WTI $104.37 +7c, Brent $109.95 +42c, Diff $5.58 +35c, NG $4.70 -4c
Oil is about a dollar higher than the end of last week, all on geo-politics, nothing to do with supply. The Ukraine dominates as the deal made only last Thursday appears to be collapsing creating further uncertainty. Iran’s President Rouhani has changed the guard at the country’s Atomic Energy Agency, side-lining the hawks and paving the way for a deal with the West.
As I said, there is no shortage of crude oil and tonight we will see the API inventory stats that should show further stock builds in all collection points.
It is worth looking at the article by Roland Gribben in the Telegraph this morning about benchmarks, as industry guru, Liz Bossley, CEO and founder of the Consilience Energy Advisory Group has spoken. Liz says that the Brent benchmark is ‘crumbling’ and is in urgent need of reform and that there are ‘too many contracts tied to Brent at a time when North Sea output is falling and demands for tighter controls are growing in an unregulated sector’. the report also shares recent industry criticism of Platts who are the dominant player in a market where responsibility for collecting and analysing prices and information lies with the reporting agencies. I have said here a number of times that as Platts only use prices from companies that are prepared to give them information if they agree to their guidelines the system is inherently floored and they wield too much power. Other industry leaders such as Ian Taylor over at Vitol have also commented recently that benchmarks are overdue a change and this seems to be a time to look at the situation.
Schlumberger, Baker Hughes, Halliburton.
In the last three days all three of the above have produced results and as I mentioned on Thursday they needed to more than satisfy the markets if they were to keep up the stellar price performance so far this year. I needn’t have worries as my favourite sector companies certainly delivered the goods in robust style all three beating the whisper and delivered excellent results. Schlumberger’s earnings were up 26% and despite bad weather in the USA and Russia (which affected all of them), saw the Middle East and Asia up 19%, North America up 12% as the highlights. The stock is now nicely over $100 at $101.80 as it says that it expects a 6% rise in spend from its clients this year. Over at Baker Hughes, where the stock price cleared $70, they beat the whisper by 5 cents and saw earnings up 23% year on year. Best regions here were the Middle East and Asia/Pac up 24% and Europe/Africa and Russia rising 17%. Margins were up 200 bp’s which appears to be the industry norm. Finally yesterday saw Halliburton producing its numbers which equally didn’t disappoint the market. A quarterly revenue of $7.35bn was a record and comfortably beat expectations and here too, big H forecast a 25% rise in EPS in the second quarter. Interestingly Halliburton see the US as being very strong this year with fraccing activity, especially in areas such as the Permian Basin, growing strongly and pushing margins up to a 20% target and a full book of work. With such positive numbers, comments on order books and a feed through to margins I can only remain more than positive on these stocks and they certainly stamp comments made by Dennis Proctor, CEO of Hunting Group at the recent results presentation that there is plenty of business around. The biggest risk in the international oilfield services business for investors is not being involved and I reiterate my bullish stance.
An IMS from Genel this morning that doesn’t really add much to what we knew about what’s going on in Kurdistan but it is reassuring to know that guidance is still very much in place at 60-70/- b/d and revenues of $500-600m this year. With Taq Taq and Tawke producing at 81/- b/d and 57/- b/d respectively and domestic sales realising $69 and $58 for each field all appears on target. In addition the pipeline is ‘substantially’ complete and the final bits should be done this quarter. The shares have drifted back towards the 900p resistance and should be bought, although attitudes towards Kurdistan are bound to remain ignorant and of course the elections are only just over a week away which might hinder progress in the short term or even offer investment opportunities.
With a lot more to come from Dart over the next few weeks, not least the Dual Listing on the 12th May, the company has had its first taste of protesters at its Daneshill Road CBM site in Nottinghamshire. Despite this site drilling for coal samples and not fraccing or testing methane, the company saw firstly aggravated trespass as a demonstrator climbed onto the rig and then a night of abuse which included masked protestors threatening staff and eventually physically assaulting the Dart site manager. When it comes to the market Dart is one to watch as there aren’t many ways to play UK unconventional resources as I have said many times.
I had a long conversation with Gulf Keystone on Thursday after their bond issue closed in what was a ‘far from ideal’ market for E&P companies to raise money. I notice that Danny Fortson in the Sunday Times is putting the boot in again claiming that its ‘jam tomorrow’ story remains just that. Unfortunately, it is easy when a company that needs development dollars in a difficult market and its equity is vulnerable for commentators and aggressive short-sellers to take advantage. At such a time it is equally difficult to try and look through the fog and see that there is a big value in the company’s assets especially when the market has pre-conceived suspicions and trust issues. I tried to catch the GKP knife at 100p but I should have seen the market weighing against the stock and overriding the fundamentals causing further weakness. For the time being those negatives outweigh the positives and with elections imminent and news on payment time lags, as well as overrunning exploration drilling on Shaikan-7 going on it isn’t looking too clever for the bulls. I’m feeling just ever so slightly out of the loop here and have requested an interview with Todd to try and get my head round it all!
A positive update from Range Resources this morning as the new CEO and management team get to grips with the situation. There is now no doubt at all if ever there was any that Trinidad is the major area of concentration and with wells being drilled and the rig fleet under maintenance programme on-going things are looking up. It is equally the case to say that Rome wasn’t built in a day and that this turnaround wont happen in a hurry but I am feeling much more positive than I have before for this company. With a new hire in Trinidad the management can genuinely be called a ‘Motley’ crew with the signing of Terry Motley as Operations manager there…
I keep getting deluged with requests about Petroneft and lots of e-mails from various parties about their side of the story. To make it clear, the stock is not and is unlikely ever likely to be, on anything other than Malcys blacklist of stocks not of investible quality…
The Department of Energy and Climate Change are apparently looking for a ‘North Sea Tsar’ to take charge of regulation etc. The Sunday Times says that this is an industry-funded and therefore highly paid position and accordingly am a touch surprised I haven’t had the call yet…only joking….
So, the Hubcap Stealers march on and with all around them clubs committing Hari Kari they only have to hold their nerve in the final three steps. Sunderland fans will be thinking that had they played like this a bit more often they would be staring at the Championship next season… Tonight sees the return of Torres to Athletico as Chelski attempt to keep their season alive, if he has any sense he will stay there…
And David Moyes gets the bullet at Old Trafford after regrettably proving that he just wasn’t up to the job. I have to admit that I thought it was the right choice when announced but it didn’t take long to see that he was well out of his depth and United was so much bigger than he could handle. One of my pet hates about football is that when a new manger comes in all the backroom staff get fired, did nobody see that it was that team of people that made life so much better for Fergie and that Moyes’s team of Everton losers hadn’t got a clue?
Great news for Burnley who amidst all the hullaballoo got promoted to the Prem for next year and I must commend Charlton who down 0-2 after 8 minutes came back like Lazarus to win 3-2 and stave off relegation perhaps.
English cricket has yet again excelled itself as it has gone back to a coach who was fired for unsatisfactory results when in the job only a few years ago. The wicketkeepers union has now taken over the setup and much as I love Nobby D, I am concerned that this is a backwards step and although the list of possible candidates was apparently dreadfully short it must be heart-breaking that no-one good wanted the job.
In horse racing I was saddened to see that Julian Wilson had died, he was always around, a bit like the BBC’s Lord Oaksey. And in another terrible twist for AP McCoy who was banned at Aintree, he gave up his ride in the Irish Grand national yesterday to Barry Geraghty and just like at Cheltenham he only went and won it.
The NBA playoffs began late on Friday night as the Nets, Thunder and Warriors all won. The biggest shock of the evening came as the Atlanta Hawks won in Indiana. The Spurs, Heats and Wizards were victorious on Saturday night as the Trailblazers overcame Houston in overtime. Last night saw the Memphis Grizzlies win in Oklahoma in game two of that series, and Blake Griffin scored 35 points in a 40 point rout of Golden State. Tonight sees three games in the Eastern Conference…
In the Grand Prix Hamilton won again and Vettel proved what everyone has been thinking for a long time that he isn’t as good as he and his mates at Red Bull thought. It was rather fun to see his own team instructing him to pull over and let Ricciardo pass and equally predictable that he wouldn’t do so, Mark Webber must be wetting himself with laughter…