WTI $56.96 -20c, Brent $67.07 -1c, Diff -$10.11 -5c, NG $2.70 +6c
A quiet day yesterday as oil paused to analyse the EIA stats and other numbers notably the domestic production which has now exceeded 12m b/d. With oil exports of another record- at 3.6m b/d – and a crude build of 3.67m barrels there was much to figure out. If it hadnt been for the much bigger than expected draw in gasoline stocks, at 1.4m b’s way bigger than the 350/- forecast, and a similar draw in distillates, oil might have fallen more.
As it is it with markets slightly up this morning it looks like crude will appreciate around a dollar on the week as word from Opec+ is still that production cuts are alive and well across the group. Worth noting that natural gas stats showed a 177 bcf draw last week which was more than expected and down 4.1% y/y and 17.5% on the 5 year average.
Oil companies are in very good nick, crude has bounced considerably from when novice forecasters didn’t realise that when Saudi says cut they mean it and the rally is meaningful. Results from the service companies show that costs remain subdued and next week it will be worth seeing how the likes of Hunting are faring.
BPC shares are up over 25% this morning as the markets notes their announcement that the 2nd exploration round of the four southern licences has been extended to 31/12/2020. As if the government were ever likely not to extend yet again. This time they have mandated an exploration well which is good and BPC ‘must in the coming months agree a work programme for 2019 and 2020’.
It will be interesting to see what BPC put in the work programme as they are still only looking for a farm-in partner after last year’s ‘unfortunate’ affair in which a big fish somehow got off the hook. Over the years the company has, at great cost to shareholders in terms of G&A expense, failed to come up with the necessary partner, funding, rig acquisition or drilling plans for what is a potentially massive opportunity but comes with equally daunting environmental liabilities. Maybe this time it will repay the interminable patience of its shareholders and deliver a partner for the project, it certainly needs to do something as the prize is huge…
Eco Atlantic Oil & Gas-Ring the bell….
Eco Atlantic employees will ring the opening bell at the TSX this morning after being ranked 2nd in the TSX Venture 50 for this year. After being 5th last year the market is clearly excited about its baby and who can imagine what will happen next year should Orinduik come in?
I was very fortunate to be able to catch up with Mitch Flegg, CEO of Serica Energy for a couple of hours earlier this week. A lot has changed since I last wrote on the company, (not least how full his diary is) but I am grateful for the time he spent with me. The acquisition from BP, Total, BHP and Marubeni of interests in the Bruce, Keith and Rhum fields were not only transformational in that they reduced reliance on Erskine but that they were structured so that SQZ paid out little up front. With the acquisitions immediately cash flow and value accretive and with the bulk of the payment made from revenues over four years this was a peach of a deal. Indeed the bulk of the decommissioning liability retained by BP, Total and BHP with the remainder capped there is little potential risk in the transaction.
With Serica increasing production at BKR and Erskine the number is now some 26/- b/d of which 85% is gas or condensate further reducing risk. Whilst developing Columbus, now that FDP has been approved by the OGA, they plan to drill in 2020 and have first production in 2021. Meanwhile the carried Rowallan well, which spudded in December 2018, will take 140 days to drill giving results around May time and gives some exploration upside.
Serica is very strongly financed, if anything rather too much so if one can ever say that. With a strong balance sheet with little debt, strong cash flow and a large pool of tax losses there is easily scope for further acquisitions which I not only would not rule out but strongly encourage. The rating, despite the 63% increase over a year, is in my view undemanding and whilst Serica may not have such headline acts in its portfolio as its peers it should be shouting them just as loudly and may have claims for a Bucket list appearance before long.
The second ODI against the Windies starts this afternoon which gives me the opportunity to mention the first which should have been in yesterday if not for operator error. Losing the toss, England allowed the Windies to set 360 but in a typically (of white ball cricket) English reply with Roy and Roooooot both scoring hundreds, won by six wickets.
The long awaited bout between Chris Eubank Jnr and James DeGale takes place tomorrow night at the O2 Arena, the market says Eubank….?
The Six Nations Championship is back, England visit Wales who plan to knock them off their recent high after they beat France and Ireland. Ireland visit Rome to play Italy whilst France host Scotland.
In football it is the final of the Haribo Cup where Chelksi, fresh from beating Malmö last night take on the Noisy Neighbours.
Liverpool have a game in hand over aforementioned neighbours and that game is away at the Theatre of Dreams on Sunday. The Red Devils are having a good run at the moment but Liverpool should be too good for them and the prize is substantial. Elsewhere in the Prem there are two games tonight unusually, The Bluebirds play the Hornets in the Avian derby and the Hammers entertain the Cottagers in a London derby. Spurs are at Burnley and the Gooners host the Saints on Saturday and Sunday respectively.
Racing is at Chepstow and at Kempton Park where I will be attending, taking a keen eye on Enrilo in the bumper for trainer Paul Nicholls and leading owner Jon Gregory who has the improving Grand Sancy which is headed for the Supreme hurdle at Cheltenham.