Oil price, Shell/BG, Amerisur, Trinity E&P, Lansdowne, And finally…

WTI $53.98 +$1.84, Brent $59.10 +98c, Diff $5.12-86c, NG $2.68 +3c

Oil price

Resilient is the word that comes to mind with regard to crude prices as most influencing numbers are bearish. Take these stats for example, yesterday al-Naimi said that March Saudi production was 10.3m b/d, even higher than I mentioned yesterday, figures show that in the last week of March US imports from Canada were 3.3m b/d, the second largest number ever and the API stats showed a crude build of 12.2m barrels way above analysts guesses of 3.4m barrels. The only offsetting bonus was the tiny fall in US domestic production which to be frank is neither here nor there. Tonight’s EIA inventory numbers will probably not be as high as the API stats as they are catching up on the Cushing number but keep a close eye.

So, the oil price rallied during the day and closed near the highs, this morning, taking into account the stock data both markers have lost about a dollar a barrel.

Shell/BG- If you see Sid, tell him…

I will make a few brief comments about todays mega bid and add more after the webcast later. Readers will know that I have always said that BG wasnt too big to be bid for, primarily as although $70bn rules out all but the largest suitors, it breaks into bite sized mouthfuls for asset sale purposes. Actually Shell is going to assimilate most of the key parts of BG but the group treasury will have much to be getting on with as BvB has identified at least $30bn of assets up for auction. Add to that $2.5bn p/a of synergies and the ability to high-grade the portfolio and I believe that Shell have made a very smart move here. The bid plays to their strategy of concentrating on integrated gas and deep-water exploration and development and it is not in my view a bet on the oil price at least not primarily.

With disposals Shell’s portfolio will undoubtedly look better adding Australia and the Atlantic basins into the process and as has been mentioned replicates the Repsol deal on integrated gas. Finally for what it’s worth I dont think that Shell placed a very high valuation on Brazil, it just suits. The jewel in the crown will be the LNG business which combines two of the best operated companies in the sector and will be a powerhouse adding the Pacific Rim to Shell’s strength globally.

The numbers are quite compelling as well, 25% is added to proved oil and gas reserves and 20% to production and the deal is ‘mildly’ accretive to earnings in year to 2017 and strongly accretive after that. In addition, the group will have a strong cash flow engine and generate $15-20bn p/a which will cover dividends, a $25bn a year buy back and pay back the equity portion of the deal.

I could add much more but this will suffice, I think it is a smart deal that plays to Shell’s strengths, is cleverly priced and will likely deter counter bidders, barring a catastrophe on the oil price front this could be a very good deal, if you see Sid, tell him…


A brief word on Amerisur as I hope to have more tomorrow. After last weeks reserves data there isnt much to add in todays figures but a couple of things are worth pointing out. The Fenix impairment shouldn’t come as a surprise as the asset has seen little activity and there is no great forward programme, the oil price defines that call. Since the last figures the board have arranged an RBL of $175m led by Scotiabank which is at present undrawn, this appears very prudent, if an asset opportunity were to come along the financing is in place and done at a good price. Finally it appears that the remuneration committee has listened to shareholders and have trimmed the share options package announced a while ago, the new SID has taken soundings and revised the quantum and distribution of the package. More later and a discussion of the Ecuador pipeline which is now strongly scheduled for 2H 2015 in the next day or two but I remain very keen on Amerisur.

Trinity E&P

I will talk about Trinity tomorrow as time is tight today and it deserves a longer chat. The strategic review will cover all options after approaches have been made for selective assets. There will be a root and branch review and there will need to be a re-financing into the bargain especially after the reserves report inflicted quite a lot of pain. ┬áMore later…

And Finally…

Again very briefly, QPR nearly won again but a Benteke hat-trick made it 3-3, probably not enough for the super Hoops…

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