is now being tested. Otherwise, the results report production of 17.1Mboepd (vs Factset consensus of 17.6Mboepd) and revenues of US$324m and net profit of US$105m, in line with consensus.
This is an excellent set of results from the company this morning and will likely re-engage those who had lost interest in the SOCO story. The company is now targeting subsequent returns of 50% of free cash flow, which is very encouraging. We expect the shares to strengthen significantly today.
Salamander Energy -DFT
Interims report a 19% YoY increase in revenues to US$214m on the back of a 39% increase in average production to 14,900 boepd, helped by the Bualuang field performing ahead of expectations. Pre-tax profit remained flat YoY at cUS$16m, however operating cash flow rose 149% to US$100m driven by falling unit operating costs. The company maintains its full year production guidance of 12,500-15,500boepd and reiterates that development drilling at Kerenden is complete and has delivered 40mmscfd on test. It will now commence development drilling in Greater Bualuang in H2 and exploration drilling at the G4/50 and Bangkanai PSCs in Q3/Q4.
Overall a positive update from the company. We believe it is an undervalued and under loved story at present and at current levels is attractive to investors who are willing to take a medium to long term view on the company’s growth strategy.
Aminex
Aminex’s interims report the commencement of pipe-laying in Tanzania, an important milestone in the commercialisation of its gas discoveries at Kiliwani North and Ruvuma. The company also reports that it has acquired Canyon Oil & Gas via the issuance of 80m new shares. Canyon’s co-founders Jay Bhattacherjee and Philip Thompson, a Geophysicist, will now become CEO and COO of the company, respectively.
Today’s news shows that Aminex is transforming. The new management team and injection of new assets progresses the story beyond Tanzania. We are also now seeing traction in Tanzania with the construction of the gas pipeline and negotiations for the GSA nearing completion. This is an increasingly interesting story and another one to watch as the new management team gets to grips with the strategy and the assets.
And finally…
Tottenham sans Bale are playing Dinamo Tbilisi in the Boropa League playoffs but with a 5-0 lead and a game against the Gooners at the weekend even Russell Taylor might get a game……………
Champions League draw this afternoon in Monaco……….
In New York Andy Murray got through with no trouble as did Laura Robson.
Already into the T20 fixtures with England vs Australia at the Rosebowl tonight…
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