WTI $80.54 -58c, Brent $85.86 -38c, Diff $5.32 +20c, NG $3.87 +5c
Its all a bit scrappy in the oil markets at the moment, totally directionless and with a long three week haul to the Opec meeting and even then I suspect we will not get an equivocal agreement. Brent is holding above the key $85.50 level but ‘doesn’t look convincing’ according to traders who are seeing weakness in the Middle East light sour market as well as West African and Asia Pacific sweet grades as refiners cut orders on falling margins. Bad weather at Basra curtailed Iraqi exports for a day or so but all is now back to normal in the Gulf.
October was a bad month for oil overall with WTI falling 12% and Brent 9%, the differential almost went to zero although predictably as ever it is now steady at around $5.
Chinese PMI numbers remain above the crucial 50 number but only just, today’s 50.8 figure indicates lessening growth in the fourth quarter. Mid-term elections in the US may well mean that the Republicans win the Senate to add to the House but will it make any difference? If you get a chance to see today’s blog from Marcus Ashworth at BESI you should do as its crammed as usual with thought provoking insight from the bond market expert…
Ophir has announced this morning that it has sent a letter to the Salamander Board confirming the proposed terms of a ‘possible’ share offer but also warns that there is ‘no certainty that an offer will be made’ or what the terms are. This is going to be one very tricky deal to follow but it may be too difficult even for the Salamander board to slither out of. Readers will know that I never once believed that figures near 200p a share were anything like achievable and the fact that the board and its advisors apparently turned down a bid from CEPSA at 145p a share puts them in a bit of a corner even in this oil price environment. Given also that the SONA deal is still in the picture, (even though that deal was negotiated at a much higher oil price) there are still straws to be clutched at but the realité is probably not looking good for the defence.
Range has announced this morning that it has signed a MOU with Core Capital Management, a China based institutional investor who proposes to put up to $50m into the company. The initial investment will be by buying $20m of shares at 1p a share which is a 26% premium to the closing price last Friday. In addition Core will subscribe for $30m of convertible bonds which will convert at 1p and make up the $50m total investment. It is envisaged that Core will end up with 19.9% of Range which might mean that exact numbers are tweaked in order not to breach Aussie securities rules. This is a major investment and whilst dilutive it proves that there are funds out there looking to invest in the right projects and managements.
Range say that the money will be used for ‘drilling and acquisition targets’ which I hope that means both in Trinidad only, after all it is the core area and there are still disposals to come before any further world domination is considered. The deal has its merits as Range is only really profitable going forward if it is well funded, by which I mean not going to very side-street money lender for wonga when you need to drill some wells to hit your production target. This deal ticks those boxes and I am quite surprised that the shares havent risen more this morning.
I have given Range the benefit of the doubt since I started looking at them seriously back in the spring and it has been one hell of a ride, for those longer term investors it has been worse. This deal might just be the ‘firm foundation’ that the company is hoping will provide the springboard for future sustainable growth but they will understand if the shareholders, like the jury, remain out until solid proof of a Lazarus-like recovery is evident…Whatever you say though it means that they have raised a decent amount of money through equity and can start to get rid of that expensive debt, it was after all only a bridging loan. Getting the St Mary’s block finalised is a timely result and the money can be used to drill some wells which are in effect near existing production and may not even be farmed down, at least until de-risked. Finally the water-flood development is the real prize for Range and there was a risk that without proper funding this may have been on the back burner for a long time, now it is genuinely on the cards.
I am going to stick with my bullish stance on Range although it does come with some caveats as which is no great surprise. Although as I have said this is dilution, this deal is as good as any I can think of the company doing and the management should be applauded, you never know they might have created the conditions whereby the Chinese investors want to buy the whole company…
As it happens the Exxon and the Chevron figures both comfortably beat the whisper on Friday and provided the best of the figures from the majors reporting season. Both companies ticked the boxes downstream and both came good with shale oil, this providing the icing on the cake that the others lacked.
Falcon Oil & Gas has announced that the PASA in South Africa is proceeding with the company’s application for a shale gas exploration licence in the Karoo Basin. This will be a very exciting prospect for Falcon and readers will know how much I think the company could be worth following the excellent farm-out in Australia and the work with Chevron in South Africa. (For those who havent seen it my CEO interview with Philip O’Quigley is on the website www.malcysblog.com)
Worth taking a look at the major article in the FT today on the Argentina shale play as it gives a lot of information about the Vaca Muerta shale formation in which Andes Energia has an impressive exposure. I have been very positive about AEN this year and am aware that political and economic turmoil in Argentina may well mean that this is a play that may not deliver substantial returns until after the elections next year. However, Andes has a significant acreage play in the Vaca Muerta and I am impressed by its management who are laying the foundations of a genuinely good resource base which will reward in the long term if not before.
Quite an interesting game at MiddleEastlands yesterday and one I expected the Noisy Neighbours to dominate more, especially after that imbecile got sent off proving that most footballers are as thick as two short planks. Chelski were a bit rattled I thought in the Library that is Stamford Bridge, even the Chosen One said it was awfully quiet for a full house.. The Magpies continued their good run at the expense of the Stealers and the Hammers got a well-deserved point at the Potters. Spurs comeback was left late yesterday but another side playing against ten men…The Saints continue to prove all the prophets of doom wrong.
Lewis won in Austin so leaving it late for Nico to launch a challenge after he ‘outsmarted’ Rosberg, two more GP’s with points for three…
I dont cover rugby league but couldn’t help noticing another awful TMO decision on Saturday…