WTI $44.78 -$1.14, Brent $45.83 -$1.54, Diff $1.05 -$1.16, NG $2.04 -14c
The oil price was up strongly last week, WTI rose $2.19 and Brent $3.02 before expiry, today they have both settled down as news is for choice, not brilliant. Having said that the fundamentals are still looking obstinately bearish, last week’s EIA stats showed a 2m build and 1.7m at Cushing and today Reuters is reporting that April Opec production is at record highs , up 170/- b/d at 32.64m b/d. There is a lot of crude from various parts of the world looking for a home and I read at the weekend that Ian Taylor the highly respected boss of Vitol reckons that the Chinese have completed their latest batch of buying for strategic reserves. One more bullish stat was that yet again the rig count showed new lows being reached as overall the number of units was down 11 at 420 and the same number in oil to 332. So it seems that those looking forward are seeing into 2017, with a significant diminution in non-Opec supplies combined with nearly $500bn off capex leading to a re-balancing of supply and demand, those looking at the present see no sign to the end of what is still very definitely a glut, there may be trouble ahead…
Good news this morning from Lamprell where CEO Jim Moffat has deferred his retirement by six months to the end of the year or until a replacement is found. The job of replacing Jim has been difficult for a number of reasons but shareholders should be grateful for small mercies as ‘new’ Lamprell is very much down to him and things were looking pretty dire when he arrived. The announcement also states that further cost cutting is under way with 100 jobs or 8% of the staff being lost in a number of areas. This is not unusual as major projects move out of the yard and whilst new work is inevitably hard to get in the current environment, LAM is in a stronger position that most to win contracts especially in the Middle East.
Ithaca has announced that its RBL re-determination has been completed which has seen debt available fall from $515m to $430m but still leaving over $100m of funding headroom. With first hydrocarbons coming from the Greater Stella area in 3Q 2016 providing significant cash flow, and the deleveraging of the business continuing, with debt having been reduced from a peak of over $800m in 1H 2015 to $630m by 3/16, Ithaca’s finances are robust and well managed and it remains a favourite in the sector.
Last week Sound Energy hosted a series of meetings, presentations and site visits for analysts and investors in Morocco which were informative and well attended. Whilst they were there, the company made two announcements regarding Italian and Moroccan investments. In Italy it seems that final approval has been concluded for Badile and the company expects written confirmation in May. In Morocco the TE-6 well at Tendrara is under way having reached first casing point, visiting the site was positive with a very good team of Schlumberger, Saipem and Sound personnel running a tight ship. Seeing the wellhead at TE-5 and also the site for TE-7 in the permit adjacent served to remind us that should this well be a success there is significant upside for the company. With a strong team from Sound showing that it is really expanding at head office and in the field, the situation looks highly promising for the company.
Falcon Oil & Gas
Whilst I was away Falcon had an operational update which confirmed my bullishness on the company. Results of the in-depth shale evaluation programme were very positive, over pressurised with high gas saturation making it perfect for fraccing and as I reported last month it looks like a potentially world class unconventional play, one of the best in Australia of no doubt. I have a meeting with P’OQ coming up shortly and will report back but the shares which are up over 100% this year so far might go much further.
Sundry round up since I was away…
Amec announced that its new CEO would be Dr Jon Lewis and that Ian McHoul would return to his job as CFO which is rather a shame as I consider that he has done a marvellous job as interim CEO. In the same announcement they slipped in a short trading update in which guidance was unchanged, revenue off very slightly with a modest currency hit and an order book of £6.4bn marginally down on the year end.
PS It didnt go unnoticed that even without the Amec publicity machine that former CEO Samir Brikho managed to get an almost full page job advert in the Sunday Times. PTSB please……………….
I recently wrote about VOG and that things were going pretty well out in Cameroon. I mentioned that they had drawn down around half of the recent BGFIBank facility which was technically incorrect, they would have been going some to that by now. In fact the correct version is that they will ‘draw down around half-ish of that facility this year’. Glad to put the record straight.
Velocys results also came out last week and whilst they themselves were of limited interest I was keen to see how things were going under new-ish CEO David Pummell. Progress at ENVIA Energy’s GTL plant in Oklahoma City plant is good but commerciality of this unit is critical to further progress. Elsewhere existing opportunities continue to progress ‘although timetables on some projects have been extended’, this might yet again add some time to delivery in full from Velocys although I still consider the market to be substantial and achievable.
Three more majors results as well, Total beat the whisper quite nicely with a là BP, costs falling and a lowering of Capex, again. Exxon made a profit of $1.81bn which was down 63% but beat the whisper. Having been stripped of its AAA rating by Standard & Poor’s earlier in the week, partly for its dividend payouts, the company duly increased the dividend by 3% giving the ratings agency the appropriate signage. Chevron however missed the whisper and came in with a loss of $725m.
Things go from bad to worse for Ophir who announced last week that following completion of due diligence, Schlumberger was to terminate their agreement re the Fortuna FLNG project. Ophir state that the project ‘still represents a technically and financially attractive prospect for Ophir and its shareholders’ and that other parties are in the wings. With capex having fallen from around $600m to $450-500m and with a number of potential off-takers around they remain confident…
Gulf Keystone has announced a standstill agreement until 20-31st May to ‘continue stakeholder discussions’. Not paying the April and May coupons puts the company into technical default and in that respect the future does look pretty dire. Having said that, notwithstanding the investment needed to keep Shaikan operating efficiently and profitably and given that the KRG are bending over backwards to help it would seem that closing the company down would be foolish and probably end up being capitulation time. For what it’s worth the operational side of GKP is still delivering as well as if not better than ever promised and it would indeed be a shame to see it fall. Finally, the company is understandably closed for contact, if ever was but probably justified under present conditions.
Finally and as no surprise, yesterday Halliburton and Baker Hughes called off their nuptials as they had been kept on the altar steps for some time by the DOJ. Always a difficult one to sort the DOJ head of antitrust said that this deal was ‘unfixable’. The value of the deal has fallen from $35bn at time of announcement to $28bn yesterday and HAL will pay the $3.5bn beak fee tomorrow, ouch!
It’s all Leicester today and fully deserved as the Tinkerman and his team win the Premiership and bring in some bets of 5,000-1. Last night at the Bridge was a night to behold as Chelski came back from 2 down to batter Spurs 2-2 who lost the plot and had nine players booked. It surely should have been more as Dier might have got another yellow or a straight red at the end and Dembele also took the law into his own hands against Costa which is almost fair…the FA will be kept busy all week while the Foxes party…
It turned into a double for Leicester after Mark Selby won the snooker pretty much at a canter.
The F1 season may be getting to its most exciting as the races turn to Europe, quite why Lewis is so off colour is anyone’s guess but I cant imagine this letting Nico win every race lasting for long…
And really finally, yesterday Upton Park staged a Pro-Celebrity England v Germany world Cup final rematch which should have been a fun affair. Unfortunately in their determination to rewrite history Germany turned up with only pro’s and England with celebrities much to Rio’s, and the crowds anger. Obviously the Germans won but it was a Pyrrhic victory and one I am glad that Saint Booby Moore of Upton and Wembley was not there to see, shame on you….