WTI $100.77 +$1.27, Brent $108.13 +$1.07, Diff $7.36 -20c, NG $4.74 -6c
The oil price rose yesterday as a number of factors had an impact, none more so than the Chinese data which came in two forms. The economic stats which beat consensus were good, particularly in the export figures whilst the oil numbers were even more surprising. Crude oil imports for April were up 22.4% m/m and the y/y figure was up 11.5%, I had speculated that they would be buying more a little while ago but this figure was even higher than that.
The EIA inventory numbers were similar to the API ones the day before and therefore caught the Wall Street scribblers off guard once again but that comes as no surprise. A crude draw of 1.8m barrels was set against forecasts of a build of 1.4m and given refineries are buying ahead of the driving season was no great surprise. Finally it seems that President Putin is being a tad more conciliatory regarding the Ukraine but then again when did we ever believe anything on that front.
EnCana Corp (Caza Oil & Gas)
EnCana, under the relatively new leadership of Doug Suttles, formerly BP’s man on the spot at Macondo, has made a big bet on the Eagle Ford in Texas by paying $3.1bn for Freeport McMoRan’s acreage there. The 53/- boe/d (spilt 46/- oil and 44 MMcf/d) has 400 locations and as you can see is intended along with other recent deals to replace natural gas with higher margin oil and liquids which is very laudable. On a completely different scale it should be noted that the management at Caza Oil & Gas did the same thing a while ago and they now have a very valuable liquids oriented portfolio with many locations for future growth. The Caza share price has eventually started to pick up and I consider that it is still significantly undervalued at around 11p.
1Q figs from DNO this morning and all ears were on the conference call to hear about Tawke production and more importantly, sales. The production number continues to impress with April flows getting up to and over 120,000/- b/d of which 100/- is going to Ceyhan in Turkey and the rest sold domestically. As speculation grows as to when that oil building in Ceyhan will be sold it must be fair to assume that it wont be long before the 2.5m capacity is reached and then I would expect, in a low key sort of way, for the oil to be sold. At that stage there is obviously a positive knock-on effect for Genel while DNO said today that they ‘had their foot firmly on the accelerator’ which bodes well for both companies.
I suspect that if they had their way, Petroceltic would not be releasing the data from the Shakrok well in Kurdistan in such a piecemeal sort of way but reading into the press release it looks like nothing can be kept a secret out there. Todays news is that the first half of the tests in the Butmah formation have been unsuccessful but the company remain optimistic about the on-going tests in the Adaiyah and Mus formations which have been successful nearby. The share price has come back from the January peak as this information slowly gets into the market and progress from here will depend very much on the current testing.
Over at Glencore, Tony Hayward has been anointed Chairman on a permanent basis and this is nothing less than I would expect. Sometimes misunderstood, I have known Tony for a long time and I am sure Glencore has made a very wise choice in this appointment but Genel shareholders may have cause to worry in case the work load is too much. Knowing him as I do I don’t think that this will affect his Genel position very much as he has an excellent team behind him and he has always thrived on what might be called a full work load but his other interests may have to be curtailed somewhat.
On the subject of oil traders I saw the Vitol results in the FT this morning and it looks as if profits are down 20% and the lowest for a decade. This comes as no surprise as Ian Taylor has been warning for some time that current range bound oil prices and increasing competition are taking their toll on profits. One consequence of all this is that the companies mentioned are increasingly becoming aggressive buyers of direct stakes in exploration and production, notably in Africa where, for example, Glencore has recently made the no-brainer acquisition of Caracal Energy in Chad. Expect more of the same and keep a close eye on what might appear to be under valued assets…
And Chevron has won fair and square against Patton Boggs who have had to pay $15m to settle the case and issue a ‘statement of regret’.
The House of Lords Economic Affairs Committee has reported on fraccing and shale in general and has come to some very positive conclusions. Saying that there is an urgent need for action and being much more proactive than even the Government has been so far it has been welcomed by the companies as you might expect and also the Shale Tsar, Ken Cronin. Investors should be aware that over the next stage of the shale gas process investment opportunities will be limited and watch IGas, Egdon and with dual listing commencing next Monday, Dart Energy.
The Villa held out for 64 minutes against the noisiest of neighbours last night but then the floodgates opened and they went down 4-0 eventually. This tees up a fascinating Sunday afternoon as the Premiership could still go either way, City need just a point against the Hammers but if memory serves me correctly it was they who thwarted Man U some years ago when Blackburn Rovers nicked the title…The Maccams stay up which will please a very grand fromage at OFGEM, who would have believed that a few weeks ago and they were at the bottom at Christmas, usually a bad omen. Louis van Gaal has openly begged for the Man U job but the appointment, although apparently done and dusted is waiting for the end of the season, expect something on Monday morning. (Or Sunday night on Twitter…)
And the return of Muzza continues as he beats Almagro which might have been a banana skin, especially after switching off in the second set.
I see that Oriel Securities have put their shareholders out of their misery by finally agreeing to be taken over by Missouri-based Stifel Financial, owners of Keefe, Bruyette and Woods for a price of £23m plus clearing £14m of expensive debt.
Looking at the Myners report into the Co-op is a fascinating read and is as damning as could have been expected and some. On the day that the Chrystal Methodist appeared in court surrounded by minders the best line in this saga is provided by the ever witty Jonathan Guthrie in the Lombard column in the FT saying that he ‘should have done the math, not the meth’…..
And did you see the Labour party broadcast last night? Worth checking out as I have to say that I thought it was borderline offensive or what some commentators are calling a bunch of playground insults and bullying of Nick Clegg…
Finally, thanks to the big team at Brunswick who turned out for a discussion on the sector yesterday, its a very impressive team and I am most grateful for their time.