WTI $100.60 -$1.34, Brent $109.58 -75c, Diff $8.98 +59c, NG $4.65 -6c
The Ukraine continues to dominate sentiment with Pro-Russian rebels holding EU diplomats hostage at the weekend upping the ante a bit more. Interestingly as I said last week, there is plenty of oil around making me think what the oil price would be in the absence of this conflict. Certainly the inventory stats continue to show abundant stocks but the Baker Hughes rig count released on Friday indicated renewed confidence with a rise of 30 rigs, 24 of them oil. Libya is not yet producing as much as they thought, the Zuetina port is still closed with more work needing to be done on the damaged infrastructure but its on the way. Finally, admission by the Kazakh Finance Minister that Kashagan production will not restart until the end of 2015 or early 2016 is a further blow to the consortium who may wish that they had never started it.
I wrote a piece about BG in my early flash blog but now I have had a chance to speak to the company and put my thoughts in some sort of order I will add to those comments. The first thing to say is that while the announcement today vis-à-vis trading, points to the lower end of guidance, analysts are being told that this is not a profit warning. Its a bit difficult to reconcile that as the statement indicates that not only has the CEO has been removed but that guidance for 2015 is being withdrawn, however the company has just said to me that if profits were to be guided down then they would have to have said that in todays statement.
In my comments at the time of the last profit warning/production guidance I withdrew my long-term buy recommendation as I felt that senior management had lost the ability to manage the company and that whilst I felt that the assets were still of significant value, something more had to be done. Todays announcement not only proves that that was a correct call but BG has now lost the ability to decide its future and needs to be broken up, probably by some exterior organisation. Shareholders, particularly retail holders, need to know that this mind-blowing display of organisational incompetence should not be rewarded by ‘no change in organisational perspective’ (quote from company today) and that only a little tinkering at the edges and another new CEO will solve everything. BG has no longer the mandate to manage these assets and right now the board should not be sitting down with head-hunters but with industry experts who can split up and sell the business while they still have one worth the while. BG has become too big and too complicated to be run as it is at the moment and the insult that is sacking 25% of the workforce in Reading is not only an admittance of not having a clue, but fiddling while Rome burns. All shareholders deserve better than this and in the past I have suggested that the Exxon CFO may be sharpening his pencil, now he sees lunch being prepared as certainly as a fox circles an unguarded chicken house. The only difference now is that BG have taken their eye off the ball to such an extent that they have sent someone over to sharpen his pencil for him.
BG now needs to go straight to plan B, call in the break up troops and work out what parts of the business they want to keep and manage for shareholders, whilst achieving value for those areas they cant will be delivered by selling or floating them. I have said many times that BG is eminently breakable, Brazil, Australia, LNG and the E&P business are valuable stand alone businesses or could be more valuable to other companies, for now BG has lost the right and the privilege to do it themselves and shareholders deserve better, what a terrible shame.
Ophir has announced that it ‘recently’ made an approach to Premier with a proposal to merge and that they believed that the combination would create a ‘well funded,re-focussed, full cycle E&P company. The approach was rejected by Premier and Ophir are ‘no longer considering making an offer for Premier’. The language changes from ‘a merger’ to ‘an offer’ so I’m not sure that the whole process was that well considered from both sides but even taking that into account it is not a perfect fit but might just have worked.
Premier has announced that they have an oil discovery at Kuda Laut on the Tuna block offshore Indonesia. 183 feet of net oil bearing reservoir and 317 feet of net gas bearing, hydrocarbons have been recovered to surface and the well will be side-tracked.
Sound Oil followed up their cracking news on the funding front with a farm-out of Nervesa today. Niche Group has acquired 27.5% of the licence for funding 100% of the cost of the second well in the southern part of the block. At $6 boe for 2C this is a very impressive deal and means that Sound now have another asset that they don’t have to spend their own cash on. Stick with my comments from last week, very impressed with management and lots of scope from here.
Chariot have announced some new advisors, I don’t normally comment on these sorts of things but having seen them a little while ago and become much more positive I think that this is the right way of getting the market to take a fresh look at the stock. Ticks the boxes, like it a lot.
San Leon has finalised key commercial terms with Baker Hughes on Siekierki which means that this at long last is beginning to materialise…
Gulfsands has been awarded an onshore block in Morocco with some potential, Morocco, on and offshore is going to be one exciting place for the next year or two.
So the HubCap Stealers had their pockets picked by JM who was half way back down the M6 before the Anfield private jet was taxiing off to the awards ceremony. Parking two buses and having 10 men on the 18 yard box were the complaints but conceding two goals was more the point, they are now waiting on the Noisy Neighbours and the whole process just got more exciting. Likewise at the bottom as Gus is working miracles, can the Maccams do the Lazarus bit? Might do as Giggsy’s army saw of the Canaries and Fulham gave away a two goal start while Villa blew up.
Meanwhile in Scotland could the unthinkable happen to Edinburgh? With Hibs losing to Hearts could Tynecastle and Easter Road be out of the Premier League…?
The Rugby was a joy as Sarries went through to the final with a devastating performance against Clermont whilst Munster were spirited but ultimately not good enough against Toulon, will be a great final.
An update on the NBA playoffs…. The Clippers took a beating in Oakland last night as the Warriors levelled the series 2-2. The Wizards beat the Bulls and lead the series 3-1. Toronto won in Brooklyn and that is now tied 2-2. Portland win in overtime against the Rockets. They lead 3-1. The Pacers and the Hawks are all square in their series as are the Thunder and the Grizzlies. The Bobcats are on the brink of elimination as they trail the reigning champions the Miami Heat 3-0. The Spurs also went down against the Mavericks on Saturday. Game four tonight. A possible upset there…
However, the most interesting news that came out of the NBA this week was from Los Angeles where the Clippers owner Donald Sterling was caught in a tape recording outlining that he didn’t want his girlfriend posing with black players. Another setback for a franchise that has, in recent years, remained in the shadow of the Lakers. Coach Doc Rivers is thought to be considering his future with the team working for Sterling.
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