WTI $99.43 -94c, Brent $106.45 +60c, Diff $7.02 +$1.54, NG $4.37 -12c
Its a very quiet day all round in markets both commodity and equities with little news to mull over. The WTI May contract starts today and with no fireworks, right bang in the middle of the range of $91.56-$104.96 and still looking much stronger than Brent. It is flirting with its support level of $105.47 which it bounced off yesterday with the top of the range at $112.50.
It might be worth noting, if only to irritate Ed Millipede, that UK petrol prices are at a three year low of 129.46p and diesel at 136.59 is a two year low.
Note that Fitch and Standard and Poor’s have downgraded Russian debt to negative and some sanctions are actually having some effects as Gennady Timchenko is forced to activate plan B and ‘sell’ his 43% stake in oil trader Gunvor to his partner Torbjon Tornquist in a pre-planned move.
I am not going to prattle on about BP and Russia for ever but I will reiterate my long held view that Bo Diddeley’s plan for the company’s future as a key partner of Mr Putin at the moment looks like an awkward choice of friends. (Not to mention a high risk place to have ones savings…) BP’s stock price is justifiably wobbling at the moment and hovering a touch over the support of 464p, today at 468p and far from the recent peak of 509p. It must be said however that it is difficult to see much further weakness as the 5%+ yield here and the on-going buy back have significantly supportive effects on the price.
Azonto Petroleum (Formerly Rialto Energy)
In my current round of seeing companies I met with Rob Shepherd, CEO and Andrew Rose, CFO of Azonto Petroleum the other day to see what they are doing with the former basket case of Rialto Energy. I must admit that a while ago I wished that I would never see this company again after the appalling previous management had turned over the London market so comprehensively but things have changed and we must all move on.
So what is Azonto and where does it fit into the E&P world nowadays? Well it is a West African focussed E&P player, primarily operating in Cote d’Ivoire and Ghana with quotes on the ASX and Aim where the market cap is £17m. At the moment as the new management team get to grips with the company, the focus is on the Cote d’Ivoire and primarily on gas although it is worth noting that the African need for gas will fund those resources and probably enable Azonto to make money from associated liquids.
There is no doubt that the key turnaround for the company was the arrival of Vitol last year when the trading house became a JV partner in Cote d’Ivoire and 65% owner of Vioco Petroleum Limited. In the country the key asset is the Gazelle gas development and with 85 bcf at P50 and 42 bcf at P90 as well as other contingent and prospective resources gives possible upside in gas plus potentially oil. The company are looking at other opportunities in the Cote d’Ivoire and intend to use the experience of the project team to expand in the country and in adjacent areas.
In Ghana things are a little different as although Vitol are also involved here success has eluded them and dulled the trader’s excitement for drilling. In 2013 Vitol acquired a 48% economic interest in Azonto Ghana for their share in the Starfish-1 well costs but it is difficult to see them making this a long term investment.
Financially, Azonto has $11m of cash which will cover their G&A but not new projects although Vioco is funded to first gas. With new management and backed by a number of high quality institutional shareholders the company is beginning to look more sensible and Vitol is a powerful partner in the market. Although demand for gas in Africa is strong and will continue to grow, Azonto will have to work hard from here to make itself a major league player in the market but there is no doubt that the management have high ambitions and there is good support for a company that was almost dead and buried. I think it is fair to say that it may be a long haul and wont go on the buy list quite yet, but Azonto is one to watch and with the right deals it could, slowly be coming out from the dark side.
As Barcelona and Real Madrid wait nervously for the Champions League draw, desperate not to get Man U, the Boropa Cup continues, I thought I saw a headline that said Spurs excited last night but it actually said Spurs exited last night…
The Prem goes on and the big fixture tomorrow is Chelski vs the Gooners or is it the Hammers vs Man Who? With the HubCap Stealers and the noisy neighbours having already added this weekends three points to their total, the game at the Bridge will be crucial.
In cricket the important part of the World T20 starts today with that monster of fixtures of India vs Pakistan, what you might call the Curry Cup…
Shame to see that lovely firm Pimco having such trauma, was it too much lying on a bed of nitroglycerine perhaps….?