Oil price, Shell, Wood Group, FOGL, Pantheon, And finally…
WTI S45.94 +$2.74, Brent $49.05 +$2.24, Diff $3.11 -50c, NG $2.03 -6c
A meaningful rally yesterday but not much red meat to get stuck into, the Fed kept rates on hold whilst not ruling out a hike in December which actually strengthened the greenback, the bounce might have been higher otherwise. The EIA inventory stats also provided a glimmer of hope, albeit slightly clutching at straws. The build was only 3.4m barrels, lower than the whisper by 0.2m and importantly lower than the API number on Tuesday, stocks at Cushing fell by 785/- barrels which also helped. On the product front stocks fell by more than expected with gasoline down by 1.1m barrels and distillates by 3m barrels which is quite telling at this time of the year.
3rd Quarter figures from Shell this morning and the clean figure is all but obscured by some hefty write-offs. The number they are pointing us to is $1.8bn of profit which is some way below the whisper. The picture is pretty much the same as elsewhere with upstream being smashed and downstream putting in a good shift, operationally the company is in good nick and costs are falling across the board. Once again it is worth emphasising quite how important these cost savings really are, most of these companies are already fitter than they were at over $100 oil by some distance. Shell say that dividends are covered by operating cash flow at $60, gearing remains at 12.7% and production gains continue to be made. The BG deal is very much alive although write-offs for the Arctic and Carmon Creek are substantial.
Wood has cemented its relationship with BP by announcing a global subsea contract with the company over a five year period. No mention of value or more importantly margins but Wood have been remarkably confident lately on the mark-up front.
Falkland Oil & Gas
After last weeks announcement it did look like Humpback might be dry and today’s announcement of ‘non-commercial quantities of oil and gas in a number of sandstone intervals, including the main APX-200 target’ confirms that call. Whilst some faint hope cant be taken from the existence of a working hydrocarbon system I find it difficult to come to any other conclusion than further exploration in the south may be a long time coming. The operator also said that for ‘operational reasons’ it was not possible to obtain fluid samples from any of the hydrocarbon bearing zones in the well which is rather disconcerting. This is a massive disappointment for Noble and FOGL, summed up by the phrase ‘the reservoir quality was poorer than pre-drill expectations’ and that further work will be needed to fully integrate the well results, normally code for its all over baby blue.
This well won’t go down in history for the right reasons, massively over time and over budget and ultimately unsuccessful it may yield some interesting data for a geologist but not much more. Fortunately for FOGL they have other fish to fry and once demobilised the rig will head north to drill the Elaine/Isobel well albeit three months late. The cash position is more interesting, guidance from the company is that at the year end they will have enough cash to run the business for 2-3 years assuming no other commitments, and whilst I can’t dispute that they are hardly working from a position of strength. At 13.75p the shares still look expensive to me and on a value basis the way to play all that FOGL has got left, ie the North Falklands Basin, is surely through Rockhopper who have the asset and the discoveries that genuinely underpin its share price, and it’s got cash support into the bargain.
A short word about Pantheon as promised after I had a long chat with Jay yesterday afternoon. The stock price performance was very creditable with a sustained rally and closing near the highs of the day. Obviously some people in for the ride had to take profits which is understandable but I would be buying here as I feel that there is much to go for. The phrase that Jay uses is that they have ‘cracked the code’ here and indeed they have, this is about as good as it gets and the outlook is more than promising. With a market cap of a little over £100m this is now a stock for institutions and without doubt I consider that the risk in Pantheon is not being a holder, forget about it being too late to get in, this is just the beginning. When I get a few minutes I will do some valuations, my call some time ago, based on pre-drill P50 estimates being franked was 100p a share, that is going to go up, possibly by a factor, the Pantheon story certainly has some legs…
Last night in the Clueless Cup Middlesboro joined the other giant killers beating Man Who on pens, Klopp got his first win as the HubCap Stealers beat the Cherries. Also in the next round are the Noisy Neighbours who demolished the Eagles and the Saints beat manager-less Villa.
It appears that following a disappointing RWC Sam Burgess is considering folding his tent and heading back down under to return to the 13 man game. If that is true it will be bad on a number of levels, clearly Ford senior was right about him being a flanker not a centre but overall he is a great rugby player and would be a loss to England and Bath.
The Royals beat the Mets 7-1 last night to go 2-0 up in the series and winning their two first home games, winning possibly only one away game might be the key to this series.