Oil price, Repsol/Statoil, Petrofac, Circle Oi, President Energy, Sundry-Shell/BG-Vitol- And finally…
WTI $35.62 -$1.14, Brent $37.93 -$1.80, Diff $2.31 -66c, NG $1.99 -3c
Its squeaky bum time in the oil industry as the crude price has fallen every day since the Opec meeting giving the bears so much to write about. Fundamentally of course they are still correct with so much oil around and no sign of any end to the overflow. Add to that the Paris agreement and you get a healthy dose of liberal politics into the process as the end of fossil fuels is deemed to be in sight. Last night the BBC managed to find (funny how they have these people in their Rolodex) a commentator who said, all it really needs is to cut out coal and shale gas and close down the North Sea oil and gas industry to achieve our goals.
Well it may not come to that as I couldnt help noticing that almost all the people at the Paris conference were in possession of tablets and phones in abundance, indeed you could almost feel the fossil fuel powered adrenaline rush…
Back to basics and the rig count which gave the oil price a modest but much needed rally on Friday afternoon. Overall rigs were down 28 units to 709 and with oil down 21 at 254 we had the biggest fall since April and a 66% fall y/y. Now this isnt any sign of imminent US production falling , nor should people clutch at straws but at these levels a lot of discretionary production will come off the market, if it gets worse, which it looks likely too there will be more and not just in the USA. It is also worth noting that Natural Gas is now trading at a low, having fallen through $2 on Friday with no sign of cold weather yet, oil of course is getting very close to the December 2008 lows…
A sign of things to come surely as a decent asset swap has been announced encompassing the North Sea, Brazil and the Eagle Ford in Texas. Overall I suspect that with Repsol looking to dispose of assets worth over %5bn and cut costs into the process. The Eagle Ford bit is common sense as Statoil will operate better and cheaper with 67%, Brazil makes sense and the North Sea move is just good housekeeping.
Petrofac announces that through its customer support operation it has won contract extensions worth around $400m in the UKCS. A two year extension from Centrica in the Rough Field and a five year deal with EnQuest on Kittiwake make up the value and are useful additions to what is a strong current order book.
An operational update from Circle this morning which is better in the detail than at first glance. Operationally the two Moroccan wells are onstream and gas sales appear to being paid for in Egypt while the Tunisian farm-out is progressing, slowly I expect. The headline discussions regarding funding looked a bit more frightening than I suspect they are, talking about debt restructuring and an equity issue to ‘right size’ the balance sheet. The RBL re-determination is under way and it is not surprising that there is some shortfall given current oil and gas prices and production levels. Although times are tough in the industry and the market may not have expected an equity issue, the work being done by the new management team should ensure long term survival for COP.
An operational update from PPC this morning with good news, albeit at an early stage, of two workovers under way. Production during workover and stimulation programs has reached 175 bop/d, significantly above expectations, making a company record of 700 boe/d.With prices in Argentina of over $70 per barrel this is meaningful for PPC and there looks like there is more to come. We can expect on the back of these results a re-classification of some contingent resources to reserves with a subsequent positive effect on valuations. I am speaking to Peter Levine later today so may add more in due course.
Shell and BG have announced that the Chinese Ministry of Investments has approved the merger which completes all five of the country hurdles they needed. All that is required now is shareholder approval which in any other circumstances would be considered a formality, at this stage in the cycle it may take just a little more persuading…
In case you didnt see it in yesterday’s Sunday Telegraph there is a fascinating double page spread on Vitol, including a rare interview with ‘boss’ Ian Taylor who I can confirm is one of the smartest guys in the industry. When you consider what has been going on in similar companies in the commodities sector he is indeed a shining light.
Lots of footy action at the weekend and the Cherries, not content to have taken the scalps of the HubCap Stealers and Chelski added Man Who to the list on Saturday. Plenty of criticism lumped on VG but ironically they are still 4th in the table somehow. Gooners go top after a win at submerged Villa and the Noisy neighbours won with a last minute goal against the Swans. Spurs could have taken that 4th spot but lost at home to the Magpies whilst the Eagles and the Hornets chase European places with wins over the Saints and the Maccams respectively. The Hammers drew with the Potters, the Canaries drew with the Toffees whilst the Baggies nearly won at Anfield conceding a last minute equaliser that would have really annoyed TP. Top of the table Foxes against Chelski tonight…
In the Champions League, the Gooners have drawn Barca whilst Chels get PSG and Noisy Neighbours the choice pick of Dynamo Chicken Kiev.
The boxing was very entertaining with Anthony Joshua surviving the odd scare to beat Dillian Whyte and on the undercard Young Ewbank Jnr looked quite tasty.
Rugby action was worth looking at again and of course the new coaching regime at team England is being put together with a clean slate.