Amec/Foster Wheeler/Worley Parsons/Wood Group, Fastnet Oil & Gas and Ophir

WTI $93.33 -56c; Brent $112.00 +3c; B/WTI Diff – $18.97 +79c ; Natural Gas $3.82 +3c

Good morning

As predicted here, Iran’s Oil Ministry has re-opened contacts with western oil majors as the deal done at the weekend paves the way for a full lifting of sanctions, maybe within a year. Although European majors such as Total, Shell, Eni and Statoil are known to have expressed an interest and been contacted by the Minister US companies are also going to be welcome.

Oil Price

All settling down at these levels, for choice although WTI looks about right, Brent looks too high as does the differential, heading for $20 I would definitely be closing it out.

Amec/Foster Wheeler

Plenty of gossip about Amec recently, todays Times puts Foster Wheeler in the frame and says that G Sachs have been appointed. Not surprised that they have chosen new advisors after the disaster that was Kentzgate. As I mentioned only two days ago I planned to put a few charts in front of you as there are some ‘discrepancies in the prices of a number of service companies and Amec is at the top of the list.

I am pretty positive about the sector as a whole and you will remember that at the 3Q figs a little while ago the US majors were very positive particularly in the international area, the UK companies have been a slightly mixed bag. PFC pushed things to the right a bit due to slower Middle East contracts whilst Wood changed guidance from 15% margins to 10-15%, not a disaster. Hunting said a couple of areas were a bit slow but that for the medium term customers were looking to order more, whilst Kentz increased the order book and announced a number of new contracts.

The Amec statement was positive and the 100p earnings target for 2014 is still on target, a target they will achieve under almost any scenario. So, are they bidding for Foster Wheeler, a company that is exactly half Amec’s size before bid premium and already up 50% since August?

My guess is that unless it can be done cheap enough to be earnings accretive then it’s possible but on my numbers FW is at this price, pre bid premium, already higher rated than Amec so on paper, as it were it doesn’t add up.

A bid for Worley Parsons in Australia, already shaky after two profit warnings, might well be a better bet although even that would stretch Amec a bit but that stock is 70% down from the February high………………

Take a look at the Amec chart then look at Wood, looks like taking a bit of Amec off the table might look smart and if you think that the Wood trading statement on Dec 12 won’t be too scary then maybe it turns into a switch.

And John Wood Group 1 Year chart, apart from being a great business just look at this chart, five bounces off 750p….

Fastnet Oil & Gas

Funnily enough this is another stock where the chart tells a fascinating story, try to read this before you feast your eyes on the ski-slope that is Fastnet’s performance this year!

The company has announced an ‘oversubscribed’ placing ( have you ever hear a company say undersubscribed placing or an only just subscribed placing?) of £10m to fund its offshore Morocco participation at Foum Assaka subject to completion of its own farm-out expected next year. In addition to funding the offshore well, the placing money will go towards a farm-in of 50% in the Tendrara licence and the drilling of an appraisal well there. The company describes these as emerging industry “hot spots” and certainly Morocco is going to provide plenty of news both onshore and offshore in the coming months for a host of companies that have placed their chips on the plays in the country.

At the placing price of 14p, exactly halved this year, Fastnet is definitely one to watch, raising money down here wont have been easy or funny for existing holders but having doubled the bet it makes the game that little bit more exciting…………..

Ophir Energy – From Daily Flow Test – Dougie Youngson

Operations have now begun at the Mlinzi well (OPHR: 80%) offshore Tanzania. This play is targeting in excess of 20tcf in total, but the pre-drill estimate for the well is 10tcf and we have assumed a 20% chance of success. Drilling is estimated to take 50 days.

This is the key exploration well in 2013 for Ophir and all eyes will be on the result. Given that Ophir has only ever drilled one dry hole we are confident that the company will make another discovery at this prospect.

Good to get confirmation that work has started, but unlikely to move the price much today. Ophir’s share price has had a good run in the last few weeks which may result in some profit taking ahead of the well’s completion.

And finally…

Australia has just had a general election, the main concern being the number of illegal immigrants there are. The Government suggest that the number is around 60,000.

Aboriginal sources say it’s more like twenty two and a half million……………………………….

Still in Australia

How did the Aussie break his leg throwing a ball?

He forgot it was chained to his foot.

In last night’s Champions League it was a bit of a mixed bag, Chelski lost but are through and Arsenal won but are not yet but it would be astonishing if they didn’t get through in the end. Celtic lost and can’t even get a place in the Boropa Cup from here…………..

Tonight Man U head off to Bayer Leverkusen and the neighbours will be noisy having already qualified.

Noting the furore about domestic goddess Nigella, I remember watching her do a recipe called a ham in coke, now I understand why it all went so wrong……….