WTI $44.53 +8c, Brent $49.13 +66c, Diff $4.60 +58c, NG $2.72 -12c

Oil price

A quiet end to the week as the crude price holds around these levels even marginally up this morning. Although the bulls are saying that we are making quite a base here I am still concerned that we might have one more tilt at the lower levels, fundamentals still make for over supply. We are at or near a six year low, particularly WTI and whilst I am sure the BH rig count will help today the EIA say that US domestic production is still at 9.2m b/d, a 31 year high. Last night the Republican dominated Senate passed the Keystone XL pipeline bill by 62-36 which puts them on for a run in with Barry who has said that he will veto it when it gets to his desk.

Plexus Holdings

I have followed Plexus for a very long time and like its industry leading and patented friction grip technology called POS-GRIP. This wellhead technology is metal to metal sealing, rented out to a blue chip list of major oil and gas operators which include most of the leading players in the industry. Plexus subcontracts the equipment manufacture and rents out the kit for exploration wells and sells for production wells. The HQ is in Aberdeen where it has recently secured a new factory directly opposite its current site from Baker Hughes, it is also setting up shop in Singapore as the company secures more and more work in the Pacific rim. Last week I attended a company visit to the company in Aberdeen to check out how things were going.

The clue to what Plexus does is in the name, its technology grips and seals casing hangers from the outside and can be installed through the BOP thus improving technical performance, reducing costs and significantly improving safety. Plexus can have between 12-16 operations on the go at any one time meaning that with duplicate kit on site as many as 30 pieces of equipment (out of 60) are out of the factory. On return the kit is cleaned, refurbished and technically checked before a lick of paint makes them ready to go back out again. It is a testament in itself that for a modest company competing against the biggest in the industry that POS-GRIP wellhead systems have been used in more than 350 oil and gas wells worldwide since the company was founded in 1997.

But with such exceptional proprietary technology and a blue chip list of clients the company believes that it can grow rapidly by developing new products and challenge in bigger markets. These include the HP/HT Mudline Tieback System and the HGSS Subsea Wellhead Design  on the blocks as well as other products in development. For the HGSS system the company established a Joint Industry Project in 2011 with what is now a list of 11 key players to test and potentially develop it, system qualification was completed last year and it is expected to go into field trials 1Q 2015. The advantages are clear, capital costs are the same, the kit is still rented and reusable giving time savings and increased reliability. This should enable Plexus to attack new markets such as the international wellhead and the lucrative $300m jack-up exploration markets as well as opening the way to add POS-GRIP products as they go.

The advantages to Plexus are clear, having achieved an enviable position in the market place it now feels that it can drive on in bigger markets with existing and new clients, there is no doubt that significant expansion is possible in the rented exploration fleet as well as other areas. This would include expanding volume production in the wellhead market, increasing its position in the subsea wellhead market and by proving itself to be a market leader in HP/HT applications. Finally there are opportunities for greater licencing of its proprietary design to a select group of customers who may in due course include the obvious absentees from that blue chip client list.

Investors will look at the significant plus side for Plexus but always balk at the rating that the company sits on, even though the shares have fallen by around a half along with other oil and service companies on some forecasts this still leaves Plexus on a P/E of just under 30x, hard to justify at the best of times.  The trouble is that with over 70% of the stock held by founder Ben van Bilderbeck (who is still the driving force so couldnt, reluctantly spend any time with us) free float is strictly limited and a natural squeeze leaves the shares permanently expensive. Over the years I have tried but failed to get some stock out of the company but it is not forthcoming which rather adds fuel to the flames if the founder thinks the stock is too cheap… So, expect to see a regular drip feed of contracts for POS-GRIP and from 2H this year the new products should start exciting the members of the JIP enough to place orders. If this happens then expect to see bigger and better orders and further expansion of the Plexus market share and remember they are headed towards a much bigger market.


I commented on Shell yesterday but at that stage hadn’t listened to the webcast, I cant say that much changed my mind. A couple of things were interesting, one was that they will be taking the cost cutting ‘as they go’ so to speak. BvB has clearly told his teams not to hurry FID opportunities and they will be addressed on a project by project basis so there will be more cuts dependent on the oil price. Secondly the resumption of the Arctic was rather peculiar, having back-burnered this last year it would have been easy perhaps to ditch it but the sunk costs are huge and the prize remains just tempting enough to roll the dice just one more time. Apart from this I was quite impressed under the circumstances, and if its tough for Shell then……………………..

Will round up on others on Monday after Chevron  but the market weren’t unhappy with Conoco who cut $11.5bn and Oxy who only cut $5.8bn.

Elsewhere Bowleven are in receipt of the signed Presidential Decree and now expect a transfer of interests at Etinde followed by gazetting and final receipt of the proceeds, not long now but lets see the moolah in the bank…

Its deadline day for Afren and the shares are up 22% at 5.12p………….who would have believed it? Best chance for shareholders is a bit of Seplat paper as bond holders are not noted for their kindness in situations such as this…

Nighthawk has announced two strategic JV’s with Cascade a local private operator, one will be a 50/50 JV where Hawk will pay for 6 wells at $2m each, 4 this year and 2 in 1H 2016, the other Hawk get 15% of the deal.

And finally…

We now know the identity of the opposition to Muzza and regrettably its going to be Djokovic but it may be a classic final, rule nothing out…

England beat India this morning for the pleasure of playing the Aussies in the one day cricket final, chasing only 201 England reverted to form by going to 66-5 but managed to get out of it thanks to Taylor and Buttler…

Its back to the Prem for the footy this weekend and probably the stand-out fixture of the season of Chelski v the Noisy Neighbours at 5.30 on Saturday afternoon.  If you didn’t already think the title was sewn up then all but a City win will leave the bookies paying out.. Elsewhere the pick looks like the HubCap Stealers hosting the Hammers, the resurgent Eagles host the struggling Toffees whilst the Magpies have a difficult trip to the Tigers and the Saints entertain the Swans.

Arizona welcomes the New England Patriots and Seattle Seahawks on Sunday in Super Bowl XLIX. Marshawn Lynch has been his usual chatty self this week after repeating the line ‘You know why I’m here’ 29 times in response to media questions. The reason of course is to avoid a similar fine to the one he received last year after refusing to speak to the media. Lynch and opposing running back LeGarrette Blount could be key figures in the game. It remains to be seen whether the Patriots will continue their passing game which has served them so well this season or whether they will employ similar tactics as they did against the Colts two weeks ago where Blount ran for 148 yards. Ultimately, the game is likely to be decided by how successful Tom Brady can be against a seriously strong Seattle defence.