WTI $47.51 +6c, Brent $55.11 -81c, Diff $7.60 -87c, NG $2.79 +5c
No blog yesterday as I was reading the Plexus statements…actually out meeting some of my favourite companies to be expanded on in due course.
The oil price is in a sort of limbo, dictated as I have already mentioned by the ups and downs of the greenback. Yesterday saw the usual mix of news, the API stats were welcomed as they showed a build of only 4.8m barrels, should the EIA numbers tonight be less than the consensus of 5.1m barrels the WTI price will probably stage a victory parade. Still on the positive front the US data was good with new home sales up 7.8%, the highest since 2008 and the manufacturing PMI was also at a recent high.
On the less good front a couple of pieces of news from the Saudis, March production nudged 10m b/d, up 350/- b/d on February so clear signs of market share preservation being exhibited here. Secondly the rig count numbers in the US are falling rapidly but take a look at the Aramco numbers to give you the jitters…At present there are 212 rigs operating in country which is up 2 on the year end and for comparison in 2013 there were 150 in use, no slowdown here…Finally Japanese crude stocks are reported as being 82.87m barrels which is down 8.7% y/y.
I mentioned as long ago as the Petrofac numbers day that impairments and write-downs would feature heavily in the results season and as we draw towards the close we seems to be seeing more. The Bowleven figures today include a $76m impairment for the oil price and following the farm-out Etinde is being written down to a carrying value of $225m which has slightly spooked the market this morning. Apart from that almost everything is good as per my note last week when the money finally went in and the farm-out completed. Form here on all is about drilling with two onshore wells due on Bonomo which have been delayed by poor maintenance. Given that these wells were due to spud at the turn of the year this is indeed a disappointment but I expect the ‘drilling’s getting cheaper’ mantra to be wheeled out before long. To think I took a lot of stick for suggesting that it wouldnt spud in December…On Etinde the new consortium is assessing all the data and the hope is that two wells will be drilled here starting this year too. BLVN is a bucket list stock as it ticks a number of boxes to make it qualify, two of those ticks, ie good management and potential exploration success will determine what the future holds, the third tick is that there is more cash in the company than its market cap, how that is made to work is the final piece of the jigsaw…
Neither a shock nor a surprise today as Petroceltic and Hess decide to exit Kurdistan after what seems like a cataclysmic drilling process that has ended in failure. Reading through the list of excuses is actually quite fun although I expect there were few laughs at Hess HQ. They cited amongst others, it being very high (no oil found higher ever?), it being very snowy (no snow in Alaska then?), remote access (I’ve seen Exxon’s PNG set-up, that’s bad access), operational problems (ask GKP about that…) and a number of down-hole issues. At the very end they say that apart from all that the Jurassic target was uncommercial which is much easier to understand. PCI are spending another $7m in 2015 and the total write-off for the Kurdistan adventure will add up to $125m, as the CFO says at the end of his nice letter, have a good day….
Yesterday was interims day for Plexus and you receive an award if you managed to plough through the statements from Chairman and CEO. Having written up POS after the recent trip there is little more to add, the 25% increase in EPS and the 6% upping of the dividend tell the story and the order book is in very good nick indeed. Talking of the order book, the company announce today that they have received more business in the shape of a purchase order from Centrica for the supply and rent of a new product, POS-SET connector for use in abandonment. Centrica will use the kit on a gas well which is 32 years old offshore Holland and this is the first step into this potentially lucrative market. Still very happy with Plexus as it is weathering the oil price storm better than most, as ever the limited free float make the stock seem expensive by comparison but it has a certain unique attraction that should continue to deliver the goods.
I mentioned Pantheon recently as the lack of a promised rig contract was beginning to look concerning, today the company say that the very poor weather in East Texas (taking a leaf out of the PCI excuse book…) has meant that it has been impossible to get onto site, in addition one doesnt want to pay any more days than it has to. The statement today indicates that drilling is likely to be within 2-3 weeks, I presume assuming no more bad weather. The first well to be drilled has moved a bit but the primary target is still the Woodbine/Eagleford sandstone and the secondary target remains the infamous Austin Chalk. The second well will follow on immediately after and thus we have potentially a very exciting time for Pantheon. If you want to hear more about it I can recommend you take a look at the interview I did with CEO Jay Cheatham who is both knowledgeable and enthusiastic, can be found on www.malcysblog.com
Faroe had figures yesterday and as this is too on the list I went to the presentation to see how things are coming along. Overall things are very much as expected although the impairment issue raised its ugly head again, as did the exploration write off. The former was £38.5m pre-tax of D&P assets and the latter was a £131.7m write-off. Primarily oil price related but with some tax reasons sharing the misery, at least it ensured that Faroe did some prudent portfolio management keeping the prime prospects at the front of the queue.
Elsewhere Faroe managed to deliver 2014 production of 9/- b/d, at the top end of guidance and for this year the number of 8-10/- b/d is how you say, taking no risks. With rises in contingent resources and reserves, notably from the Pil and Bue discoveries the position looks very strong and the upside could be enhanced by drilling this summer. The drilling programme is fully funded and is underway already with the Shango well spudding on 16th March. Over the next few months there will be a well on Bister and the two Pil follow up wells, being Boomerang and Blink which will hopefully upgrade the reserves substantially.
Faroe remains in a very strong position compared to a lot of its peers, the Greater Njord Area is one of growing strategic importance, with new discoveries close to existing infrastructure which may well be highly economic, others will drill in the area too backing up Faroe’s optimism. Being financially robust even at lower oil prices and with cash flow maintaining balance sheet strength also puts the company in a strong position to participate in potential M&A deals on their own terms. I remain confidant that Faroe is in a strong position with good exploration upside over the upcoming drilling season and it remains in the bucket list.
Two slightly differing aspects of being a US exploration company at the moment in todays trade press. You will remember that Whiting announced recently that is was exploring all potential opportunities which might have led to a bid for the company. It looks a bit like no one turned up with a cheque book, at least not with a suitably fat wallet, as they have announced that they are doing an old fashioned equity and debt raise. It seems as if they will pick up around $1.4bn of equity money and $1.15bn of debt in this process but it may not stave off the inevitable…
Over the road at Linn Energy the situation is slightly different, here apparently, Private Equity player Quantum Energy is providing the company with a billion dollar warchest to go out and buy some distressed assets, no shortage of them I would think…
And a new kid on the block in London today as Highlands Natural Resources makes its debut on the main market. CEO Robert Price, ex San Leon and Palomar intends to develop an 80/20 model with the 80 being production and the 20 being exploration. Here too the company say they are looking at distressed and cheap assets in oil or gas and are looking everywhere, the statement says the USA, the EU, East Asia, South East/West Africa, you name it they are looking there. The CEO has put up £600,000 of the £1m raised so he is certainly aligned, watch this space as they say…
A bit thin on the ground for sports news, often the case when we have these dreadful international breaks. But for followers of carnival football the Scotland v Northern Ireland friendly is not to be missed…
The Cricket World Cup is nearly over and as I watched the highlights of the NZ v SA game last night I nearly cried. There was so much aggressive and explosive cricket from batsmen who left all their inhibitions in the dressing room and played with abandon, I hope that the English selectors watched and felt appropriately embarrassed. India v Australia in the early hours of tomorrow.
Still on cricket I couldnt help noticing that KP has signed for Surrey in order to try and keep his side of the contract and make a shed-load of county runs. Who knows if he will or not but along with the other young lads like Jason Roy and the wonderful Sangakara, the Oval might be the place to be this summer..
And the good news from Davis Love 3rd is that Tiger Woods is determined to make the US Ryder Cup team which means he will probably use up a wild card and still not make much of an impression…