WTI $78.78 -$1.76, Brent $84.78 -$1.08, Diff $6.00 +68c, NG $4.05 +17c
We are back down towards the lows after Saudi Arabia announced their December pricing policy yesterday. The market got a bit rattled and initially marked Brent up to around $86.40 but soon realised that within the ‘formula’ there was a discrepancy aimed at the US market. The thing is that that is actually what it is, a pricing formula which is purposely designed to react to market supply and demand signals and local pricing to ensure that the Saudis compete in every market. Yesterday saw them drop the price to the USA by 45-50c a barrel even though they increased prices for Europe and Asia. Interestingly my traders say that North Sea crude for November is seeing ‘decent’ demand and clearing well and for December net margins are picking up and product is selling quite well too.
The other side of the coin is the retail gasoline price in the US which as you can imagine are seeing downward pressure, indeed as predicted here last week the Shermans are now filling up their vehicles with gasoline at sub three bucks a gallon although diesel is still much higher. At $2.99 a gallon, down another 6.3 cents on the week drivers across the board are getting a material advantage.
An old time favourite of mine is Weir which has today put out an update that would in any other market have been received much more positively than it has been. Full year expectations are unchanged, with input growth up 14% in constant currency terms while revenue and operating margins are also in line with guidance. Weir has implemented a new efficiency programme which will deliver savings of up to £35m in 2016. The 3rd quarter showed strong aftermarket trends with minerals up 12%, Oil & Gas up 44% and Power & Industrial up 9% showing the resilience that Weir can prove in an otherwise subdued market. The oil and minerals services market have fallen sharply since the highs of the spring when corporate activity also bolstered the shares. Weir has always traded on a rating premium but that has more or less disappeared now and although the sector is out of favour it is a brave investor who disregards Weir at these prices.
IGas Energy-Reassuringly boring…
IGas has announced the results of the Barton Moss well which has been delayed as information from it was used in the company’s 14th licencing round submission. As my title says, the result didn’t surprise, it merely confirmed the interpretation of the basin and pointed the company in the right direction application-wise. The results were dead in line with pre-drill objectives and consistent with the model on which they were working including Sabden and Upper and Lower Bowland shales.
Also included in the release were the GIIP numbers, for the first time using IGas and Dart numbers together although the company promise a revised group CPR 1H 2015. The mid case number of 147 TCF hasn’t actually altered that much combining the two companies but the high and the low numbers have both shifted upwards, I would like to see that number rising as further evaluation of the prospects are made. On that note IGas are shooting 2D seismic at the moment and I expect the Ellesmere Port well to spud sometime this month.
I mentioned the 14th Round which has now closed, and should be a very interesting guide as to how much interest there is in the UK onshore situation, word has it that around 80 applications were received by DECC which is higher than I had expected and surely good news for the UK oil and gas industry.
IGas is one of the purest and most exciting of the UK onshore plays in the market and these results cement current valuations which in my case are well above the current price. The market however, has discounted such numbers due to the risks inherent in the industry, political difficulties and timing issues. 2015 will eventually start to prove or disprove the unconventional story and one way or another will make these stocks possibly as cheap as any in the market at least as long as the spotlight is on them and next year it will be.
The Lidongo X Marine 101 well offshore Congo (Brazzaville) appears to have tested very well indeed. The test results ‘significantly exceeded pre-test expectations’ with 5,174 b/d of oil and 3.65m scf’s of gas. The world clearly has to much of the stuff as the shares are unchanged on good news although there aren’t many better than SOCO in the market place where cash is increasingly king.
I need to do some more work on it but the flash number from Foster Wheeler looked way short of expectations yesterday. Although to be subsumed by Amec and therefore difficult to read, I have been very concerned that this deal may have been a touch risky at the time, proof of the pudding as they say…
And I noticed that Iona Energy, the new Ithaca, announced that it had hired Robert Gair from Trinity E&P as CFO, anther investment banker steps up but that board is now pretty strong. The company also announced that a number of ‘insiders’ had purchased stock in the recent window adding up to 1.7m shares.
Off to the Oil Barrel tomorrow morning so should be a short blog first thing, I look forward to seeing you there.
Protectionist wins the Melbourne Cup ridden beautifully by Ryan Moore but the race was overshadowed when two horses were put down after the race after freak accidents.
Last night saw a right six-pointer as The Eagles took on the Maccams at Selhurst Park, the outcome being a 1-3 after Palace were denied a stone wall pen in the first minute. At least it means that the black ribbon can be removed from the coffee mug of the Chairman over at OFGEM…
Tonight we are back to the Champions League where the HubCap Stealers are away at Real Madrid and allegedly playing a weakened side ahead of the Premiership game against Chelski at the weekend…That’s your story…but for Real, Gareth Bale is fit again…The Gooners host Anderlecht and can secure qualification if results go their way…