WTI $50.85 +22c, Brent $51.78 +40c, Diff -$0.93 -2c, NG $2.99 -15c
The oil price was virtually unchanged last week, the inventory stats helped with another draw but the rig count numbers on Friday showed the 17th straight up week with oil units up 11 at 443. With only five weeks to go until the November Opec meeting all eyes are still on the talks and of the cuts, Russia and Opec are still apparently ‘committed’ to success and with production still high they will need to at least be seen to work. There appears to be little sign of money managers reducing their length which is always worrying but I wouldnt be surprised to see them taking some money off the table at some stage.
Wood has signed a five year, with two five year optional extensions, EPC and maintenance contract for the Hibernia platform offshore Newfoundland with its client, Hibernia. No value is attributed to the contract but it maintains the WG stranglehold on business in the area.
Faroe took a group of analysts for a site visit last week to see the Njord A platform currently awaiting dry dock at the Kværner Stord yard in Bergen. After completing a refit the platform will return to the Njord area, hopefully for another twenty years of production now to include Snilehorn and the Pil/Bue discoveries.
Faroe has taken the opportunity in the last two years of oil price weakness to hunker down, concentrate on fewer wells in Norway and to bolster its financial strength. Having raised money just before the crash it remained financially strong and this has been added to by the raise of £66m this August, more than was needed for the Dong acquisition. 2016 will prove to have been a good year to buy assets and strong companies like Faroe have taken advantage and will likely do so again. The Dong deal will come out cheaper and more efficient that initially planned and Faroe will make a final payment of around $35m in November or December of this year to complete it. With £122m of cash on the balance sheet the company is likely to make more acquisitions, probably back in the UK sector but dont rule out some trading of portfolio assets if monetisation is more efficient. Indeed whilst the RBL may be replaced with a similar facility of up to, say, $250m it may be looking for more innovative financing via convertibles or other such high yielding instruments.
The exploration strategy adopted by Faroe in recent years has consistently delivered commercial discoveries which have fed through to reserves and production. Along with the acquired assets this means that this year Dong’s 10/- b/d will more that double current production, currently guided at 16-18/- b/d and the five year plan is for 40-50/- b/d from the existing portfolio. Faroe are taking advantage of this perfect storm of increased production, development costs falling and accretive acquisitions not to mention exploration success such as at Brasse at this time. With some high-upside wells to come, such as at Dazzler over the winter and appraisals at Brasse and Fogelberg, plus others, the tax efficient drilling in Norway should provide excitement.
Faroe has consistently delivered on its strategy of being a well managed, strongly funded company with a base of exceptional exploration success building towards a very strong production growth scenario. Combine that with a successful acquisition policy with hopefully more to come, investors may have overlooked FPM at their cost, a stalwart of the bucket list and a readily achievable target of at least 125p.
The test match against Bangladesh turned into a real thriller, going in last night was a great call and this morning the disciline of the seam attack meant an England win by 22 runs. In low scoring games modest looking score often appear disappointing but on this occasion with runs and wickets Ben Stokes was justifiably man of the match.
Chelski and the HubCap Stealers were the big winners at the weekend another goal for the latter would have put them at the top of the table as neither the Gooners or Spurs could win. The Special one probably didnt feel so special in the Kings Road last night but its still all very tight up there.
Despite winning in Texas Lewis still needs to have something extra over Nico and it still looks like the team have chosen who will win this year. Without a DNF Lewis can win all he likes from now on in……
And for the first time at Twickenham it was American Football as the New York Giants beat the Los Angeles Rams 17-10 with more to come next week.