WTI $93.67 -9c ; Brent $108.63 +6c; B/WTI Diff – $14.96 +55c ; Natural Gas $3.65+4c
Good morning
The week will be dominated by the World Oil & Gas Assembly hosted by the Oil Council and its Chief Executive Ross Campbell. Now considered to be the premier event in Europe if not world-wide, it is a must attend event for over 1,300 oil and gas, financial and investment executives from around the world. The formal proceedings are kicked off at 0730 tomorrow by BP Chairman Carl-Henric Svanberg and Iain Manson, Senior Client Partner, Energy at Korn Ferry followed by Andrew Gould Chairman of BG Group.
As I will be attending the event as a delegate and as a speaker the blog may be missing or shortened a little this week, for which I apologise.
Oil Price
A quiet morning again in the oil markets as the Brent prices eases a bit ahead of the resumption of talks in Geneva on Wednesday. Recent stats show that Saudi Arabia exported 7.8m barrels of oil on September 13th which was the highest in 8 years and must mean that with internal demand to take into account that they are cranking production up strongly.
The differential between Brent and WTI was $14.96 on Friday night and although it has narrowed a touch this morning it is probably too high now, reflecting those EIA figures on domestic production and figures recently continuing to show hedge funds selling long positions off.
Exxon Mobil
I reported on Friday that the Sage of Omaha had bought a 1% stake in Exxon for $3.7bn in the last quarter and that the stock price was already up $10 a share. After this was announced on Friday the Exxon share price rose 2.2% adding $9.2bn to the market cap, shrewd move that, hell probably be out by now!!
Petrofac IMS – A profit warning in sheep’s clothing………………
The IMS from Petrofac this morning was indeed a profit warning but just dressed up as contracts moving to the right. Or ‘flat to modest growth year-on-year reflecting the rephrasing of both the Upper Zakum project in Abu Dhabi and the second stage of the Berantai project in Malaysia’.
There is a lot of ‘jam tomorrow’ in this statement and I listened to the conference call and whilst it looks like 2015 is going to be a bumper year there may be a bumpy road ahead. The Upper Zakum contract may well be bigger than previously expected ( currently worth $2.9bn to PFC) which is good but there is a worrying degree of difficulty getting these deals over the finishing line. Ayman was keen to remind us that his company didn’t participate in the price cutting, margin slashing wars of 2011/12 and that that behaviour is now history and there is no sign of margin sacrifice, it’s just taking time.
The good news is that earnings growth is expected from IES in 2015 although the company will invest the best part of $1bn in the process, the bad news is that at the moment 2014 will probably be flat-ish as well.
The 2015 target which I have to admit that I felt would be achievable with some ease is going to be a titanic struggle, but it should be remembered that there is still a record backlog, a very strong bidding pipeline and a host of opportunities for the company to pitch for.
The Capital Markets day on the 5th of December is going to be most interesting………………….In the meantime its usually right to buy down here and the business is very sound for the long term indeed.
Kentz Corporation – IMS
We will never know if by putting out a cracking IMS like this on the day of the great Petrofac profit warning of 2013 impeded Kentz’s price movement on the day but I would guess that it probably has. This is a very strong statement and probably deserves better, it certainly shows that had Amec been a bit less parsimonious then that would have been the deal of the century.
So, today Kentz has announced strong order intake in the first ten months of the year, $1.8bn gives a record backlog of $3bn at the end of October, the figure that the company had budgeted for the year end. In addition to this the prospect pipeline has increased to $15.2bn and with the company’s excellent conversion record who says the backlog isn’t going to increase again.
There are a number of stand-out points, thanks to a number of recent contracts the EPC unit has increased activity in a number of key areas, specifically in the Middle East and Southern Africa. Historically Kentz has benefited from its repeat business from the blue chip client base, now there are a number of new names on that list. In construction, business in Australia has been good and should remain so as will orders from the Middle East.
The Middle East has also been good to the TSS unit as it and the Americas have supplied good contracts as well as the ever important framework agreements over the longer term, this unit has better margins than elsewhere
Overall this is a good trading statement that confirms my belief in Kentz as a really good business getting on with the job in hand. The return to good business in the Middle East is what I was most pleased about and there is no margin pressure, indeed with TSS motoring I expect it to be rising slightly.
Our numbers are already a bit low end of the range and whilst I’m happy with that for this year, where we expect to be beaten slightly, next year will need some attention on the upside.
Still very much a favourite and on a better day the shares would probably gone higher.
And finally…
A cracking game at Twickenham on Saturday showed that Champions are just that but that England can compete on their level. Whilst the scrum was fantastic the backs with the exception of Farrell and Brown were pretty dire, Tomkins didn’t make one pass all game………Just think what it would have been like with Tuilagi in the mix.
The English football performance though was predictably poor and tomorrow night will be no better.
David Haye has been advised to retire after shoulder surgery, (no I’m not going there…) I thought he had already retired….
Will he, won’t he? Be fit that is, for Matthew Prior ahead of Thursdays first Ashes test in Brisbane?
And you can’t not mention Henrik Stenson after his amazing feat winning the race to Dubai having already won the US PGA play-offs in September.
And from last night’s action in the NFL
In the two televised games on Sky, the Bengals beat the Browns and the Saints beat the 49ers courtesy of a late field goal by Garrett Hartley. At the end of a dismal week for the Miami Dolphins, they edge out the San Diego Chargers 20-16. Peyton Manning led the Broncos to victory and handed the Chiefs their first loss of the season. Both teams remain undefeated at home. The NY Giants win their fourth game in a row against an injury hit Packers. The Bears beat the Ravens with a field goal in overtime after a significant delay due to the weather conditions. Finally, the Eagles managed to hold off RG3 and the Redskins to win 24-16.
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