The situation in Syria continues to escalate and markets don’t like uncertainty or itchy fingers on the red buttons on Capitol Hill or in Downing Strasa. Could it be that the Nobel peace prize winner could press the button and retaliate against Syria for this “cowardly crime”?
The oil market has decided that the risk of political and thus military intervention has increased substantially overnight as the chances of wait and see are reduced. A market that was already tight on fundamentals didn’t need much of a kick to push it up although after rising another dollar or so in Singapore, Brent in particular has drifted back to around $115.50 as I write. It would be easy to say that neither Egypt or Syria have meaningful resources but actually whilst sundry Saudi Princes are offering the Russians an alliance with Opec to keep the price stable then pretty much anything might happen. The two year chart shows that recent highs have been at $118.33 and just over $125 to give an idea of what the market might do under these circumstances. ( Previous highs have been Libya and Iran sanctions)
My initial comments yesterday have turned out to be reasonably accurate and I wouldn’t change much post the meeting. Following careful guidance and disappointments from Amec and Wood, PFC turns out to be in pretty good nick and lower rated than most and more importantly than it has itself been for some time. I remain of the view that this multiple is unjustly below longer term ratings and whilst I don’t expect a P/E of 20 it should be higher than this and accordingly am happy with our 1850p target price.
If I see one more gag about it being a long way to Tipperary I might scream! Figures yesterday didn’t add much to general thoughts, they were always likely to be better than expectations and the order book and most importantly the pipeline is stuffed full of goodies.
Major shareholders would do well to think of what this may bring them in the future rather than a few short term pieces of silver. On the subject of cash, vulgar as it might be, the one thing that did appear to be different yesterday was that any M&A by Kentz rather than for them may have been put on the back burner for the time being and that paying back some of its cash pile is now a more realistic proposition. Of course they would have to ensure that the CFO didn’t try to keep too much for working capital but that should be in the calculations as to the value of the business.
With the knowledge that we ascertained yesterday, particularly on the order book ($2.8bn with $4.5bn bids submitted in Q2 2013) and the pipeline (Up 17% at $15bn) as well as the strong balance sheet, my feeling that below 750p a share would be a scandal is reinforced. Investors should consider buying at this level, not for a higher bid but for long term exposure to a high quality, fast growing player in a geographically and sophisticated market.
I have had a larger number of enquiries about Lamprell in the last 24 hours when I temporarily suspended my buy recommendation due to confusing the market on a number of matters pertaining to tomorrows results. The fact that the CFO’s resignation was announced today was also curious, Finance Directors don’t often resign the day before the figures. I am aware that the resignation is for personal reasons which is totally understandable but the timing was very strange.
I am very much looking forward to reinstating my recommendation, I hold Lamprell in the highest regard and hope to see good numbers and a positive outlook on the order book but having had some minor reservations it would not have been right to keep them to myself.
While on the subject of tomorrow it is a truly manic day, in addition to Lamprell, Cape and Hunting both report and have analyst meetings in the service sector. In the E&P sector SOCO and Salamander also report. Hunting are a very interesting play at the moment and as a second half weighted play, comments from Dennis tomorrow at 1030 will be most important, expect a pm blog tomorrow after that meeting.
Work on the pipeline from Kurdistan to Turkey continues, the Iraq Oil Report said yesterday. With only three kilometres to go, the new tie-in station is being completed that will allow full exports to Turkey to take place. This new tie-in station will keep the KRG’s oil separate from Baghdad’s thus maintaining its independence. This is good news for all operators in Kurdistan but at present Genel and GKP are the biggest gainers as far as UK quoteds are concerned.
Genel also noted today that it will be included in the STOXX Europe 600 effective at COB on 20/09/2013.
Ophir Energy From DST DY/JS
The Pweza-2 appraisal well in Tanzania is a success and has intercepted 20m net pay with “excellent reservoir quality”. This confirms the company’s 1.7Tcf resource estimate for the Pweza field. The Deep-sea Metro 1 drillship has now moved to the Pweza-3 drilling location 5km to the west and will collect further cores and perform a Drill Stem Test to confirm the reservoir deliverability of Block 4.
Good to have confirmation of the resource base at Pweza, although an upgrade would have been preferable given the recent direction of the share price. Ophir has two key wells to drill in 2013, with Mlinzi being crucial. The share price has seen resistance at 300p and we view it as a good entry point at current levels.
The company is funded for the current drilling programme and we continue to believe (although the market is sceptical) that farm outs will occur in order to fund future drilling. The recent ONGC/Anadarko deal (US$2.6bn for a 10% stake in Rovuma Area 1) in Mozambique shows that there is still interest in acquiring East African gas assets.
New Guinea Energy -From DST –DY/JS
New Guinea Energy (NGE) has reported that the proposed sale of its 50% participating interesting in the PPL 269 licence to Esso will no longer proceed as Esso “has been unable to reach alignment on a number of confidential commercial matters” which have not been disclosed to NGE. The company now intends to re-engage with other parties who have approached them regarding the possible acquisition of its interest in PPL 269.
Disappointing news from the company, however we continue to see medium-term value in this asset and there is potential that another sales agreement could be made. The stock has fallen c30% retracing much of the gain made following the original announcement of the sale.
So Gareth Bale doesn’t turn up for training again, someone tell Spurs that Bale shirts are already selling in the Real Madrid shop…Let’s get this bloomin transfer window over and done with huh?
Haven’t forgotten the weekend results but mainly as the noisy neighbours went to Cardiff Bluebirds who play in red and got duffed up. Man U Chelsea was a rather boring nil niller with no one wanting to lose.
Clueless Cup last night, fun watching the Hubcap Stealers v Notts County…………………And in the Champions League the Gooners win but the Fenerbahce were thrown out of the competition so they didn’t need to play them!! V big game for Celtic tonight…..
The cricket was indeed thrilling but only on Sunday and when it looked like getting too much fun the umpires stepped in. Funny how these rules and regs get you, wanna bet that if that was being played in India in front of 100,000 people and India needed 28 from 28 balls they would have gone off too……………..Still 3-0 though.
And in the Women’s Ashes another win for England edges them one stage closer to victory, only one from two games left now…