Oil price, Shell, Caza, SOCO, Sundry-BP-IGas-Petroceltic- And finally…

WTI $44.45 -$1.78, Brent $48.47 -$1.13, Diff $4.02 +65c, NG $2.87 -12c

Oil price

Are we about to capitulate one might ask? Although the market has stayed remarkably stable for all of two weeks the signs are not that good, el-Badri continues to say that the pain has to be taken  before the gain but it might take one more shake out for the market to become more comfortable. Last night’s EIA inventory stats, although not as high as the API numbers the day before, showed a build of 8.9m barrels to nearly 407m barrels – a new record. The product numbers however drew over 6m barrels and with imports up and refinery runs up 2.5% indicate that total product demand is strong. What will happen when it’s time for the refinery maintenance season I wonder?

Shell

Today’s 4Q and final results from Shell offered the first insight into what the season is going to be like and maybe more importantly, how the companies are going to approach the new world of lower oil prices. Shell missed the consensus by a bit, although to be fair, forecasts have been coming down since the year end. Ironically, 2014 might turn out to be a historic one for RDS as this time last year saw a profit warning, accompanied as it was, by the BvB cuts which put the company some months ahead of the competition. Operationally it was a pretty good year too, cash flow of $45bn left $25bn of free cash flow and gearing fell to 12.2%. I might have more after con call this afternoon.

Shell are trying to tread carefully, weighing up the temptation to slash capex without overdoing it, in their words ‘stepping up the drive for greater capital efficiency whilst being careful not to overreact to the recent fall in oil prices’. They intend to cap organic spend at 2014 levels with the option to further reduce the number if market conditions worsen, a $15bn fall in capex over the next three years isnt actually that bad in the circumstances…

Caza

An interesting update from Caza that must please Mr el-Badri albeit in a modest way. Caza are in the middle of a highly successful drilling campaign in the Bone Spring play which has resulted in a number of very good well results and a significant increase in production. I mentioned in my last note on Caza that they are in the fortunate position of being able to hold their properties by production and therefore not lose out longer term by shutting in successful wells. Accordingly the company, whilst continuing to produce from some recent discoveries which provide ‘ a good return on investment even at current WTI levels’, can postpone some developments and not ‘lose’ profits for shareholders. Back to Mr el-Badri, he will be pleased to see production coming off but i’m afraid that as soon as the price rises this will come straight back on the market, quelle dilemma….

SOCO

There probably isnt a company more insulated against the current oil market trauma than SOCO with no debt, a pile of cash ($185m) and break even at oil prices ‘in the low$20’s’. With its capex programme fully funded SOCO can continue to talk the talk and is addressing costs, future plans and of course the cash return to shareholders is genuinely at their discretion. Of course this didn’t stop the shares being marked down by about 6% this morning but then as Warren Buffet would say….

Sundry

Bo Diddeley has been at the forefront of the oil price bears charge saying that it could stay below $50 for three years and accordingly more asset sales are the order of the day for BP. Today’s sales are however a tad more interesting as they are key pieces of real estate in the Gulf of Mexico, they are being sold to Chevron and they are ceding the operator-ships into the bargain.  With a price on half its positions in both Gila and Tiber according to the trade press of ‘a few hundred’ million dollars we are already seeing some bargains being knocked out, put some more Chippendale furniture on the fire to keep our shareholders warm must be the shout…no ‘overreaction’ here then. The words family and silver come to mind…

Although IGas shares are up 25% this morning to add to the 30% yesterday, I am reminded that that only takes them back to last weeks levels, such is the volatility of the market. The FT market report suggests that some sort of a tie-up with Ineos is imminent, whilst this may be accurate and has been alluded to in this blog often enough, (mainly as Jim should have bought Dart), would IGas sell any of their hard won portfolio right now I wonder? A moratorium on fraccing in Scotland might well concentrate the mind however, either way, as the price suggests this is probably no time to be short IGas stock and those ‘Sheriffs of the Aim market’ may have to retreat under their stones…

A very brief word on Petroceltic as I am going to write more ahead of the big vote but yesterday I attended most of the very lengthy capital markets day by the company. The detailed concentration on Algeria in particular was good, albeit reminding us of quite what a challenge it is going to be, but now that the process is underway some visibility is possible. The company did a bit of mea culpering as it were on exploration which is fair, it hasn’t been great in the last year or so and concentrating on Algeria and to a lesser extent Egypt is probably right at the moment. The other thing I have to mention is a classic piece of commentary by Zac Phillips of SP Angel yesterday in which he discusses governance issues with particular reference to one of the board members, no mincing of words by any means. As one who has written here about poor governance at this company before I would urge you to check it out and it makes for an interesting few weeks ahead of the AGM on 25th of Feb…

Also for those who only dip into the blog, here is the link to the bucket list from Monday   https://www.malcysblog.com/the-bucket-list/

And finally…

So, Spurs go through to play Chelski in the Clueless cup final, eventually dispatching the Blades who fought very hard all the way through. In the African Cup of Nations you have to feel for Mali and Guinea who will draw lots to decide who goes through after finishing exactly equal in the group stage.

And as Ravel Morrison signs for Lazio, ending service with another club for non-football related issues apparently, he becomes the first English player to play for the club since……you guessed it, Gazza, if only the comparisons were football related…

With the 6 Nations coming up I notice one interesting signing for next season as Geoff Parling has signed for the Exeter Chiefs which seems like good business to me.

And as I write, Muzza has just beaten Thomas Berdych in four sets to get to the final of the Australian Open, he looks to be in cracking form…

 

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