WTI $97.36 -5c, Brent $107.85 +44c, Differential $10.49 +49c, NG $5.56 +52c
The FOMC delivered as expected and with no fireworks there it was just the EIA inventory stats for the market to look at. So the analysts failed to get anywhere close in either crude or distillates as per usual, their bosses must set the bar pretty low, nice work if you can get it…Crude stocks rose 6.4m barrels vs forecast of 2.3m and in distillates the draw of 4.6m barrels might have been expected but consensus there was 2.2m.
Watch the natural gas price, again heading well over $5…
Shell – BvB heralds a new era
The figures today from Shell were unsurprisingly in-line with the recent profit warning and if you judged Shell by these figures you could be disappointed. However this is not the current yardstick and the fact that the shares hardly fell on that warning was a testament to the fact that the market wants to like what is going on here. So what exactly is going on at Shell? The easy answer is that BvB has decided, as I said at the time, to use the very first opportunity in his tenure to ‘kitchen sink’ the problem areas but more than that he is creating the early stages of a blue print for the next decade for Shell. So what they are not going to do is spend money in areas where the obvious risk is not necessarily a technical challenge but where sentimental odds are stacked against them and where politicians use anti oil industry rhetoric for there own ends. So, Alaska goes as its in the too difficult box as well as being a right pain in the butt. Actually I suspect that quite a lot of upstream assets in North America will have the for sale signs erected outside as BvB has realised that Shell came into gas too late and will leave it to those who might have the cost base to make it work.
Downstream I expect a massive look at the business across the globe, this is an area that as much as anything else needs to be looked at with fresh eyes.
Numerous other projects, assets and investments will also go, mostly all mentioned here and elsewhere, but Nigeria is at least onshore no longer core, the Woodside stake gives them no obvious advantage whilst tying up cash and other minority stakes such as pipelines and peripheral assets will go. Roll up, roll up for the great Shell sell off, everything must go.
This will leave BvB the opportunity to restructure the company in his own image and create the building blocks for the ‘sharper performance’ and ‘operational delivery’ talked about in the statement. Finally , with a greater capital efficiency and a firm lid on capex, the opportunity to be less parsimonious with the dividend is a big possibility. So, its a new era for Shell and whilst you don’t change something this big overnight the signs are that BvB has gauged the mood of the market and decided that action like this is mandatory. To step out of a long term range bound chart Shell needs to attack the 2500p level, watch this space, it might happen.
Reports this morning that the DoJ has said that BP should remain banned from all US Government contracts which puts yet another obstacle in their way and probably yet more expensive litigation.
Kentz has announced that only four weeks into its ownership of Valerus it has won a meaningful contract from Crestwood worth $62m. The work, EPC for two compressor stations is typically of the Kentz model, repeat business and leaving the opportunity for the group to win more work from a long term client.
Whilst this doesn’t of course make a huge difference to a company with a $3bn order book it shows that this acquisition may indeed already be paying back and gives added scope in new geographical areas. Kentz, despite the share price move remains a preferred investment in the UK oil services sector and I hope to confirm this when I meet the company later this week.
Parkmead continues to go from strength to strength and has announced a very successful placing to raise £40 at 255p, a price I venture we wont see again for a while. Always a preferred stock, you will know that in recent interviews ( on the blog website www.malcysblog.com) I named Parkmead as one of my preferred stocks for this year and longer and this placing will give Tom Cross the firepower that he needs to develop the existing asset base as well as to participate in the 28th round and of course make selective acquisitions. At 284p this morning I think that there will be some post placing indigestion but there is still huge upside and it should be a core holding as the market cap creeps up to £200m and more.
What can I say about Egdon and UK shale that I haven’t already done for the last year or so? Today they have announced another deal with Total where they have farmed-out PEDL 209 which is adjacent to blocks 139/40 the subject of the recent deal with Total. I said at the time that I thought that this valuation would lead to more activity in the area and although I thought that IGas might come next Mark Abbott has confirmed his deal making skills by doing this one. With this being in the eastern Gainsborough Trough there will be more activity but to get 100% of the exploration programme paid for for 50%, a bill of potentially £13.47m has been paid, excellent work.
I will bang on about the fact that investors will have to be involved one way or another in the UK unconventional space and with so few opportunities Egdon and IGas plus I hope soon to have a dual-listing, Dart will be the only plays and they are all still far too cheap.
Last night saw further Man City destruction, this time Spurs-again. The chosen one complained that the Hammers camped in the box but he was only grumpy as his team couldn’t score, not the problem at Villa where the Baggies turned up with their current manager and managed to lose 4-3, time for the head hunters…
So as I mentioned yesterday after the abysmal T20 performance, why was Ben Stokes, our best current player dropped? He bats better than Bresnan and Bo Peep, bowls better and, you’ve guessed it fields better too. Broad said he wanted to keep his old team together, get a grip you ……
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