WTI $49.72 +54c, Brent $50.47 +49c, Diff -$0.75 -5c, NG $2.76 +3c
The Opec ‘machine’ went back into action yesterday in a number of ways. Firstly, ‘sources’ revealed that the reduction in peak output would be 4%, to my maths this is about the very minimum that they could get away with. Then it became known that Opec were prepared to agree to an Iraqi exemption in order to facilitate an agreement which is more interesting…
Inventory stats have helped a little this week, after the poor API numbers the EIA produced a draw which even though a modest 553/- barrels was better than the build forecast by the teenage scribblers, yesterday Genscape helped by noting a 650/- barrel draw at Cushing.
At long last, yesterday AMER announced that the OBA pipeline link was open and starting with 1,500 b/d would build up to 5/- b/d and presumably by the year end 7,200 b/d. It seems like we have been talking about the benefits of this export route through Ecuador for a long time, now the results will be tangible. The most obvious gain is in the opex costs, which owing to the lack of trucking, with minor exceptions, saves around $11-12 a barrel. Another gain is that in due course the company will be able to offer the same economics to other local producers probably starting with their partners’ crude. In due course this should lead to greater profitability and create a value for the pipeline in its own right as an annuity. In a way even more importantly, is the way that it has developed the ongoing strategy for the company, with the prize of oil being near the OBA, management has embarked on the ‘cluster’ policy to drill the prospective areas in the south which have been hitherto less attractive.
A recent visit to Colombia has confirmed that not only is the in-country management of a very high quality but that it has strength in depth, more than capable of taking advantage of this scenario unfolding. Amerisur has no debt, a raise earlier this year has ensured funds for drilling are available and now a seriously positive cash flow from operations, all in all the outlook for AMER is highly encouraging.
A brief mention of Hurricane this morning as most was covered in yesterdays flash blog. With the news that the horizontal sidetrack well had been completed with a natural flow rate of 6,520 b/d and 14,500 b/d using an ESP and a very impressive PI of 147 the well can be considered to be a significant success. The rig moves to do some clean up work on 205-21a-6 before spudding a Lincoln in early November. I managed to lure CEO Dr Robert Trice into the TipTV studio for what turned out to be an amazing interview yesterday and the link is below.
Tip TV CEO interview: Dr Robert Trice, Hurricane Energy
Tullow has confirmed the rather nervous confidence that I showed in it at the beginning of the year when putting it into the bucket list by further sorting out its finances. The six monthly re-determination of RBL facilities including embedding the accordion provides plenty of headroom going forward. Although the Jubilee FPSO has been unhelpful we have been advised that it is a likely insurance offset and the news from TEN has been nothing but good and the fourth quarter will see genuine free cash flow and the start of paying down debt. The shares have justified the confidence and are now back to the years high, I expect things to continue to go well.
Difficult times for IGas as they juggle with the cash situation and a horde of bondholders not whom all appear friendly and having the best interests of the company at heart. With various payments due the spotlight is on the 31st of October but things could change at a moments notice. The 10 day grace period is almost certain to be needed but one thing is almost guaranteed, the company has much change on the way not all of which will be at its own discretion.
The results season for the majors is under way, yesterday Statoil missed the whisper by making a loss but the shares went better as cash generation rose reducing gearing. Exxon, Chevron and Total today and BP and Shell next week.
The difference between the performance of Hunting and Amec FW yesterday could not have been more marked. Hunting took advantage of the strong share price by raising £70 odd million and the shares are still only around 5% off the recent peak. This means that with continued canny financial management and adept use of inventories they are probably sorted until at least the end of next year, by which the worst should be behind them. Amec took rather a different route by postponing the Capital Markets Day by over four months, hinting at a rights issue and suggesting that earnings may need to fall and that asset sale prices are disappointing. And there was me thinking that the worst was over. Clearly the new CEO has a lot to learn about handling investors and markets, after two days his shares are down 30% and when the rights issue comes it may be at a 50% discount to the recent high of 620p, the words ‘hole and stop digging’ come to mind, Jon Lewis, never knowingly oversold it seems….
Independent Oil & Gas have completed their acquisition of what is now to be known as the Vulcan Satellites and the deal is clearly very smart from an economics point of view but still a long way from development. In the immediate short term there are questions to be answered about the Skipper oil, maybe next thursday on TipTV all will be revealed…
So, it is finally all over for Xcite Energy for whom the bell tolled yesterday, this morning Liberum, the company’s NOMAD resigned which means that in 30 days the shares will be cancelled. It is a shame as it could have been avoided, an over rosy view of the asset and arranging debt that it appeared was not covered by any substantial cash flow was always an accident waiting to happen.
The cricket from Bangladesh this morning has been most peculiar, batting first the Bangas raced to 177-1 before being all out for 220! England then followed suit by losing three quick wickets before the rain came.
This weekend sees a bunch of fixtures without a standout amongst them. The Gooners go to the Maccams, the Noisy Neighbours go to the Baggies and the Foxes go to White Hart Lane. The HubCap Stealers go to bogey side the Eagles, the Red Devils host Burnley and the Hornets welcome the Hull City Tigers. The Hammers go to the Toffees, and the Saints host Chelski.
The ‘World Series’ is 1-1 after the Cubs came back, beating the Indians comfortably in game two, off to Wrigley Field now for the next two crucial games.
And the GP circuit moves to Mexico where Nico apparently feels confident, at least he knows that it wont be his engine that packs up….