WTI $42.50 +27c, Brent (October) $49.19 -44c, Diff $6.69 -30c, NG $2.80 +1c
Brent expired on Friday and is a touch easier this morning, it has fared better than WTI which is nearly a buck off today at $41.79 showing a two dollar fall from this time last week. The Baker Hughes rig count showed a rise in oil rigs for the sixth successive week, albeit by only two units but still the fall has definitely been arrested. The CFTC data showed that net long positions in WTI actually fell on the week by 21,250 lots to 225,843 lots.
Two other things have cropped up, firstly the advocates of US oil exports are feeling a step closer to their goal at the moment as the US Commerce Department has announced albeit quietly, that it intends to approve oil trade with Mexico. The man to read up on this is the eminent Dan Yergin who eloquently makes the case for ending the export ban. Secondly the Iranians continue to keep the pressure on Opec and oil markets by saying at the weekend that ‘Opec production may hit a record after sanctions are lifted’ which is fair comment if you merely add Iran’s potential to current output but it’s not as simple as that for a number of reasons.
The summation of all that is still undeniably bearish particularly if you add the other factors such as refinery outage, now added to by an Exxon unit down and of course Labor Day is only three weeks away and the charts particularly for WTI look awful…
As you will know Lamprell has been very much a favourite since it was obvious that Jim Moffat really did know how to get to grips with the mess he inherited and in only two years he has not only turned around the company but restructured it in what is a difficult market place to say the least. From a nadir of 61.25p the shares saw 178p when others in its sector were being decimated and even now are around 130p.
So, the announcement on Friday that he was to retire in June 2016 after three years in the post of CEO was a significant disappointment as I genuinely believe that his plan for Lamprell is only part completed. Although he is staying on until next year, the company has announced that John Kennedy is to become ‘Executive Chairman’ until then which always leads one to try and determine who is really running the show. It is a good thing that JK is such an experienced operator in the sector but you couldnt put money on Jim staying the course. The second part of the statement is rather more concerning as it says that he will be in the position ‘as the company refreshes its strategy in the light of the current market environment’, apparently the current strategy was designed ‘in better times’ and that the board is merely checking it is in the ‘right path in the current environment’.
This announcement certainly raises more questions than it answers and with the company not taking calls on Friday, or indeed until the interims on Thursday week, it leaves things rather up in the air. The analyst visit expected this autumn is now apparently not being considered until next year which means that there can be no tyre-kicking or speaking to people on the ground for the foreseeable future.
Investors have done better in Lamps than in many oil stocks, particularly in the sub-sector in the last couple of years and I had expected this out-performance to continue as Jim’s game plan was rolled out. Also given the company’s relationship with Dynamic Industries, I was expecting serious work from the Saudi Aramco long-term agreement which Dynamic are in. Right now I dont think I have any option but to suspend the recommendation on the shares at least until the end of next week when I hope that we get a good opportunity to meet with the CEO and the Executive Chairman who hasn’t historically done investor stuff. Will we hear that the addressable market is still good and that Lamps are on target to be on plenty of bidding short lists, or will we hear that the inevitable competition and price cutting might threaten margins? Watch this space next thursday when the company has chosen to release its numbers on the same day as a number of other sector heavyweights, I wonder….
If you had asked me a couple of years ago if I would be still writing about Ascent today my answer would undoubtedly have unlikely been printable. Today the company are asking shareholders for permission to issue and allot shares to the value of £1.5m without pre-emption rights. In addition they have said that the CEO is ‘in the redundancy process’ which probably comes under the full and frank description of his current job prospects. The shares have responded by falling 36% giving them a market cap of £2.3m which in the context of what they want to raise is more meaningful than words can say. Ascent is yet again defying its name, just how long will it be before it becomes Crash Landing Resources I wonder?
More leaks from DECC have led to articles about Fraccing and licence awards appearing in the press, I can commend Emily Gosden in the Telegraph who says that 6,000 square miles of England is earmarked for the process. Expect the round to be anytime soon and the process to be focused on the Bowland Shale in Lancashire, Cheshire, Yorkshire and Lincolnshire according to the Telegraph…
Tomorrow sees the start of the reporting season for the UK quoted oilfield service companies as Wood Group delivers its interims and has an analyst meeting. We know that the second half will have been the worst so far as seen by the end of period trading statements and it is unlikely that anything will have got any better since then. It will give us an idea as to whether the companies are digging for a continued bad time in the second half and whether the cost savings are enough, the US majors were after all,relatively upbeat under the circumstances.
And finally, after a rather peculiar show of turkeys voting for Christmas at the Trap Oil meeting the resolutions were all passed and as of this morning the company is now Jersey Oil & Gas, all they need now is some money…
The US PGA unsurprisingly didnt go to the choker but to Jason Day who won with a record 20 under strokes, he now joins the brigade of youngsters who will be a lot of fun to watch on the circuit in coming years.
And Muzza must like this impending fatherhood as yesterday he beat Djoko in the final of the Rogers Cup, that he held serve after 6 break points in the final set shows some steely determination.
In the football the big game over the weekend was Chelski going to the Noisy Neighbours where they lost 3-0. After the game the chosen one said the result ‘did not reflect the game’ which is probably right, it might have been 8-0…After other games only the Red Devils and the Foxes have 100% records although the HubCap Stealers could join them tonight as they host The Cherries at Anfield.
In rugby the warm up games for the RWC are fully under way and I note that The All Blacks rather took apart the Wallabies in the Bledisloe Cup which probably isnt a warm up match… England beat France and the Burgess v Slade argument is not proven yet, I have to say that I was impressed by both players and choosing only four centres is going to be hard going. Elsewhere Ireland beat Scotland and the Springboks beat the Pumas.