WTI $100.30 -5c, WTI $108.73 n/c, Diff $8.43 n/c, NG $5.21 -1c
Firstly the prices above are official prices but as the US was closed reality is somewhat different, WTI and Brent are around 30 cents higher and natural gas is $5.49 this morning, considerably higher.
More cold weather in the Northeast of the States has drawn more on products in the last few days and the natural gas price has reacted accordingly. On the subject of cold weather I notice that a number of economists are blaming it for their inability to forecast, apparently the economy is just fine but the weather has ‘clouded’ things as it were.
UK inflation has come in slightly below consensus at 1.9% which is more grist to Mark Carney’s mill, just think where we would be if he had been in charge for longer…!
The grand fromages are hanging out again, its the resumption of the talks between Iran and the 6 World Powers today and good news for Sydney restaurateurs, the G20 is in town for its regular shindig.
At I P Week its been the turn of Ian Taylor, boss of Vitol, the worlds largest oil broker to express his views, this time on Brent as a benchmark. He says that it is becoming less ‘efficient’ and with North Sea supplies falling it should be widened to include crudes from West Africa, Kazakhstan, Algeria and even Russia. Its usually worth listening to Ian Taylor, as they say, you don’t get where he is without knowing a bit about your subject and he knows more than most.
Full year figures from Wood Group this morning which came in in line with expectations, indeed in a couple of areas they exceeded my forecasts. Although there will be a few bears around picking up on comments from the company regarding the ‘slower pace of significant offshore awards’ I think that by now even the analytical community will have factored this into longer term prospects. The figures revealed EBITA and EPS up 16% and at 22 cents the dividend was up 29%. Since its IPO, Wood has increased its divvi at a compound rate of 20% and todays increase still leaves it covered 4 1/2 times, on consensus numbers 2014 cover is 3.7x. Guidance for 2014 is for another 25% hike and beyond 2015 double digit + increases are on the cards, this is very impressive and should be noted.
The analysts meeting was crisp, confident and even I dare say it, short, which is another bonus point for the management. The long-awaited strategic review is completed and after sorting out GTS (still in my view just being tidied up for sale/disposal) the company has twiddled with a few things but feel, correctly, that the model looks pretty good. The capital structure is efficient, if anything the company might pay out the odd special divvi but acquisitions are a key part of the company’s mantra and they almost always work well. The main positive driver is from PSN where the exposure to the US shale is very profitable and the Elkhorn acquisition has proved my point above by being very well made. Finally on PSN, it itself is proving to be a great deal as it expects to have ‘strong’ growth this year probably 15%+ and it will also continue to increase its margin albeit not as much as last year.
Overall, the shares are justified in the rise today which has seen a continuation of a recent pick-up in the price. Although unlikely to return to the 900p level quite yet, I am confident that a range between 750-850p would not be wrong for a company that is very sensibly getting to grips with the industry situation and today has displayed a quality that sometimes recently has been missing, Wood Group is back.
A statement today that says that the consortium has been granted an increase in the ‘areal extent of SEL 1/11 which might lead to ‘potential significant volumetric upside’ for Barryroe. Apparently the structural closure as mapped now appears to extend further south and southeast although no wells have been drilled here. The shares are waiting for only one thing and that is the farm out of B-roe and until then with not much drilling activity, timing is essential. I got this one wrong last year and the farm-out has taken, like many others, much longer than expected, providing this is still on the cards both stocks are cheap, investors are going to have to remain patient, I don’t think agility is going to help here, news will be black or white.
At the Olympics the every four year interest in curling has started to grip the country, I’m quite surprised that Alex Salmond isn’t there to cheer on the lads and lassies and of course claim any medals. Both men and women are into the semi-finals so time to dust down the stones and brooms.
Hull City Tigers got a last minute equaliser last night shattering Brighton’s hopes but Hull may not want another game, even if it might lead to an exciting derby.
The Champions league recommences tonight as Man City take on Barca, according to the chosen one the weakest Barca team for many years…
I had the check that it wasn’t April the first as I read the commodities section of the FT where an article about fish farming described ‘peak salmon’ and said, ‘as fraccing allowed producers to release crude, developments in fish farming will allow them to do the same’…