Oil price, Pantheon, Petrofac, Hunting, Genel And finally…
WTI $57.22 +28c, Brent $66.03 -36c, Diff -$8.81 -64c, NG $2.81 +1c
The oil price may or may not end up on the week, at the moment it’s a close call but it did end up on the month, February produced a rise of 6% for WTI and 8.5% for Brent, those figures for the year to date are way more impressive with both being up some 26% in the first quarter.
There are a number of reasons but of course the cutbacks from Opec+ are the key to most of it, led by the Saudis who have actually gone considerably over their mandate the market is tightening quite sharply and soon stocks will be shrinking. Even the Russians who as I have said many times, take a long time to cut back, are slowly getting to their target.
In addition to the decreasing supply there are a number of geopolitical hot spots around the world, the market knows about Venezuela, Libya and Nigeria all of whom are under-producing but the US/Sino talks are no walk over, Russia is still talking the talk and of course this week the US talks with North Korea stalled and we now have aggression between India and Pakistan….
Pantheon has announced this morning that the Winx-1 exploration well in Alaska may be a duster. Pantheon have a 10% carried WI here and an option to back in for another 10% which they probably won’t take up. The well had oil shows in the Nanushuk which were ‘at the bottom end of the range required for commerciality’ and that there were no oil shows in the secondary target. The well drills on to TD to test deeper objectives but I sense without too much optimism.
To be fair to Pantheon the Winx well was not their most favoured play, that is reserved for the Alkaid discovery which they will go to next and forms a significant part of what the company are expecting to find. A previous discovery in 2015 and surprisingly not re-entered until now could be enormous for the company. Finally I have to own up to an error in a previous blog, in talking about John Walmsley I referred to him as Chairman, I should have been aware that he stepped down at the last AGM and is now just an NED, my apologies to all concerned.
A couple of items from yesterday when I was dashing around the various company meetings, the next few weeks get worse as the results season goes into overdrive!
Petrofac produced a genuinely sound set of financial results which showed revenues of $5.8bn, net profits of $353m and margins rising by 0.5 ppts to 6.1%. A dividend of 38c showed that confidence is high and that with $5.1bn of new orders customers are not walking away, indeed the reverse is true.
Petrofac has returned to a net cash position two years ahead of schedule partly due to $0.8bn of disposals but partly due to continued and significant efficiency gains, cash management and conversion for which CFO Alastair Cochran should take significant credit. The shares rallied on the results but are still down after further news recently from the SFO that they were charging a former employee of a subsidiary company under the bribery act. CEO Ayman Asfari made an impressive and impassioned speech in which he pointed out that its client base is as rigorous and takes compliance extremely seriously as it is possible to be. If you are prepared to bear that in mind Petrofac are looking incredibly attractive and should be tucked away.
Hunting also produced results yesterday which showed marked improvement across the board in revenues ($911.4m), profits ($104.7m) and margins (Up by 6 points to 30%). The return on capital continues to strengthen and during the year the dividend returned and the final here of 5c making 9c was declared.
Hunting Titan was the leader here, unsurprisingly with perforating systems up over 30% and with longer laterals industry wide connections are becoming state of the art, like the company’s TEC-LOC design being particularly popular. The company is throwing off cash, $30.9m last year which leads me to only two questions. One is why no M&A, to which the answer is clearly that opportunities are too dear due to private equity vendors being greedy and the other is why is the capex so modest? Either way Hunting is in an enviably strong position and if holding on to your cash is your worst trait then that’s not a big problem.
I notice that Genel got approval yesterday for its deal with Chevron from the KRG authorities. This very impressive deal is likely to turn out to being something extremely important to the company and I look forward to hearing much more on results day.
My fault for only producing this today due to being out, buckets lists and so on, the VoxMarkets Podcast link is below.
It’s all about derbies this weekend, Liverpool travel across the park to play the Toffees, the Gooners head to Wembley to play Spurs and Chelski take the short trip down the Kings Road to play Fulham. The Noisy Neighbours are at the Cherries and the Red Devils host the Saints.
The 5th and final ODI between West Indies and England is on tomorrow in St Lucia with England dormy 2-1 up in the series so far.
Racing suffers from being so close to Cheltenham but there are meetings at Newbury and Doncaster for those who won’t be going, like me!
And it’s quiet without the Six Nations but there is a full Premiership programme on.