The Oil Man: Oil price, Ophir, Plexus, Halliburton, Caza
25th January 2016 13:07
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WTI $32.19 +$2.66, Brent $32.18 +$2.93, Diff +1c -27c, NG $2.14 n/c
The rise on Friday of 10% appears to have energised oil market punters; so much so that, on a dog walk yesterday, I was advised by a local know-all to buy the Brent future, and sharpish.
I think, however, that a bit of short closing and a spell of bad weather on the East Coast is insufficient to turn the oil market around on a sixpence and that this particular gentleman probably hadn't seen the report from the Straits of Hormuz, where an Iranian tanker was sailing with the first shipment of post-sanctions crude, bound for South Korea.
Prices were up over 10% at the end of the week, with WTI finishing up $2.77 and Brent $3.24 in the period. The rig count was down 13, at 637, and minus five in oil to 510.
If you didn't see it, it is worth reading the article by Dan Yergin in the Financial Times last week; as usual, an interesting perspective and one in which we share a common view regarding the medium-to-longer term.
Readers will know that I believe that the OPEC move which might have made US shale blink didn't actually achieve that for various reasons. It was the majors that blinked and now we have consensus that around $400 billion (£281 billion) of capital expenditure (capex) has been cut from their budgets.
Yergin takes it another way and, using IHS stats, points out that there will be a reduction of $1.8 trillion's worth of supplies between 2015 and 2020 - another pointer to higher prices down the line.
With Dav-oh wrapped up for another year, what will all those wind bags do, you ask? Well, they might get back to their desks and find some work to occupy themselves with; shareholders in , and , to name but three, might be suggesting that it really isn't worth the money just to purchase kudos…
Ophir Energy
Good news today from , who have announced that has farmed into 40% of the Fortuna floating liquefied natural gas (FLNG) project. Although pre-final investment decision, they will pay 50% of past costs in the form of a development carried interest and this, importantly, means that Ophir's capex is carried until first LNG.
In a trading update, the company say that production has beaten guidance at 13/- barrels per day (b/d) but now will be 10,500-11,500 b/d for this year. Net cash at the end of 2015 was $360 million, giving gearing of 12%; this falls to an estimated $225-275 million at the end of this year, with gearing rising to a relatively modest 17%.
Plexus Holdings
has finally bitten the inevitable bullet and released a whopper of a profit warning this morning. Phrases such as "significant slowdown" and customer projects being "delayed, postponed or cancelled" don't come easy to Plexus, whose model of hiring out kit would have meant that they had a slight advantage to others in the sector.
Indeed the POS-GRIP technology is used by many blue-chip customers, with more to come. This might have been worse if Plexus hadn't made moves to diversify away from the North Sea; the international business should ensure that the company will recover with the sector, but also proves it is not immune…
Sundry
has released a long update on its Chachahuen block in Argentina, which appears to be performing well, with 26 new successful development wells since June 2015 increasing production, making 97 wells onstream.
has confirmed that CFO Nicholas Mardon-Taylor is retiring on 31 January, as previously announced, and that the process to replace him is well underway.
has announced that it has secured a $100 million resource-based lending facility from JP Morgan, with an initial draw of $15 million. Terms seem pretty tight at 200-300 basis points over Libor and it will be used to develop the Bone Spring play in New Mexico.
It is a shame that the company had to give away so much of the equity in its last refinancing, as this play remains one of the best in the US and Caza has a strong position there.
And, just in: report 31 cents a share, the same as third-quarter, and remain relatively upbeat under the circumstances.
"We are pleased with our fourth-quarter and full-year results in this challenging environment, as once again we outperformed our peer group in North America and international revenue, both sequentially and on a full-year basis," said Jeff Miller, President.
"Total company annual revenue of $23.6 billion declined 28% year-over-year, outperforming a 35% decline in both the average worldwide rig count and global drilling and completions spend."
And finally…
Good news from the Australian Open tennis, where wins for Johanna Konta and Andy Murray ensured British participation in both men's and women's quarter-finals for the first time since 1977. Also note that Miles Raonic beat Stan the man, which is interesting in that side of the draw…
The cricket is so predictable; after winning the Ashes I spent a long time watching 11 blokes with hangovers chasing the ball around The Oval in a dead rubber and this has been much the same. It may be a draw, but probably not, as there's still a day and a bit to go.
One for the statisticians: will AB De Villiers go down as getting a pair in his last test match for South Africa?
The Premiership weekend was fun unless you were at the Theatre of Bores; the main game was clearly at The Emirates where the Gooners simply had to turn up to beat Chelski. It didn't go like that and, with an early sending-off and Costa scoring to make Arsène see red twice, the Gooners dropped the points.
Canaries four, Hubcap Stealers five was the match to watch, although one doubts if one should lose, having scored four…
The Hammers held the Noisy Neighbours in a real thriller on Saturday evening. Elsewhere Spurs and high-flying Leicester keep the pressure on, taking all the points.
The Broncos edged out the Patriots in a thriller after New England failed on a two-point conversion to take the game to overtime. Brady was kept quiet by a stunning Denver defence led by the relentless Von Miller, who had 2.5 sacks.
They will face Carolina in the Super Bowl, after Cam Newton led his side to a crushing victory over Arizona. The Panthers, however, will pose an entirely different threat from the injury-hit Patriots and the Broncos will do well to keep Newton as quiet as they kept Brady.
This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.