WTI $31.20 +72c, Brent $31.03 +72c, Diff +17c, NG $2.14 -13c
Another short blog today as there is precious little company news but one should report on the oil price taking another caning this morning. The -very- brief respite yesterday has been ended by the rumour that sanctions on Iran might be lifted sooner than expected. UN inspectors are reported to have watched as the Arak reactor is being made safe by the pouring of much cement into the core. Quite how much oil Iran could put onto the market is a moot point but at this stage it is really just adding fuel to the flames, if you get my drift. Apart from the stored crude, which might be as much as 50m barrels (half a days world usage), how much might they realistically bring on and when? I suspect that around 250/- b/d may be possible but the 1m b/d they claim could be a long time coming. Either way it is not good for the market and extends the time when Opec are in control again but that time will come, my figure of $300bn of capex cuts is now out of date, WoodMack have leapfrogged me by increasing their number from $200bn to $380bn. There are many people who havent realised that when these projects would be due to come onstream demand wont just have gone away….
The Premier E.ON deal announced on Wednesday has been picked over by most but the market can’t deliver its verdict until the shares return from suspension. The deal is a reverse takeover, who would have thought that a $120m deal would be such only a few days ago? To be frank I think the deal is, in itself, entirely rational and sensible, indeed what one might call a bread and butter transaction for the company. However, as the short sellers found in recent days, they could make out like legal bandits merely mentioning the ‘C’ word, in this case as in covenant. So to me the deal was actually a better signal from the company that things were not desperate and it is business as usual at the company. The new phrase used in this deal is surely going to become part of the industry lexicon, it is ‘covenant accretive’ so there.
The assets acquired are fine without being such to write home about, being operator of Huntingdon is going to change things apparently and there is immediate cash generated production. In the trading statement guidance for last year was adhered to at 57.6/- b/d and with 15/- extra barrels guidance for 2016 is 65-70/- which indicates a leak, especially if you add Solan which is late and inefficient but will appear in February. Catcher is on schedule and budget and Sea Lion as discussed in the note on RKH is actually looking promising. The usual stuff on liquidity with cash and undrawn bank facilities of $1.2bn remains and there is covenant headroom of $900m although the banks have to approve this deal.
Premier had to do something and in my view this is as good as any, apart from anything else the short sellers had to be stopped, whether this has happened will be revealed when the quote is resumed, any bets on the first price?
Statoil has paid $539m for an 11.9% stake in Lundin Petroleum in a deal that escapes my version of logic. Why not go buy any of the billions of dollars worth of immaculate assets up for sale out there? This smells of the return of the Investment Banker, after all, who else would be able to dream up overpaying for assets on such a grand scale at such a point in the cycle?
More interestingly, look at American Energy Partners who have tucked into a modest slice of Argentina’s Vaca Muerta, an old blog favourite. Now, nobody knows whether Aubrey McClendon is on the spot here but if her is then go and take another look at blog favourite Andes Energia who have an enviable position in the rich shale and much more cheaply….
The big game in the Prem this weekend is surely at Anfield where the HubCap Stealers host the Red Devils. Having used up all their January Goals, Man Who may struggle but then both teams scored three last time out… Elsewhere the Foxes are at Villa, the Gooners host the Potters, the Noisy Neighbours have the Eagles round and the Happy Hammers go to the Magpies. Chelski host the Toffees, the Maccams go to White Hart Lane and the Saints host the Baggies.
The cricket looks like a low scoring affair and as I write England are 30-2 chasing 313 which might not be a bad score…
And what a surprise, at 35 years old and of course no money worries at all, David Haye is returning to the ring, starting with Aussie Mark di Mori. What tells you everything about this is that it is going to be screened on the Dave channel, known for old repeats…
Finally, Happy Birthday Holly, have a great day and go on, suspend the marathon training for the weekend!