WTI $50.52 +93c, Brent $61.02 +$1.48, Diff $10.50 +55c, NG $2.71 +1c
Firstly apologies, my very short blog yesterday got lost to some addresses due to operator error, I was leaving early for a series of meetings. This meant that for some people the blog came twice, for others they will get two today! The main message from yesterday was on the retail US gasoline price update which you know I watch avidly, rising to $2.47 a gallon, up 14.1 cents on the week and remember it got down to $2.04 only last month.
Yesterday the current steady oil price continued, aided by the Saudis actually raising their official prices to Asia and the US which gives the impression at least of being able to increase tariffs without the fear of losing market share. Put this day down as one to note if we are near the bottom… Also the Glencore boss said that current volatility was great news for them and this year they would ‘shoot the lights out’ in the oil trading department.
With the API inventory stats actually undershooting analysts expectations for once, stock build was 2.9m barrels against estimates of +4.2m, there was reason for further optimism, lets see what the EIA numbers look like tonight.
Afren has crossed the Rubicon and by failing to pay the interest on its 2016 notes has admitted that it is now in default on that paper. The company say that it doesnt mean that it has cross-defaulted on its other debt but that is surely semantics. The argument goes that by saying that the ad hoc committee agreed not to take any ‘enforcement action’ the company can still negotiate with them and other parties for some sort of settlement. In this process Afren state that these negotiations will ‘substantially dilute’ the interests of current shareholders which has been my default position since we heard what a mess the company has got itself into.
In common with a number of E&P companies recently it has been hard going for President especially if you consider that they are working in a frontier area which has never produced meaningful oil. Having said that, and with the backing of Peter Levine and the World Bank, the progress that the company has made has been good, they have without doubt punched above their weight in the last year or so.
Today sees an operational review and a financing and at the moment the spotlight is turning back towards Argentina and the work programme on Puesto Guardian. This should realise the ‘significant opportunities’ with ten workovers and 17 new wells on the concession. They have also started the farm-out process on the large deep palaeozoic gas prospect at the Martinez Tineo field. In Paraguay the company will go ahead with seismic operations on the Hernandarias concession and the company has seen ‘encouraging levels of interest in its local assets from major industry players’ following work at Lapacho.
With the review comes a financing, a firm placing of 29.7m shares and proposed placing of a further 43.1m shares at 12.5p with 3 year warrants which kick in at 18.75p, as I said proper skin in the game from PL. As I said its been a hard ride and in very difficult circumstances but I still believe that the story stacks up even if it is very hard going at the moment.
Primeline Energy Holdings
Readers will know this TSX quoted Chinese gas play as I have written about it before, indeed, some time ago in a different universe I had the pleasure of helping out with some institutional visits. The Primeline story moves on and what we talked about then is actually happening now, the cash flow is coming in and with a good gas price and significant potential upside from the exploration portfolio the stock looks incredibly attractive.
These figures are for the three months to December 2014 and the cash growth is there for all to see. From a virtual standing start of 1 cent the cash was up to 22 cents at the end of the quarter, a figure that will grow strongly towards the end of this year. The company are guiding to EBITDA of C$60m this year which is about the market cap and therefore the exploration is in for not a lot. There aren’t any debt repayments until the end of the year and of course their development costs have been repaid in full. With the infrastructure in place and having been one of only two independents to successfully deliver an offshore gas field of such size the chances of further success must be significant, they might even farm-out some of the portfolio, after all they wouldnt want to raise equity here.
Given the model and the inherent value offered I would not be at all surprised to see some corporate activity from Primeline, the stock is very cheap and a big investor would be very welcome and would probably make out like the proverbial bandit, this is still one very much to watch…
I’m sure i’m not the only one that looks at a Bowleven announcement at the moment to see the words ‘the cash has reached our bank’ but today they teased us again with an announcement of drilling delays in Cameroon and Kenya. The Bomono permit drilling is imminent but the contractor has found some ‘mechanical and control issues’ which need to be sorted before the well can spud. In Kenya delays mean that the seismic programme wont be complete by the due date of 26/5/15 and the operator has requested an extension of the licence. Neither of these mean too much grief but along with the arrival of a net $170m drilling at Bomono would be nice to see…
Nice to see that despite falling profits last year at BP it did not stop the remuneration committee increasing Bo Diddeley’s pay and rations by 25% to $12.74m. The same body also increased the wages of the CFO by 41% to $4.8m or so…
Circle Oil has announced a double bad news whammy with the well in Oman having drilling difficulties that caused it to be plugged and abandoned, the other bit of the whammy is that is was a dry hole…
I attended the Falkland Islands drilling Capital Markets afternoon yesterday to hear presentations from Rockhopper and FOGL as the campaign is imminent. I will write the meeting up in the next day or two as there was a lot of information to digest from both companies.
It is pleasing, if slightly disconcerting to see so many eagle-eyed readers commenting on yesterdays blog. Due to a technical problem some people received the short tome yesterday as usual and those who didn’t got it this morning, making it look like I was a day behind. Baggies fans will wish that I was as they could rewind the clock and at least play a goalkeeper who could catch the ball. The legion of Villa fans out there as I came to find out this morning, are delighted to have picked up three valuable points and look forward to the same fixture in the cup at the weekend.
Elsewhere the managers of Hull and the Maccams brawled on the pitch and like the match, that fight was a draw on points even though Steve Bruce appeared to have a slight weight advantage.. The Saints just saw off the Eagles 1-0 at the end.
A big programme tonight of which the highlight is probably the Hammers v Chelski but the Noisy Neighbours host Leicester who need the points as much as Burnley who go to Anfield. The other London derby is the Gooners at the Super Hoops while Man Who go to St James’s ‘whoever is sponsoring us now’ Park.