WTI $101.44 -2.05 ; Brent $108.92 – 1.40 ; B/WTI Diff – $7.48 +80c ; Natural Gas $3.70 -2c
Futures markets are excited this morning as rumours of a compromise deal are running round the market. Don’t hold your breath and hum the Beatles track that goes like this, didn’t know it was written about politicians…
Day after day,
Alone on a hill,
The man with the foolish grin is keeping perfectly still
But nobody wants to know him,
They can see that he’s just a fool,
And he never gives an answer,
But the fool on the hill,
Sees the sun going down,
And the eyes in his head,
See the world spinning ’round.
The recent stability in the oil price came to an abrupt end on the street last night when the EIA announced the weekly inventory stats. Yet again the Wall Street intelligentsia’s combined brains managed to be so wide of the mark on their guesses (word used deliberately) that the oil price fell 2% after the release. Crude built by 6.8m barrels against consensus of 940,000 bbls on the back of run cuts at US refiners causing demand to fall away in the period. More on this in the Chevron comment as they guided lower for downstream earnings last night.
Some of the fall in the oil price was reversed in Singapore and London this morning on the news that the Libyan Prime Minister had been kidnapped in Tripoli this morning. Reports of the kidnapping are rather mixed, one says that he is being held by the interior Ministry’s anti-crime department others say that it was former rebels who believe the PM colluded with the US in the seizure of an Al Qaeda suspect recently.
Libyan crude exports have recently picked up, recent lows of less than 100,000 b/d have increased and we now believe that the country’s output is around 700,000 b/d.
Chevron issued its interim update last night and the market was disappointed by the lowered guidance in the downstream earnings department although the upstream should beat the estimates. Third quarter earnings number are due on the 1st November and are likely to be hit by maintenance and turnaround activity in the Gulf of Mexico as well as some assets worldwide.
Chevron is my favourite international super-major but this is slightly disappointing, albeit much of the miss is down to maintenance etc, it has outperformed most of its peers but the chart below indicates that it may have a bit further to fall although support levels look hard to find.
Shell, along with Total and Eni have put up a package of assets up for sale in Nigeria, these assets in the eastern delta also include the Nembe Creek Trunk Line and valued at around $2-3bn are amongst the most valuable sold by the group so far. We have seen a large number of locals and independents, as well as the biggest oil trading houses, showing interest in onshore Nigeria as the majors exit to stay with their offshore acreage.
Ithaca, you won’t need reminding, is a favourite stock in the sector and after a very strong run has been marking time a bit in the last month or so.Our views on the shares have not changed at all and we would treat the breather as an opportunity to pick up stock.
Today they have extended their Reserve Based Lending (RBL) facility from US$430m to US$610m and retired the existing US$350m bridge credit facility established for the Valiant acquisition. A five year US$100m corporate facility has also been established with the idea of giving the company the optionality to add to the current portfolio.
The company states that the new facilities were heavily over-subscribed highlighting the confidence in the portfolio. Few specifics are given but the extended RBL is based on “conventional oil and gas industry borrowing base financing terms”. The ramp up of the Greater Stellar Area should drive significant cash generation from the middle of next year and should adequately service this new debt.
I remain convinced that Ithaca are operating from a position of significant strength and with a market cap of just below £500m will be on the radar of larger investors in the sector.
Gulf Keystone Petroleum
-From DFT – DY
The company has confirmed that production as restarted at the Shaikan field at an unspecified rate. The field currently has 20,000bbl/d of installed capacity and construction continues at the second identical production facility.
Positive news, but it would have been useful to have been some more detailed information on the current rate. The company does state that production will ramp up to 20,000bbl/d, but no timescale was given.
We feel that the share price will strengthen today on this news. We also highlight that the share price has fallen back to pre-litigation resolution levels as investors have locked in profits. Today’s news is a good reason to start buying the stock again.
Harvey Nash Annual CEO dinner………………
I mentioned that Harvey Nash hosted a wonderful dinner on Tuesday where the oil industry turned out in force to support RAFT, sponsored by PwC. Host Sherree Young and guest speaker Lord Digby Jones spoke as did Francis Gugen as Chairman of RAFT, an exceptional charity, with Sam Laidlaw a Trustee. Elsewhere I saw some veritable legends in the sector, Cameron Davies from Alkane and Ascent, new Faroe CFO Jon Cooper on fine form, chatting to Mark Bilsland who’s Equus Petroleum is growing by leaps and bounds. Keith Bush took time out from restructuring Northern Petroleum and Rob Arnott had some great stories to impart. Joe Darby, sector veteran was on good form and so was Mark McAllister, seen chatting to John Pearson deal maker extraordinaire. I saw Andrew Austin chatting to John Hamilton and joined in, Andrew telling me of a gruelling few weeks on the party conference circuit where he has to ensure that the unconventional story is told. John’s President Energy remains a favourite and all is going well. Scott Richardson Brown new CFO at Trap Oil was working the room and also there was Steve Jenkins, now a consultant to Cairn Energy. Stuart Joyner, ex of this parish and now CFO of Sound Oil drifted over for a chat, he’s enjoying the challenge, another stock I like, the market are blissfully unaware of his arrival he said as the new CFO rally has yet to materialise…………….
A super do for a great cause, I hope they raised a lot of money.
Many congratulations to Murray Walker, F1 legend if ever there was one, he’s 90 today.
In footy its quiet ahead of the big international weekend but Jack Wilshere is spending more time on Twitter with English Kev than he is training…..
On the subject of nationality, former Scotland Manager Bertie Vogts has revealed that he tried to get Wayne Rooney to play for Scotland when he realised that Wayne had a Scottish grannie…………………I’m not going there………………………..
Sad to see the little master, Sachin Tendulkar retiring from all forms of cricket next month after playing in his 200th test match against the West Indies.
It’s the Aim dinner tonight, won’t be going myself but if you are, have a great time. I hear tickets are better bid than Royal Mail shares, how things have changed huh………………