WTI $56.99 -16c, Brent $64.83 -45c, Diff $7.84 -29c, NG $2.49 -4c
A quiet day in the oil market as traders report little movement leading to classic price drift. A few pointers though, the Saudi Deputy Oil Minister was speaking in Beijing where he made two points, firstly that the oil market is apparently in ‘excellent’ condition and secondly that China need not worry about being short oil, they would satisfy their every need. Short oil is not what the ICE is reporting as their data yesterday showed that another new record has been set in terms of speculators going long Brent crude oil. Far be it for me to suggest anything but it may just be that the traders are a bit early to the party, if they are the words tears and end in, will come to mind.
There is also a slight concern that the API inventory stats might show another build when they report tonight, if so then we really aren’t out of the woods yet, certainly for WTI. Finally my old friend the US retail gasoline price is picking up again as predicted here recently. Figures from the EIA yesterday show that the blended US price rose by 8.5 cents a gallon on the week to $2.57 which is still $1.14 lower than a year ago but well off the February low of $2.04.
Under the circumstances a perfectly reasonable set of quarterly numbers from BP this morning. $2.58bn beat the whisper comfortably and although there were a lot of funnies that can only be expected at the moment. Upstream was predictably poor but not dire and as I mentioned yesterday downstream did indeed show ‘a stronger environment’ with refining margins in quite good nick. All the usual spiel such as ongoing divestment programme, resetting capex and addressing costs which are taken as read at the moment. BP has risen strongly so far this year and is a pound of the bottom having outperformed Shell who have been punished for the BG bid by the market. With the Shell figures on Thursday we may have an opportunity to assess how things are going there and it may be the best place for loose change at the moment.
Finals today from Sound Oil and also an opportunity to catch up on strategic views and progress in Italy and beyond. The backward facing stuff is in line with expectations, production is growing in Italy and revenues ‘largely’ cover costs there with Rapagnano in for a full year and Casa Tiberi in production. Nervesa has spudded and is expected to add substantially to cash flow, investors, analysts and the press are visiting the site over the next few weeks which will provide more news flow.
Badile has its EIA and farm-out negotiations continue, I still have a potentially very large number in for this exciting part of the exploration portfolio which still gives Sound a good deal of upside potential. Elsewhere, progress is being made at Laura and a potential farm-out is being considered at this ingenious step-out from onshore to offshore drilling.
The most interesting thing about this announcement is on the corporate side where Sound is very much doing what it said that it would by building a mid cap Mediterranean oil and gas business. With Italy undoubtedly delivering the goods in all sorts of ways the management have certainly not been idle as the statement shows. The company has ‘various transformational transactions’ which include a strategic partnership with a major oil and gas company to ‘fund and technically develop a selection of Sound’s assets’, a farm-in to a southern Mediterranean onshore gas discovery with v significant estimated reserves and exploration upside as well as continuing to consolidate in Italy including the acquisition of various onshore exploration, development and production assets.
So, the management havent been standing still and this demonstrates the credibility that they are showing in the sector as evidence for example the reach out to Antrim shareholders who must be kicking themselves for being loyal to their own spendthrift management. Despite the strong performance of the shares, the company remains right up there in my bucket list of stocks to invest in in this difficult market, stay with this one for the ride.
Another bucket list stock and one which hasn’t done quite so well but the recent bounce is pleasing as although this is a longer term play all is looking set fair for Velocys. Finals today which for this company are even more superfluous than almost any other but 2014 was a very good year as they put together the building blocks for the long term. Positive news flow included at GTL JV with Waste Management, NRG and Ventech and the first commissioned plant under construction in Oklahoma which will be commissioned 1H 2016. The company raised £52m at 225p from their highly supportive blue chip shareholder base which leaves them with cash of £59.8m on the balance sheet.
Velocys is a very interesting play in smaller scale GTL which despite the difficult environment has strong support from its partners and shareholders, I expect more positive news flow and will report further after the next time CEO Roy Lipski is in this country although its possible I might see him on my forthcoming visit to Houston.
Faroe has announced that it has spudded the well on 6407/8-7 which is called Bister and is close to 2013 discovery Snilehorn which looks very interesting and close to the nearby producing Njord field.
Following from yesterday’s Kosmos announcement the shares did eventually start to make some ground after their very exciting discovery in Mauritania rising 10% on the day in the end, not bad on a $3.7bn market cap company… It is worth taking another look at Chariot Oil & Gas who also have significant acreage in the country and in their case it may be more oily….
It’s a big up to Bournemouth who sealed their promotion to the Premiership last night, this is a real rags to riches story as the club were teetering on the edge of financial disaster and expulsion from the League altogether only 6/7 years ago. Fans in the 11,000 capacity ground will surely love welcoming the Premier League sides next year so its a great day for the Cherries.
Tonight sees the HubCap Stealers play their game in hand against the Hull City Tigers who have a dreadful run-in. Interviewed today on the 25th anniversary of winning the top league Brendan was very positive that they will be challenging, if not this year then very soon.
Haven’t mentioned the snooker yet as it lasts for weeks but as we head towards the bank holiday weekend the quarter finals are taking shape with Ronnie O’Sullivan, Shaun Murphy, Judd Trump and Neil Robertson reaching that stage.