WTI $97.38 +18c ; Brent $110.98 -90c ; Differential $13.60 -$1.08 ; NG $4.13 +17c
So, did you sell the differential at 20 bucks, I ask? Today with a good week for WTI ending and Brent looking a bit soggy it has rattled back to $13.60 and probably has more to go at some stage. Traders tell me that Brent is well offered at the front end and with a major selling in size and the January contract expiring next week it could be a choppy ride for a few days. The predicted cut backs because of the bad weather in the North Sea haven’t materialised although some operators did take some personnel off rigs as a precaution.
Having said that Brent is still not abundant and I suspect the downside is to a certain extent limited.
The cold weather has extended to the US with a very cold snap actually shutting in production in some areas and demand for natural gas, particularly for space heating has soared pushing the price well above $4, take a look at the gas chart on www.malcysblog.com
The UK Chancellor of the exchequer rode into town yesterday and along with his better than expected GDP numbers gave a pleasant fillip to the energy industry, at least those involved in UK onshore unconventional drilling.
Fraccing tax allowances as they are going to be named will reduce tax on profits from 62% to 30% and as I understand it there will be allowances equal to 75% of capital spend on projects, I wait to be corrected or substantiated by one or more of the operators.
Shell has apparently withdrawn from its planned $20bn+ investment in a GTL plant in Louisiana, a plant I have been championing for some time. The reasons they give are high project costs and uncertain commodity prices amongst other contributory factors. Whilst this is totally understandable as the model is Pearl in Qatar, which does have guaranteed low gas prices and an equally reasonable cost environment I cant help feeling that one or two of Shells investments are either moving to the right or disappearing altogether.
Statoil has announced that they have made another big gas discovery in Block 2 offshore Tanzania. The Mronge-1 well has discovered 2-3 TCF of gas making the current estimate 17-20 TCF. With Statoil having 65% and Exxon 35%, provided the Union of International LNG buyers doesn’t succeed in its attempts to get the price down there are ample reasons for the companies to push ahead with the development.
The Annual Capital Markets Day happened yesterday and whilst there were some comments on ROCE and margins that some analysts appeared concerned about I felt that none of these comments came as any surprise. It is certainly true that historic ROCE will probably prove to be unrepeatable but compared to the international peer group, Petrofac to me gives a more than adequate return.
There is also an almost manic view amongst some of those analysts there yesterday that the building of a vessel for Petrofac to use in its high end projects is in some way a company breaker. Ever since the results meeting back in March, a number of the scribblers have consistently asked the same questions about the spec, capabilities and costs of the ship. Each time they ask, Ayman gives the same, perfectly reasonable answer which is greeted by the analyst assuming the position that they know better than him, I would have a quick look at your combined net worth’s chaps if I was you….
Although the stock price fell again yesterday I would have no hesitation in taking this opportunity to lock a few away, its a quality company after all.
Another bad day at the cricket and we’ve only just started to bat yet….I’m sure they would have scored a hatful anyway but with 286 runs scored after having been dropped that’s a meaningful start, add to that missed run-outs and a wicket taken with a no-ball its too much of a start to give even this Aussie team.
Its the football World Cup draw this afternoon and England Manager Woy Hodgson is quoted today as saying “England fear no one” let me tell you that other managers all around the world as saying, “can we play you every World Cup please”
The Premiership hasn’t thrown up any particularly exciting fixtures this weekend, Newcastle will fancy their chances at Old Trafford, no longer a fortress and maybe the Saints are dreaming of turning over bad travellers the noisy neighbours whilst Everton wont find the Gooners as generous at Man Who at the Etihad…
Also a few cracking games of rugby as Sarries take on the Tigers (no, not Hull City) and the Quins visit Bath.
Have a good weekend and thanks for all your support in this, my first week.