WTI $42.64 -$1.09, Brent $44.48 -63c, Diff $1.84 +46c, NG $2.06 -8c
Blogs later this week may be a bit patchy I’m afraid with company meetings in and away from the UK.
The WTI price took the brunt of the fall yesterday primarily due to the Genscape figures pointing to a 1.5m barrel increase in the stocks at Cushing. As I said earlier inventory numbers are pretty key at this time of year and have to be watched carefully, these numbers dont bode well for API or EIA stats later in the week.
Elsewhere it was news from the KSA that teased the market, they have announced that they are to expand the Shaybah field this quarter and expect to increase capacity to 12m b/d which if accurate would not be helpful but would serve to irritate Iran. They have also made a preliminary announcement regarding the IPO of Saudi Aramco as part of the ‘Saudi in 2030 Vision’, whereby it is valued at $2tn+ and they will sell a stake of less than 5%.
First quarter figures from BP this morning which beat the whisper but were still very mixed. Interestingly and in line with my comments in the last few months, lower costs have now more than offset weaker oil prices and BP are confident about the cash flow figures, at least in the short to medium term. Bo Diddeley appears to be backing down from the lower for longer or even lower for ever by saying ‘robust demand and weak supply growth will move global markets closer into balance by the end of the year’. Welcome to the real world Bobby…Unfortunately the last quarter has not been about the figures but about the scandal of his $20m pay packet, for which responsibility must lie with the non executives and the committees upon which they serve, not suitable for a major, if that is what BP are trying to be…
Interims today from Egdon which for some reason the market havent initially liked the look of. The numbers themselves are not that relevant and I would suggest that the 9 licences received in the 14th Round which increased their acreage by some 50% in favoured areas was good news. Wressle is also set to proceed this year achieving production in the second half which will be helpful. Drilling at Holmwood is imminent and as it is adjacent to the Horse Hill oil discovery it will be closely watched. The company has £5.26m of cash and no debt so about ok there but the rarely miss a chance to raise money if the ducks are quacking albeit not necessary at this stage. A minor point is that I would prefer to see the statement by Mark Abbott who knows what’s going on but the Chairman has to do something occasionally I suppose. Although the Egdon price has been in the doldrums lately the company are doing all the right things, Wressle will bring in revenue, Holmwood adds some exploration and the portfolio is now full of things to work on.
Victoria Oil & Gas
I reported last week on VOG’s operations outlook but commented that I was meeting the company so would come back with more after that. I met with Kevin Foo, Laurence Read and Ahmet Dik who is the CEO of GDC, VOG Director and seemingly heir apparent. With such an array of main board open to me I have to say that it was a very good meeting and we fleshed out a number of points from the statement during the session.
AD seems very impressive and just who the company needs to be in control in Cameroon, very much hands on and if there was any complacency from suppliers or contractors before, I strongly suspect that has been disabused in pretty short time. Work on the Bonaberi pipeline continues apace, with speed increasing especially as they move out of the city, a perfect example of cutting costs is the use of open trenching and sharing expertise with road builders. To go with this expansion the company has signed more GSA’s and are approaching all sorts of potential clients for their gas and this area looks very promising.
The key to providing feed-stock is the drilling campaign on the Logbaba field, the large photographs of the site show just how much work has already been done in preparation and the scope for further expansion. These wells are very important and as with other areas of the industry costs are down dramatically. There has been significant renegotiation leaving VOG with very favourable terms indeed. The advantage of drilling success is not just to supply gas, it will move 2P reserves into the 1P category thus increasing the value of the portfolio. Drilling should start in late Q2 and expect 180 days in total and at a cost of less than $40m, substantially less than previous estimates. In addition to all this the Logbaba gas plant which is adjacent to the drilling site is already expanding and in stage one of the process.
The recent purchase of the Matanda block from Glencore is significant in that it shows that the company’s plans for the future are very much under way. Matanda dwarfs Logbaba and is 2/3 onshore and 1/3 offshore, I suspect that the offshore bit will be farmed-out or at least stay on the back-burner for a while. The onshore part though is already seeing some action although the company point out that it is very definitely to be done after Logbaba, having said that by the end of this year there will be a good idea about seismic work and other activity making Q1 2018 a likely probability for drilling the prospect.
Financially VOG are in good shape, revenues will rise again modestly in the 2Q and although there will always be wet season/dry season factors they are doing all they can to mitigate that. At the quarter end they had net cash of $4.6m and since then they have signed a $26m debt facility with BGIFI Bank of which around half has been drawn down. In conclusion I would say that VOG looks in a good place to me and looks extremely undervalued on much any yardstick, as an explorer, a pipeline operator and a utility selling to a wide range of customers in a market where there appears to be no end to potential demand, what is not to like?
Ithaca recently hosted a trip to the ship yards of Gdansk where the infamous FPF-1 modifications are being completed. I say modifications but if you look at the before and after pictures they might have virtually rebuilt the rig from the legs upwards. After all sorts of delays the current programme remains on track for a May/June sail away and first hydrocarbons in 2H 2016. Ithaca is an absolute favourite in the bucket list due to its outstanding management, rigorous cost control, effective hedging policy and resultant strong cash flow. With a placement raising $66m to Delek last year at a 39% premium to the share price, IAE exhibits all the characteristics and more that are required to remain right at the top of its peer group.
PS Never, ever, fly Wizz Air whose incompetence and total disregard for its passengers knows no limits, an 11 hour delay, at the gate, at Gdansk was only conspicuous by the absence of any announcements save for saying that there would be a further one in 30 minutes.
Expecting results from Halliburton yesterday? Now on the 3rd of May as all sorts of skulduggery is being surmised as they try and rescue the Baker Hughes bid…
Plexus has announced that it has raised $5m at 52.05p from LLC Gusar as it accelerates its Russian roll-out which manages to avoid any sanctions. The area is, along with the Middle East, still showing some growth and with partners Gusar and Konar, Plexus are addressing the wellhead market and have an additional licence to enter the larger and more active platform production wellhead equipment markets.
Finally I notice that COPL which I mentioned last week has increased the London private placement from $6m to $8.25m, I find this stock most interesting to keep an eye on.
So, have Spurs blinked first after they dropped points in their 1-1 draw with the Baggies last night? Not completely done but Leicester will probably get more than one bite at this particular cherry yet…
Tonight it’s the Noisy Neighbours taking on Real Madrid in their semi-final first leg, certainly one to watch…