WTI $95.72 -92c, Brent $106.69 -$1.19, Differential $10.97 -27c, NG $4.85-34c
The oil price came off yesterday but again it has rallied a touch this morning putting Brent back over $107 which is turning into a key level rather as $96 is for WTI. The economic news from China has had a modest effect in the last few days and so it should, demand there is still strong, emerging market and currency problems are also only a minor distraction for the oil price. The FOMC meet today with Big Ben in the chair for the last time and its a busy day over there as it is also the State of the Union address this evening. Over here we have UK GDP figures for 4Q 2013 which are expected to show growth of 0.7% giving the possibility of an annualised rate of up to 2.8%.
Inventory stats are always interesting (how could we analysts have got it so wrong?) but this week it may be better to look at distillate stocks in the US after all this cold weather. Expect a big draw as seen by the natural gas hike which has normalised after a quick peek into territory over $5.
Another good contract win for Amec, again from BP, this time in the Caspian sea offshore Azerbaijan. The consortium ATA, in which Amec line up with Tekfen and Azfen has secured a contract in the Shah Deniz gas field worth $974m. The stage 2 work consists of fabrication, load-out, offshore hook-up and commissioning of the topsides of the two platforms amongst other work and will start immediately and complete in 2018.
BG – Much too much, much too young…
I need to add a bit to yesterdays comments about BG as following the conference call and various discussions with investors a few interesting points came out. Firstly, on trading grounds what are the chances of the next major news being good or bad? Despite all the major projects still being more or less on track I think the verdict here is that its probably 75-25% likely to be another warning, either on costs or delays or both even if it is only the weather. The rating that the company is on at the moment leaves little room for further disappointment even if the asset value is still £2 a share north of here. On the subject of asset value one would normally suggest that the wedged-up cavalry would be just over the hill sharpening their pencils preparing to bid as I mentioned briefly yesterday. However vulnerable BG may be, they are defenceless save for one thing, their assets are waiting to be stripped at a time when international shareholders are demanding preservation of capital, thus ruling out a number of potential bidders.
Herewith a few comments I made to clients yesterday afternoon…
I think that the pencil will be being sharpened in some places but at the moment in a world when shareholders want less, not more capex, bidders are fewer and slightly more esoteric. If I had to guess then maybe Exxon or Chevron or one of the Chinese would bid on Brazil, the Aussie assets would normally be of interest to Shell but not right now under new management so the obvious choice there might be PetroChina. They could buy it to tie up the Pacific rim LNG supplies and it would have the added bonus of taking the gas away from the Japanese buyers…Any buyer of the Aussie gas interests would have an interest in the LNG kit and a buyer of that could well be the Qataris, they don’t need the gas but would love the LNG business…Statoil and some others would be all over the Norwegian assets and maybe even the UK stuff. Things like Trinidad are easy to sell as are some of the other parts of the portfolio.
BG is working from a position of weakness even if it still has a number of genuinely world class assets in the portfolio, unless it feels that it can get through on its own it may have to at least have a plan B up its sleeve. Changing the guard is not a possibility, Chairman, CEO and CFO are all new so the non-execs may have a role to play in this. Don’t be surprised if at least being contemplated is the appointment of a leading energy advisory firm to ‘make a strategic assessment of the Groups assets with a view to maximising shareholder value’ as they say, just a thought…But do they have the number for Hydrocarbon capital on speed dial?
A very positive trading statement from Afren which has perked up the share price after recently losing some of its 2013 winning run. The OGO discovery is full speed ahead into its appraisal programme and was one of the biggest finds worldwide last year. 2013 saw production of 47,112 boe/d against guidance of 40-47/-, what a joy to see a company comfortably hitting its targets. Financially things remain strong with revenues of $1.65bn and operating cash flow of $1.1bn +. Capex last year was $685m and with net debt of $739m the company are planning capex this year of $845m, with double digit production growth funding its high impact five year exploration programme things appear to be in good nick at Afren.
I wouldn’t normally write up a mere land lease acquisition but as today is the day I am catching up with messrs Parsons and Joyner for a full Sound Oil debrief I thought I would. The lease is to prepare for the 2nd appraisal well on Nervesa which is to be drilled in the first half of this year and the company says it will be cash flow positive in 2015. Much more after the meeting where I know that I am going to have Italy thrust at me from both sides but I hope that there will be more as the shares, even for an Italy specialist, have probably been oversold.
A big programme of Premier league footy tonight with the Merseyside derby not only being the possible highlight but definitely for BT Sport who are getting in there and now have actually got some decent games to go up against Sky with. The Gooners face a tricky trip to the Saints and the silent assassin goes back to the Theatre of Dreams, now subtitled nightmares to see Juan Mata on debut.
Transfer deadline approaches and one issue is sorted, Cabaye goes to PSG, funded by the Qatari’s but they still want Messi…
I cant believe that F1 starts testing today, it seems only five minutes ago that Red Bull were screeching with joy about the winner of a race with only one car in it, lets hope the new rules make it competitive again!
And RBS, now complaining about having to pay for historic mistakes whilst at the same time asking for 200% bonuses, lucky the place hasn’t been closed down lock stock and smoking barrels if you ask me…