Oil price, Echo Energy, Frontera Resources, Wood Group, Aramco And finally…
WTI $49.89 +59c, Brent $55.47 +31c, Diff -$5.58 -28c, NG $3.07 +1c
There is little to add about the oil price, the dollar remains weak, Libya is exporting well below its best levels, hurricane damage has affected production and refining capacity is still down. Opec and Non-Opec production is under control especially from Saudi Arabia. Traders will be particularly cautious about being short here although both WTI and Brent are trading at recent highs, WTI went through $50 in intraday trade yesterday and $55 seems high enough for Brent for the time being. This week all three reporting agencies were displaying unusual accuracy in expecting a fall in global fall in oil stocks.
Echo has announced the award of a seismic reprocessing contract for 3D seismic data over the Huayco and Rio Salado blocks in Bolivia. The recipient is DMT Petrologic who have ‘extensive experience of reprocessing data in similar thrust belt areas’. The work should be completed in Q1 2018 and shows that whilst Echo are still to finalise the deal on the blocks they are getting on with the work and showing a very positive attitude which should go down well in country.
I have met Frontera before but not in Person, that was a call with Steve Nicandros which made me interested but thereafter little happened. So I was most interested to hear that a number of changes had happened and there was a new broom in town and Zaza Mamulaishvili had become President and CEO of the company with such exciting assets in Georgia. I met up with Zaza on Tuesday which was a most interesting meeting. The primary asset hasn’t changed although I would suggest that the focus has, Block 12 is a substantial piece of real estate (5,060km²) onshore and 100% owned and with significant history. It is adjacent to the huge offshore finds such as Shah Deniz and has similar attributes to the BP operated structures.
Valuations by Netherland Sewell on three occasions give rise to optimism that the long serving Taribani field and the Dino-2 well could provide a great deal more hydrocarbons, indeed only a handful of the 25 available zones have been produced from and only a 13m section. They (NSA) have oil OOIP of 10.2bn barrels of which 1.7bn is recoverable and gas OGIP of 12.9 TCF, 9 recoverable. It is clear that a fairly minimal investment could increase the value of this company in a big way. It seems that a number of small frac jobs would bring much more to surface and the pay is so good that a decent return should be made, indeed I understand that sidetracking is also an option. As one might expect in such a cradle of the international oil and gas industry infrastructure is all around and oil and gas pipelines intersect the acreage on their way to lucrative international markets.
The investment opportunity here seems fairly low beta, the current production brings in $3-3.5m p/a which FRR can run the business on and expect more oil and gas discoveries and more production in the next few months. The company will look to farm-out some of this prime acreage but I also expect a possible offering to existing shareholders in due course as capital shortage appears to be the only major impediment to growing this asset. More to follow after a further meeting with the company.
The final capitulation of the once mighty Amec is near, following the disaster that was the Foster Wheeler acquisition just at the wrong time in the cycle, there was some inevitability of its demise. It is a shame to see a company with so many good people let down and if it wasn’t for Ian McHoul the fall might have been faster. The UK upstream business and clients of AMFW are to be sold off after a deal with the CMA. Last day of dealings is 6th October after which Wood should start taking real advantage of their windfall.
It seems that the City of London Corporation has approved the new listing rules put forward by the FCA which would allow state-owned companies to qualify for a premium listing in London with less onerous disclosure and regulatory rules. These rule changes are in order to let the City compete for the Aramco listing when it floats next year. Interestingly the newly merged Aberdeen Standard Life is against such rule changes, its UK head of Governance saying that their opposition is to ‘protect the London market and that it is not made more volatile and less attractive, by the inclusion of a huge, deeply cyclical, company’. Now I don’t have a view either way about Aramco but I find it hard to believe that Aberdeen Standard Life does not already have ‘huge, deeply cyclical companies’ in its portfolio already…
Saul ‘Canelo’ Alvarez will face Gennady Golovkin this weekend in what could potentially be the fight of the year. Canelo has only lost once in his professional career and Golovkin is unbeaten in 37 professional fights. Both men have had to chase their opponents around the ring throughout their careers so it will be interesting to see who takes the first step backwards on Saturday night. It is a real 50/50 fight that will cement the legacy of the winner as an all time great. It is likely that the winner will face either Billy Joe Saunders or Willie Monroe Jr to unify all the belts in the middleweight division. Saunders and Monroe Jr fight earlier on Saturday night at the Copper Box Arena in London.
This weekend sees the Singapore GP which I am reliably informed will suit the Ferrari’s and Red Bulls better than the Mercedes, indeed Hamilton said that his ‘was not the best package’ for this track.
Doncaster hosts the oldest classic in the British racing season tomorrow, the St Leger is not only thus but for investors who sold in May are expected to return to the market on Monday…..
Last nights football was rather peculiar, 20,000 Cologne fans pitched up to the Emirates and pretty much all got in after only having 3,000 tickets allocated. Spread around the ground where I hear that there was no segregation or searching of fans, they had tickets in the family stand and some Gooner season ticket holders ‘helped form an orderly market’….They won 3-1 after going behind to Cologne whilst in Italy the Toffees lost 3-0.
The footy weekend starts tonight where the south coast ‘Riviera Derby’ takes place as the Cherries host the Seagulls, both need the points badly. Tomorrow’s big games include pointless and goalless Eagles under Woy taking on the Saints, the HubCap Stealers entertain Burnley, the Noisy Neighbours are at the Hornets, Spurs host the Swans, the Baggies have the happy Hammers and its the ‘Bugle derby’ as the Terriers go after the Foxes. Tomorrow the big weekend game is Chelski v the Gooners and the Toffees go to the Theatre of Dreams.