WTI $101.56 +11c, Brent $108.10 +34c, Diff $6.54 +23c, NG $4.66 +14c
Todays blog is mostly adding to the very sparing remarks I made yesterday as a number of companies held meetings or calls, in the case of Kentz I ran out of time for an early comment.
The oil price stays subdued, with the Ukraine dominating the headlines but nothing yet getting out of hand, the geo-political situation has not yet got beyond sabre-rattling. I have to say that although I have skirted round the point myself this week it appears that the most obvious axis has been overlooked by many, in particular the BBC whose warmongering earlier this week appears to have been crass and inflationary. The key and only player with any sway in this whole process is not Barry in the White house but Angela Merkel, as having ditched nuclear power she is totally dependent on imported gas from Russia. At least three pipelines supply Russian gas and one of them comes through the Ukraine, with such a dependence she is hardly going to be pressing the sanctions button any time soon.
Elsewhere the markets are on stanby for this months non-farm payroll in the States to see how the economy is doing, consensus at present appears to be for an increase of around 150/- new jobs. Finally, the natural gas inventory figures came out yesterday and showed another bigger than expected draw, at 152 BCF against forecasts of 139 BCF it showed that stocks are still falling and at a much lower level than normal for the time of year. Although this means that the summer refill period will be busier than normal, unless there is a massive heatwave it probably means that gas should remain fairly priced for the time being.
Kentz announced yesterday that it had won the Moatize phase two contract for Vale in Mozambique. I had very much expected this award for a number of reasons, firstly the company has successfully completed phase one, (which I have visited) secondly they had remained in the area with another transportation contract and thirdly because of the work already done for the client will have left them head and shoulders above the competition. This contract value is very much worthwhile, it represents about 5% of year end backlog and is therefore worth +/- $150m and means that Kentz gain more mining work and also keeps them front and centre in Mozambique where lucrative LNG business looms. No change on my view of Kentz as yet another good contract is announced and this excellent not so little gem of a company continues to deliver the goods.
I attended the meeting yesterday and found that after a flat 2013 things are definitely looking up for Hunting. Dennis Proctor and the ever more loquacious Peter Rose make a good double act and Hunting is looking forward from a strong base. I wondered whether I had gone a bit early with my strong BUY recommendation last November and I had, but just by a bit. If you haven’t already started to add to your holdings here you should as demand for products and remember they are high end, high margin bits of kit is obvious almost all the world around. Problem areas from last year were the North Sea, where rig count dropped sharply but is now rallying, Canada which is also picking up and in downhole electronics which saw some destocking. Concerns that capital expenditure discipline from the majors might put pressure on costs and margins is not evident and in the US market, particularly offshore, activity is rising by at least 15% y/y compared with previous forecasts of a 5-10% increase. With new products, new and growing existing markets and plenty of investment in new capacity I remain very confident in Huntings future. I see not only the recent high of 920p being challenged but also the 969p and 1000p barrier being no obstacle.
Genel has been a favourite of mine for some time and yesterdays results and presentation by the company has done nothing to dim my enthusiasm for the company. Having believed in the frontier story told me by TH some time ago, one then saw significant discoveries of oil and gas and it is interesting to see that now it is the politics and economics of moving and selling the hydrocarbons that make up the bulk of analysts questions. With production forecast to be up to 70/- boe/d this year revenue guidance is a very pleasing $500-600m against $348m last year. Now clearly this number will depend on some factors working but with cash flow building up from Kurdistan at a rapid rate even the bundles they are investing there should be covered in 2014. The aim of CFO Julian Metherell is to be cash neutral over a ‘multi-year period’ and longer term that will mean opportunities which may lead to returning cash to shareholders although I feel that should any of the African exploration portfolio come good then that may be a preferable and more efficient way to reward shareholders. Discipline is also being exercised as the Miran deep well has been pushed back until next year at least, as with plenty of demand for gas from Turkey and domestically Genel have to supply at present. I should clear up a point from my last Genel note as I got my £’s and $’s confused, my target valuation for Genel is around £25 and see the 1123p recent high being challenged before long.
Shell announce that they aren’t in favour of Scottish independence, this follows BP, RBS, TSB/Lloyds bank, the whisky industry, Standard Life, Alliance Trust and the EU.
BP announces that Bo Diddeley’s salary and package has trebled, also massive increases for other directors as well. Worth looking at the Lombard column in todays FT…
Quadrise Fuels is a stock I have followed for some time and whilst not totally within my remit I like it very much indeed. Yesterday they completed a successful £10.7m placing which leaves them well placed and well funded, watch this space..
Another cracking weekend of rugby coming up, concluding with England v Wales at Twickenham. England have lost Vunipola but Morgan is a great replacement and it should be a great contest.
In Footy Carson Yeoung has been jailed for 6 years in Hong Kong, as the owner of Birmingham City its a big plus and big minus, I mean Hong Kong jails are pretty grim but at least he doesn’t have to watch them play every week…
FA Cup is boring this round, Gooners without Wilshire (Wenger fuming at England) and Noisy neighbours v Wigan who wont let last year happen again. In the Prem, the two hottest favourites for managers to be sacked meet as the Baggies take on the Champions.
Its the opening ceremony of the Sochi Winter Paralympics this afternoon, lets hope it goes well with no interruptions.
Couldn’t help noticing that in the Clifton North Council Bye-Election last night that Elvis beat the Lib Dems….