WTI $48.17 -12c, Brent $57.54 +$1.15, Diff $9.37 +$1.27, NG $2.82 +9c
Brent performed better than WTI yesterday as markets worried about the EIA inventory stats due out after the close. In the end they were poor, reporting another stock build of 4.5m barrels not echoing the small but important draw from the API the day before. What was most interesting about the stats was that they came with a fall in imports and an increase of 1.2% in refinery utilisation which is almost impossible to do, I smell something afoot here and it’s not 12 inches…
Nasdaq have launched a new futures commodity market for oil, natural gas and US power as they see the CME and ICE taking almost dominant market share in an area where volatility and thus trade is on the up.
The market got the news late yesterday that India had landed a $1.6bn fine on Cairn after a long period of discussion regarding their tax affairs. Unfortunately I couldnt get on the 5.30 conference call but I imagine that it was fairly predictable, albeit more than irritating. I have to admit that I have called this one wrong, not on the fantastic Senegal play and its potential massive impact for Cairn but in under-estimating the impact of the attitude of the Indian Government for which I am mighty hacked off. In my defence I didn’t see India acting like a tin-pot dictatorship in a 1970’s African state but clearly they have decided to forgo any further inbound investment in oil and gas or any other industry, and there were we thinking that Modi was going to change the world – he certainly has done that.
As a result of this Cairn are clearly not able to sell any more of its Cairn India stake which slightly takes away its capital strength which was one of my cornerstones, but all is not lost and provided the company does not buckle the value will out in the end. Still very much on the bucket list…
SOCO has disappointed the market this morning on a number of fronts. The much smaller dividend than last year, even smaller than expected, has hit market sentiment but keeping guidance low and worse, writing down reserve numbers are more than this market can take. I had hoped to be at the analysts meeting this morning but might catch up with the company soon, there is much to hear from the management. The company remains well financed, the balance sheet has $166m of cash and first hydrocarbons from TGT H5 are expected in late 2015 so all is not lost.
Today’s announcement makes me understand why it has been almost impossible to get hold of the company lately and the call for a meeting of the note-holders ‘to make certain amendments to the trust deed’ will strike terror into the hearts of investors. The company want the removal of the Book Equity Ratio put option to ‘strengthen the company’s ability to negotiate with interested parties’ and think that bond holders will be happy to agree. Also in the statement GKP say that they are ‘exploring funding alternatives including an equity raise’ which wont come as a great surprise to shareholders.
This last few weeks has been a perfect storm for GKP just when things were looking up, operationally all is going well with both production facilities flat out and exports had maxed up making 2015 look very positive. Ironically when the threat of ISIS appeared to have diminished we clearly have underestimated the financial chaos that it would leave Iraq and the KRG in, a position that leaves some companies fighting for their lives. It is of no comfort to weary long term holders to see their magnificent asset effectively sequestered like this especially as Genel with its financial strength and DNO raising NOK975m into the bargain may weather the storm. Today’s action is I suspect, a way for GKP to hang on in there and bondholders need to ensure that this does not lead to further massive value erosion that has already had a negative impact on what is still a fantastic asset.
It appears that Shell is going ahead with its Prelude FLNG project offshore Western Australia which I have to say comes as no surprise…
And Total have, according to Reuters, sold their 80% stake in the Laggan-Tormore field in the Shetlands for around $1.5bn. This project has seen almost endless delays and holders of Petrofac have had to see value wiped away after an awful construction phase which has become their first loss making contract in the company’s history so no tears from them.
I have mentioned my Alma mater Wood Mackenzie a number of times in recent weeks as owner Hellman & Friedman put the Edinburgh based leading industry consultant on the market. With a number of offers around it was thought that they might go down the IPO route and get even more for the company but these markets are fickle and $1.85bn in the hand is worth more than $2bn the bush so Verisk Analytics are Wood Mack’s proud new owners.
Coming up in the next few days I will be writing a few words on Hunting who reported results last week when I was away. My compensation for that was a long one on one chat yesterday with CEO Dennis Proctor who as always had some interesting things to say about the service industry, some of which I will be able to share…
Finally I must give a big plug to the team at Vigo Communications who tonight host what is rapidly becoming the ‘must attend’ dinner in the energy sector from a team that in a short space of time has made big waves in the industry.
Not sure what to make about the game at Stamford Bridge last night but either way playing against 10 men, probably unjustifiably, for 90 minutes and going ahead twice shouldn’t end up with a Champions League exit, leaving the Noisy Neighbours and the Gooners flying the flag.
Tonight its the Boropa Cup where the Toffees are the last man standing and they host Dynamo Kiev.
Tomorrow England play Afghanistan in the World Cup cricket, if it is not overwhelming I think the blog will go off the air…