WTI $37.18 -$1.32, Brent $39.53 -86c, Diff $2.35 -54c, NG $1.82 n/c
The wall of optimism finally gave way yesterday and again this morning as crude prices fell, albeit modestly on what turned out to be generally unhelpful news around the oil patch. Iran started the ball rolling by confirming that whilst it would participate in a production freeze it will do so when it gets to 4m b/d, hardly the stuff bullish dreams are made of. Other countries are holding out for the big meeting, now thought to be possibly in April and possibly in Doha, either way not for a few weeks. The market is also cognisant of further inventory build and this week analysts are guessing at something over 3m barrels which will only top up stocks that little bit more. Chinese data and a strong dollar ahead of the Fed meeting were contributory factors and the Opec monthly report appears to be less bullish than that of the IEA which comes as no surprise. Finally, watch the US retail gasoline price which is rocketing up, at $1.96 it is up 12c a gallon this week, 18c in a fortnight.
Results today from Cairn which showed a loss of $516m after a CIL impairment of $319m. All eyes were on the news from the SNE field, but even with a 20% increase in the resource estimate and a promise that more was to come when the SNE-3 results were fully assessed, the market found this to be old news. Catcher and Kraken are in line for first oil in 2017 and the Indian tax dispute continues. Financially the company has $603m of cash and the RBL is undrawn plus letters of credit available. Cairn’s share price is 53% up so far this year reflecting what is clearly a world class discovery in Senegal, I am still of the view that the market has not yet quite appreciated how big this could be, so there is still upside. For those investors still wanting exposure to Senegal directly I maintain my preference for Far where the upside is many times greater but obviously with concomitant risk.
The strategic review continues and the company are genuinely looking at all options. These include the sale of assets, a merger with another industry participant or a sale to one, an equity raise and maybe finding a strategic investor. The IFC are ‘supportive thus far’ but clearly not quite so happy with the oil sector, they are rumoured to be on of the banks that sold out on Petroceltic so nothing can be taken for granted. Mitch Flegg tells me that he is enjoying the process which may be a touch of exaggeration… Some of the assets are already being farmed out leaving Egypt and Morocco to be attended to. Whilst Egypt is ok it has been difficult getting the money out and they are owed plenty which leaves Morocco as the jewel in the crown, so to speak. If the company really are looking at all options, the sale of this part of the portfolio is likely to be the only place where realistically cash or a partner can be expected.
Not much more to add on Range but it is certainly getting back on its feet after years of turmoil. A 46% cut in revenues and a post tax loss of $25.2m is no worse than I had expected and going forward I see a number of exciting developments over the next year. With cash of $21.9m and SIBO having invested $30m at 8p the company looks to be in a strong position now, not something one thought one was going to say only months ago.
Not much to report on Aminex although the market has been a touch harsh on them this morning I think. Whilst to some people the Songo Songo Island gas plant, which will now come onstream in April, is delayed again I wasnt expected this to be much sooner. The KN-1 well appears to have been better than expected and all work required will shortly be complete. I am scheduled for a chat with Jay soon and will report back after that.
The Foxes beat the Magpies last night securing their lead in the Prem and Newcastle’s position in the danger zone. The former certainly look like winning the league is perfectly possible whilst the latter are, although better already, somewhat in trouble. The derby with the Maccams on Sunday will be most interesting…
Much more importantly the Cheltenham Festival starts today with four days of the best jump racing at Prestbury Park. Bets on Willie Mullins and the Irish beating the rest are already stacking up but apart from the odd nauseous investment banker it will be fantastic.
Cath @ FAR said today pre a presentation that SNE 330sqkm, 30M net @ 30% recovery points to a 2.2B find. Stated Soleli / Sirius prob part of the same then 544sq KM2 which @ 30% would 3.6BBLS. Thoughts?
More detail on the tabs here – https://www.dropbox.com/s/x9wpnculmtzfnpl/Edison%20research%20mockup%2015-3-2016%20v8.xlsx?dl=0