WTI $33.07 +92c, Brent $35.29 +88c, Diff $2.22 -41c, NG $1.71 -7c
Three days since the last blog, a number of early meetings and travel have kept me away from the desk so I will do a whirlwind round-up if I may.
The oil price is up a couple of bucks since Monday for no particular reason, traders tell me there is a surfeit of hope over actualité with which I concur. On Tuesday I read an article in the FT by Professor Nick Butler which started with the phrase ‘the Saudi’s blinked’, someone somewhere needs to smelling some coffee and then reading a transcript of Ali al-Naimi’s CERA conference speech. Nothing could be further from the truth and the FT carried an excellent letter afterwards picking many holes in the good Professors workings. In the CERA speech the Minister said that the Saudis had tried to bring Opec and non-Opec together but they had ‘no appetite for sharing the burden’ and that ‘no one delivers even if they say they will’. Cutting production ‘ is not going to happen’ he said, hardly blinking in my eyes, as it were…
The inventory stats were mixed this week, the API showed a build of 7.1m barrels which didnt look clever, so when the EIA numbers came out as only a build of 3.5m barrels it was a triumph. Indeed if you add a 1% fall in refinery utilisation and a draw in gasoline and distillate stocks you can understand why things looked a bit rosier.
Today sees the G20 Finance Ministers meeting where more action is apparently to be decided, whilst there are elections in Ireland and Iran. With slightly better economic data from the US, led by a rise in durable goods orders in January things may be looking up. The final straw to be clutched at by the oil bulls was the announcement that the Venezuelan oil Minister will be topping up his air miles in March by having further meetings with Russia, Saudi Arabia and Qatar, if I was him I would read the transcripts of the CERA conference and stay at home.
The hair shirt was being well and truly worn by the Wood management on Tuesday, a paired down virtually black and white presentation ( the coloured values having gone west) the use of the broker’s meeting room saving hire charges of the Lincoln Centre were all meant to make us realise that the company meant business. In fact the only extravagance was the 10% hike in the divvi but then that was a promise. Wood turned in perfectly respectable numbers under the circumstances, $320m and 21.4p of pre-adjusted profits and earnings were in line with guidance, something that isnt on offer at the moment. Upstream and subsea were flat, or down depending on the nuance of the language and PSN suffered ‘significant volume and pricing pressure in US onshore’ I think they meant lack of volume. But, the good bits wooed the market, good cost savings, some margin retention and even some cash for acquisitions ticked a number of boxes and the price rallied, the chart looks quite good. It’s not good out there at all and I guess that the favourable price movement was a sort of relief rally, others will do worse.
Wednesday was Petrofac day which I followed from Glasgow but $440m of net profit was in line with guidance and there were fewer impairments than I had expected. Indeed although relatively positive on PFC they they too ticked a few boxes, debt of $686m was way less than I had expected for one. Laggan-Tormore losses havent been done with yet but must be almost over, whilst at long last it looks like the sailaway of the FPF 1 is really going to happen in Q2, did the wallet warmer actually work? Elsewhere the order book is a very healthy $20.7bn and will cover revenues for some time to come and with margins ‘consistent with guidance’ profits too by the looks of it. The shares have been good this week, up 20% from the lows and having had a 50% retracement from the 1001p peak look good enough on the charts.
The bad run of luck with the drill bit continues for Faroe as the Kvalross exploration well in the Barents Sea has come up dry. However this well, inexpensive to Faroe already came in significantly under budget mitigating the bad news.
Yesterday saw the Premier results which can be characterised by mostly good delivery on their targets with only Solan and the debt pile to really complain about. Production of 57.6 kboe/d was above guidance and for this year analysts are being directed towards 65-70/- which should be easily achieved with Solan and E.ON production. Solan delays are down to the bad weather but within sight of the line and Catcher is on track for first oil next year and is under budget.
In the Falklands it was a very good year for discovering oil and Zebedee and Isobel Deep proved up significant resources further increasing the potential for Sea Lion. Overall the addition of 132m barrels of P2 reserves from the Falklands, making 332m barrels should not be underestimated, Sea Lion in all its phases is, subject of course to the oil price, going to be a major part of the portfolio in due course. I can understand that they should be cautious about its development, but the project economics have been enhanced significantly, particularly as it seems to me that they are already carrying cost estimates that will be reduced in a big way thus appealing to the potential additional partner Premier are seeking.
It is a given that the market will be concerned about the debt and the management are also cognisant, ‘it is our primary focus going forward’ which is good but there aren’t that many ways that they can reduce it, some asset disposals continue specifically within the E.ON portfolio and Pakistan but can only add so much and the latter may not be much net sum gain. With costs cut and apparently much more to come, Premier does have attractions particularly to those who like the leverage and with costs ‘re-set to a sub $50 world’ should be able to prove up its valuable portfolio.
All appears to be moving on nicely for Sound at Tendrara onshore Morocco. The rig for the first well has been mobilised and will be on-site in early March whilst the final approval for the first and second wells has been received from the Moroccan National Environmental Committee. As previously announced work is already under way on-site and the camp and the well pad areas are on schedule.
This morning Worldview have made an all cash offer of 3p a share for Petroceltic. There is no comment yet from the company but I suspect that the publishable words will be like, derisory and unacceptable. Off the record it will be more terse and not surprising as Worldview have done little but destroy value in the company by their actions in recent months. Ain Tsila may be needing more capital which PCI are again endevouring to source but it is surely worth more than the ludicrous and time wasting offer tabled this morning.
Another huge weekend of sport coming up, last night saw all three English clubs through in the Boropa Cup (News in as I publish, Man U get the HubCap Stealers…!) and Sunday sees the Clueless Cup final between the HubCap Stealers and the Noisy Neighbours.
In the Prem the big game is…..obv the Leicester Foxes against the Canaries but almost as big will be the Gooners going to the Theatre of Dreams…The grudge match will be Big Sam taking the Maccams to Upton Park whilst Spurs host the Swans. The Eagles go to the baggies, the Saints host Chelski, Villa are at the Potters and the Hornets entertain the Cherries.
The 6 Nations rugby is back and tonight France, 2 from 2, go to the Principality Stadium as we must now call it. Tomorrow sees the Scots in Rome and later Ireland go to Twickenham, might just see you there…
And dont forget the boxing, a unification fight is always good and tomorrow in Manchester sees Scott Quigg taking on Carl Frampton, very tasty…