WTI $48.17 -$2.82, Brent $60.05 -$1.58, Diff $11.88 +$1.24, NG $2.70 -17c
Its the last working day of the month and whilst for Brent its been quite good, up 13% over the period, for WTI it has not been so much fun, indeed at $48.17 it is flat, only three cents higher than at the beginning of the month. This has had its effect on the differential which you can see is nearly at $12, as I have already said, one would normally start to think about taking action here in expectation of a narrowing of the prices of the two crudes but at the moment I would keep my powder dry. WTI will continue to be driven by stock levels in the States and I dont see them coming down in the short term, in fact with imports needed for some refineries, the strike if anything gathering momentum and domestic production taking a while to ease, it may get worse before it gets better.
Internationally the spike in the prices caused by the words of the Saudi Oil Minister were just that, another, familiar spike which is how it has been going lately. There is a mixture of production news, parts of the Middle East are still shut in for bad weather, Libya has not got back up to 100/- b/d yet and Statoil shut in Statfjord C after finding cracks in the flare tower, a modest loss but it did hit sentiment in the very short term. Of course all eyes will be on the rig count due out shortly but even gifted amateurs are now realising that A) Every swallow doesnt a summer make, ie a big fall is only good for sentiment amongst bulls but B) Even a big fall in the rig count doesnt mean that production comes to an immediate halt, watch for that lag effect.
I attended the Premier meeting yesterday which was notable for two things, firstly how smoothly it went and secondly that the place was totally rammed. I mean, assuming that there aren’t that many analysts covering the company there must have been many, many bankers in attendance as there were a lot of faces you dont normally see at these events. Whether they were there to keep an eye on their money or to consider splashing out a bit more I dont know but there were many unfamiliar names in the room of over 100 people…
As for 2014 we know that it was a pretty good one for Prems, they beat the production guidance and continue to do so, they sanctioned Catcher, refinanced well and got on with disposals whilst at the same time, when the oil price fall became clear they started to take positive action. In addition they have, again as documented, been more successful than most at hedging giving valuable protection for shareholders. We had a good presentation on Indonesia which is a model of consistency even at current oil prices, being protected by sound gas sales into Singapore a long way out. In Vietnam Chim Sáo has been a great success and despite some worries about production and revenue falling has incremental production potential to arrest any falls. As for Sea Lion we all know that is going ahead under changed configuration, adapting to the lower oil price but the upside in the Falklands is in the drilling programme about to go live next week. I will be writing much more extensively on this after the FI Capital Markets Day next Tuesday so more then.
Overall I still feel quite positive about Premier despite the rigours of the current oil price, admittedly all bets are off if we go to and stay under $50 oil but at present I am more concerned about other companies who are not as strong as this one is. Indeed, certainly on the asset front, should anything distressed become available I feel that Premier are still in a position to take a good look.
A couple of things have popped up this week and until I have spoken to the companies I cant add much. Gulf Keystone has had a busy few days with a plan to possibly sell the business and the receipt of funds as well, as and when I get a grip on particularly the latter I will write more but I hope they aren’t a forced seller at what I consider to be the wrong price…
I talked about Caza recently regarding the Yorkville note which I am not mad about but the company have given me reasonable confidence that it was the best way of approaching current funding. I am hoping to talk again soon with them about the terminating of the Clayton Williams deal which had looked good but again, in current markets probably needed to be ‘tweaked’ terms-wise which the vendors wouldnt do. More on Caza on Monday I hope.
Finally, Tangiers Petroleum has changed its name to 88 Energy Ltd which sounds like something you see on the front of a footballers shirt advertising who knows what but I suppose it is another roll of the dice with other peoples money after all…
Missed yesterday but had to mention the Gooners performance v Monaco, I had said it was a bye but didn’t mean it quite like that, they can still go through…Muzza lost to a teenage Croat and whilst on Scotland, their cricket team lost to the Afghans which was almost worse than losing to England, I said almost...
Last night in the Boropa Cup it was another bad night as Spurs, the HubCap Stealers and Celtic all went out leaving the Toffees left to hold the flag in the competition. Footy this weekend has the Clueless Cup Final between Chelsea and Spurs and in the Prem the big game may be the Noisy Neighbours at Anfield, the Toffees at the Emirates, the London derby between the Hammers and the Eagles also look good, not something Man Who did last week, tomorrow they entertain the Maccams which puts the Chairman of Ofgem up against his former colleague!
More importantly there are Rugby Six Nations matches, none more relevant that England visiting Ireland but Wales in Paris will be interesting and what might be the Wooden Spoon decider between Scotland and Italy…
Also cricket with England playing Sri Lanka, this morning South Africa posted 408-5 against the ‘mercurial’ Windies who collapsed under the pressure of replying to that formidable total.
Finally there is some boxing with Carl Frampton fighting Chris Avalos whilst in London we have Tyson Fury and Chris Eubank Jnr on the card.
Malcy, I just can’t get my head around why you like caza.
They’ve used virtually all of the Apollo facility to get to just over 1000boepd
A $42m debt to service on a declining 1000boepd, only around half hedged till next year.
The fact they went to Yorkville (lender of last resort)shows they are desperate, I suspect they have taken this loan in order not to breach liquidity covenants.
In the current environment CAZA is a train wreck not an investment.
I am reviewing my recommendation at the moment, i have spoken to the company twice in the last week and plan to again this afternoon. In line with your concerns i think that without adding barrels and having to shore up defences you may be right, i could have got this one wrong and may have to cut it.