WTI $94.17 +$1.58, Brent $107.13 +74c, Differential $12.96 -84c, NG $4.32 -4c
The oil price had an interesting day yesterday, particularly WTI which rallied hard at the end of the day after the EIA inventory stats managed to fox the market yet again. Coming in at a drop of 7.7m barrels against consensus of 600/- barrels was indeed a shock and products surprised as well particularly distillates that fell 1.2m barrels when analysts had been expecting a rise. Its a tricky time at the moment with the next contracts being for March when refinery turnarounds peak.
Brent was more subdued and with the February contract expiring today, volumes fell a fair bit. This morning it is looking decidedly frail with recent buyers looking for bids and BP who have been the aggressive buyer in the market lately on the offer. So, Brent has held above the $106 level steadfastly and is now attempting to go through the 200 day moving average of $107.40. With the World bank increasing its global growth rate to 3.2% for 2013 1nd 3.4% for 2014 things look quite stable but watch out for March buying.
Readers will know that I kept my faith in Lamprell and even with recent share price weakness I have been convinced that a combination of sound fundamentals in the rig market and an excellent new-ish management team would deliver the recovery in its fortunes.
So todays trading update does just that and according to management they are delivering a performance ‘above’ market expectations. With an order book of just under a billion dollars and the pipeline a healthy $4.7bn, the company is in good shape and its customers who include a large number of regulars are happy too, projects are being executed on time and budget. I haven’t managed to talk to the company yet but hope to shortly, my main questions are about margins and how the order book is covering revenues at the moment but I am pretty happy on these fronts at the moment. With net cash of $180m being higher than expected due to good management and payment timings the position is good albeit working capital will eat into the cash. Subject to a chat with the company I remain an unconstructed bull of Lamprell and feel that the upside from here is still substantial.
Same old, same old is the cry from the market this morning as at first glance production numbers don’t quite hit the targets and guidance appears to be falling, again. Its probably a bit unfair but I know where people worry, with peak production of 75/- boe/d why is the target this year for 58-63/- b/d likely to be the same as or marginally ahead of last years 58.2/-? With some maturing production and a ‘better exploration record’ as they put it one might expect more, this years 13 wells are targeting 160m barrels with just under half of those wells exploration. Premier is best treated as a trading play, it doesn’t have a trophy asset nor a portfolio to die for but at change from 3 quid a share neither is it by any means expensive. The Rockhopper/ Falklands part of the portfolio is interesting but you can buy that directly, maybe they should too, elsewhere the portfolio is solid without being overly dynamic, there is a case for a bit of reorganisation perhaps?
Having just discussed Premier, Rockhopper offers the more direct exposure to the Falklands with its Sea Lion discovery and exploration upside. Regular readers know that I have a mixed record on RKH having been as carried out’ (a term used to imply being broke at a card table or from a boxing ring!) after a hugely successful run, after which despite having discovered a huge field, those who did believe the story were outnumbered by those who either didn’t or felt that the development process was going to be protracted and expensive. I still believe that the RKH team has much to offer, the development is going ahead and today they have announced that it will be a tension leg platform and production is on target, although I’m not sure what the target is! There is exploration upside with todays announcement indicating four definite targets which they hope to start drilling later this year. All in all I think that although the recent near 40% rise in the share price might be enough just now, later in the year all that Falkland excitement might be back on and accordingly I will stay an undimmed bull despite the head winds sent to try us.
I listened to the Sound Oil call and it really didn’t add to my overall knowledge of the situation (see recent blog) and although my meeting with the company has been deferred a few days the prognosis is still the same. The people on the call didn’t understand why the shares have fallen so much and why they are raising funds at 4.2p, partly it is just the market in E&P stocks and partly because Italy as I always go on about, is loved less by investors than those operating there, ask MOG. I will do a bigger piece after my meeting but this will work but it will be time consuming and everything will have to click, don’t be surprised if it takes longer than even I predict, however with Sound you do know that these really are top quality assets and the value will out- eventually.
A quick word on Alkane as a few people have asked after I gave it another tip on Monday and it went through the 50p level. The overriding message is that you must definitely not sell it, it has underlying attractions and so far a possible unconventional portfolio whilst not being Premier League could add another leg of significant value, current target for the shares is 70p.
Frankel has had his first offspring, an ‘attractive bay colt with a white blaze’ according to Juddmonte farms, the year may now be littered with potential champions a while from now!
Muzza is a set up in the tennis, getting another evening game as he recovers from injury
And the noisy neighbours stuck another 5 in yesterday this time against Blackburn.
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