Oil price, Amec Foster Wheeler, Circle Oil interview link, Sundry-Kosmos-VOG- And finally…
WTI $46.32 -$1.58, Brent $48.58 -$1.96, Diff $2.26 -36c, NG $2.26 +1c
It was back to square one for the oil price as higher crude oil stocks and a strong dollar put the kibosh on any sustained recovery. The EIA reported a build of 2.8m barrels of crude although product stocks drew quite sharply. With the Fed seeming to point to a stronger economy the dollar was strong, particularly against the Euro, hindering any kind of rally.
Amec Foster Wheeler
Readers will know that I have been cautious on Amec since the Foster Wheeler acquisition, almost despite world market conditions, I felt that the deal smacked of overpaying for an asset that didnt pass the required tests. Today’s announcement is therefore not a great surprise, if only as the market is unforgiving at the moment and that drastic action is being taken around the industry. The good news is that underlying scope revenue is in line with expectations, albeit quite low expectations and that like most oil service companies cash generation remains ‘solid’. The order book has held quite steady but the company admit that trading margins are falling under ‘ongoing pricing pressure’ and cost savings are being made at an aggressive rate. The bad news for shareholders is that one of the cost savings is in the dividend, the 2015 final is to be halved and the 2016 number will be half the 2014 payout.
I fear that worse is yet to come and particularly in write-offs and impairment charges, at the year end there is little doubt in my mind that these numbers could be substantial, the result of buying a company at the top of the cycle. Amec repeatedly said on the conference call that they were ‘not immune’ from the effects of these markets, this is certainly true and whilst there are companies in the sector that offer some protection from the worst of the crisis, they are not one of them. A quick look at the charts is very distressing indeed…
On Tuesday I interviewed Mitch Flegg, CEO of Circle Oil on TipTV. In a wide ranging and open discussion about how he has found things at Circle and with his plans for the future of the company we covered a lot of ground, here is the link to the interview.
I took a look at the Kosmos statement that came out with the results on Tuesday and found it refreshingly upbeat. Andy Inglis is getting to grips with the organisation and operationally the key areas are performing well. In Mauritania the company have spudded the second exploration well, the market seems to think that success or failure is a straight call between oil or gas, the former would be highly significant, not just for Kosmos. Elsewhere TEN is 75% complete and on schedule for first oil in the third quarter of 2016 whilst at Jubilee production is approaching the capacity of the FPSO. Overall things are going pretty much as well as can be expected at the moment.
And VOG announce their 3rd quarter update today but as it is only a few days after their last update it is only the gas production that really counts. That is down sharply since the 2nd quarter as to be expected in the wet season but compared to the 3rd quarter last year the number of 8.2 mmscf/d is up 105% which is more positive news from the company.
A mixed night in the Champions League last night, my confidence in the Gooners recent form was misplaced as they got done 5-1 at Bayern Munich. Chelski came good and beat Dynamo Kiev 2-1. Tonight it’s the Boropa Cup and Celtic, Spurs and the HubCap Stealers are all involved.