WTI $104.35 +61c, Brent $110.54 +18c, Diff $6.19 -43c, NG $4.41 +5c
A quiet few days, at least as far as the oil price is concerned. With some markets shut for Memorial Day or Whitsun yesterday there has been little movement and the elections in Europe whilst showing a serious anti-Federalist surge haven’t changed much. The election in Ukraine was as predictable as one might have been expected although Poroshenko’s task is as hard as it is unenviable. My traders tell me that Brent shows good and continued support at $110 and WTI continues to depend on inventory numbers.
The driving season so much loved by blog readers over the years started yesterday and interestingly the gasoline price is almost the same as it was a year ago when the economy was still in the mire. We shall see whether demand picks up at all as along with housing stats and PMI data it is a good leading indicator.
You have to admire the conjones of Bo Diddeley or maybe its rather more that someone called Sechin has got his nutcracker out. At a time when BP are up to their eyes in litigation in the US, including an appeal to the US Supreme Court and defending cases post Macondo, they pitch up to Davoski (advised against by the US) and sign a contract with Rosneft in the form of, yes you’ve got it, Igor Sechin who is on the US sanctions list for crimes against Ukraine. Both these best friends also make dangerous enemies…
The Pil side-track well appears to have delivered the goods all right as oil in reservoir sands were a high net to gross ratio and there was 80 metres of oil in the Upper Jurassic Rogn formation. It looks like the pre-drill estimates of 50-170m barrels is now nailed on and likely to be at the top end of the range. I have remained confident about Faroe after an extended wobble and my confidence has been vindicated so far. With interesting projects either drilling now or about to spud I see no reason why Faroe and its share price cannot continue to ascend further from here and I am promised a meeting with the company before long.
Lamprell has announced another good contract this morning, another brace of Le Tourneau Super 116E’s this time from Shelf Drilling worth the usual $370m. Shelf is a new client for Lamprell and accordingly another step forward in a market place I expect to increase significantly.
Last week I was fortunate to have a long session with the company on a one on one basis and following that my confidence in the outlook for Lamprell has increased, so much so that I think this company offers outstanding opportunities, particularly following recent funding activity. The funding is three fold, a $120m rights issue that funds a capital investment programme in the yard, paying off the tranche ‘B’ facility and improving working capital. There is also a $350m optimum debt package to replace the former facility A, as well as giving the company increased headroom for working capital. Finally there is a committed bonding facility of $250m to further aid flexibility. Paying off the B tranche also lifts the dividend restriction and I can see Lamprell returning to the dividend list before long. One of the key advantages of this overall refinancing is to give the company a substantial increase in its addressable market, up til now Lamprell has been operating with its hands behind its back as many clients were off limits due to its inability to offer any sort of financing. For the jackup market nowadays, clients are increasingly demanding back ended payment terms and ‘enablers’ something Lamprell has not been able to provide and the company consider that had this system been in place last year their addressable market would have trebled.
The capital investment in the yard will bring about a serious increase in efficiency and productivity with the cost per man hour reducing substantially and this will give Lamprell even more ability to price work more competitively. With the financing options now available, I predict that the game has significantly changed for the better in terms of addressable market and margin growth and Lamprell will now compete much more effectively in a broader market with Tier 1 clients in their sights. The management of Lamprell has changed completely in the last year or so and with them addressing legacy issues, solving the debt issues forced upon them and with a strong order book and a pipeline offering more prospects than ever before I think that the shares are a strong BUY.
Results today from the 31/2-21S well offshore Norway are not encouraging and even changing continents has not managed to lead to better fortune. I understand that this is not a disaster but the statement is even more brief than ever and I cant get hold of the IR company!
Another short statement as Ophir announce that their well offshore Gabon on the Attanga Deep-1 well on the Gnondo Block has been unsuccessful. It seems that hydrocarbons were encountered but they were not significant and had poor reservoir characteristics.
Exxon have announced that they have shipped their first LNG cargo from Papua New Guinea, worth mentioning it because there were many sceptical people around when it first started and it must be one of the worst places to work in even by oil industry standards.
For followers of offshore Malta, (Genel/MOG/Rockhopper) news that the Hagar Qim-1 well spudded on May 24th is most interesting. Malta has been drilled before but the most recent well was in 2002, I understand that the COS of this well is around 20% so a bit of a long shot and why the contingency payment is separate in the RKH bid for MOG. Expect results in 60-90 days.
Conversion of some more shares today by Range Resources as it continues the process of refinancing all its existing debt under new CEO Rory Scott-Russell. I have had a number of conversations with him and other members of the board recently and feel as confident as one can about a company in its situation. There is little doubt that having found the company in such dire straights the CEO and the board are doing a remarkable job under the circumstances and if this recovery continues it will rival Lazarus or even Charlton Athletic as recoveries go…
There was so much sport over the weekend the and finally could have been a very long piece today but in the interests of brevity I will shoot through my highlights. All three playoffs happened in the football with QPR, Rotherham and Fleetwood Town gaining promotions to higher leagues. QPR, with a man back in the dressing room, hung on and having not had a shot on target at all in the second half found the net in the last minute leaving the wally with the brolly in a typical losing situation at Wembley.
In Scotland you couldn’t make it up, last week I said that Hibs had scored two away goals and merely needed to coast the SPL comfort, but oh no they couldn’t, they lost 0-2 at home and after that it went downhill. The second league of Scottish football next year contains Hibs, Hearts and Rangers and will be much more fun than the SPL despite having the wonderful St Johnstone in it and a Celtic side with a new manager. Maybe David Moyes is being lined up for that gig, even he could lose that…..
The Champions League Cup final was even more spooky as Gary Neville said with five minutes to go,’ Real will only get one more chance now’ and they did and the rest is history as they equalised and went on to beat Athletico 4-1.
Spurs look like they have signed Southampton manager Pochettino who will be disappointed with the squad at White Hart Lane but maybe he can buy some of his old club’s players who all appear to be for sale…
The Monaco Grand Prix looked a bit tasty as knowing he was about to be pipped for pole position by English Lewis, Mr Rosberg decided to park his merc on the track thereby ensuring that his team mate couldn’t complete a fast lap. Must have learnt at the feet of Shumi huh..?
In the Saracens versus Jonny Wilkinson game it was reassuring that Toulon prevailed and gave the South Africans a bit of a hiding, brought it all back as Jonny dropped for Heineken victory…
English cricket reverted to norm as chasing 257 odd we managed less than a hundred in reply, trouble is that playing Carberry who has no future in English cricket left the best one day opener on the bench, v poor selection indeed.
Last night in the NBA…
The Miami Heat take a 3-1 lead against the Pacers. Lebron James with 32 points.
San Antonio take a 2-1 series lead to Oklahoma. The return of Serge Ibaka for OKC could be the turning point in the Western Conference Finals.
And nice to see that the FT has pulled to bits the Piketty Witch, revealing at the weekend that the ‘wonder book’ is full of errors and data problems.
The Sunday Times reports that Hogan Lovells had a marvellous soiree recently, the law firm that are pushing into the energy field with a piece of work that I mentioned recently were glad-handing apparently but I’m afraid that the blog never made it to the invitation list…