WTI $47.83 +78c, Brent $49.24 +55c, Diff -$1.41 -23c, NG $2.96 -4c
With Brent expiring at the close of business tonight there was little incentive to push it through 50 bucks yesterday and sure enough it peaked at $49.81 and drifted off to the close. Given that the so called Opec agreement has more holes in it than a collander i’m surprised that both crudes did so well on a day that they started looking understandably wobbly. It does seem that the parties that I mentioned yesterday appear to have carte blanche to produce what they like thus making the deal unworkable as it stands.
IGas reported this morning and the figures were as expected, lower revenues and EBITDA and higher post tax losses and net debt. Operationally things are going according to plan, whatever that might be and there is the prospect of good news next week for them and Cuadrilla. The company commissioned D&M to report on their assets, a reasonable choice given their shale expertise and the report validated the assets in the group. Their gas in place numbers seem to tally with expectations, risked prospective resources are 2.5 TCF whilst in conventional assets they are given a 2P NPV 10 estimate of $287m.
Away from the operational issues IGas has other slightly pressing financial worries. It announced this morning that it projects non-compliance with its daily liquidity covenant by the second half of October with all that entails. The E&P sector is littered with companies who have applied for waivers of covenants with varying degrees of success. Going to have a chat with the debt holders has been de rigeur this summer but IGas has a slightly different call to make in that 34% of its bonds were bought this year by a mystery investor, they now know who to call I understand. Although the company is protected by its cash on the balance sheet and the fact that it owns a chunk of them itself, this is not a nice position to be in, shareholders should proceed with considerable caution at this stage.
Independent Oil & Gas
If you thought that IGas were in a pickle then the situation at IOG is a nightmare of considerably higher proportions. The results from the recent Skipper well came back from the lab and were nothing like what was expected and then some. The oil is heavy but mobile and the joker in the pack is that it is only 11° API, significantly less than the 14-16° expected particularly after the samples were ‘flowed to jerrycan’ at the surface. The sand quality suggests 10 Darcies which is significantly better than expected but doesnt make it any better, ‘determining commerciality may take several months’.
I have spoken to the team and it would be fair to say that they genuinely dont understand it and they are as good a team of professionals in the industry. If it werent virtually impossible it would look like something may have happened to the sample, at least there are more to check but it’s a long shot. This isn’t back to the drawing board for IOG, quite. Determination to make this work and to continue with other projects such as the gas fields and closing Vulcan will keep the team on their mettle in the next few weeks and throwing in the towel is not in their dictionary. Normally this would be the time for investors to cut and run, but in this case I would at least for the moment, hang on in there and see what comes up, it may not be quite as bad as at first it seems.
Reuters is reporting that that Tony Hayward has decided to call it a day as Chairman of Genel and will leave in the new year, i’m not sure that its quite such a story and that the board are probably choosing a successor already but they havent made any comment.
Tullow has announced that it appears to have a recoverable claim for business interruption insurance for the Jubilee field problems encountered earlier this year.
At long last it’s the Ryder Cup and the next three days should be a great display of golf for both sides…
On Sunday it’s the Arc and England have the warm favourite in postponed, if you are going it’s at Chantilly!
And the Malaysian GP where Lewis has been the fastest so far, we really have a fantastic end of season in prospect.
In the Prem the standout fixture is Spurs v the Noisy Neighbours apart from that its a big mix up with no classic fixtures, or so it seems.