The Oil Man: BP, Victoria, Ithaca, Egdon
26th April 2016 12:51
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WTI $42.64 -$1.09, Brent $44.48 -63c, Diff $1.84 +46c, NG $2.06 -8c
Blogs later this week may be a bit patchy, I'm afraid, with company meetings in and away from the UK.
The WTI price took the brunt of the fall yesterday, primarily due to the Genscape figures pointing to a 1.5 million-barrel increase in the stocks at Cushing. As I said earlier, inventory numbers are pretty key at this time of year and have to be watched carefully; these numbers don't bode well for American Petroleum Institute or Energy Information Administration stats later in the week.
Elsewhere, it was news from the Kingdom of Saudi Arabia that teased the market; it has announced it is to expand the Shaybah field this quarter and expects to increase capacity to 12 million barrels per day, which, if accurate, would not be helpful, but would serve to irritate Iran.
It has also made a preliminary announcement regarding the IPO of Saudi Aramco as part of the "Saudi in 2030 Vision", whereby it is valued at $2 trillion (£1.4 trillion) plus and they sell a stake of less than 5%.
BP
First quarter figures from this morning, which beat the whisper but were still very mixed. Interestingly - and in line with my comments in the last few months - lower costs have now more than offset weaker oil prices and BP is confident about the cash flow figures, at least in the short-to-medium term.
Bo Diddley appears to be backing down from the "lower for longer" or even "lower for ever" by saying "robust demand and weak supply growth will move global markets closer into balance by the end of the year".
Welcome to the real world, Bobby - unfortunately the last quarter has not been about the figures, but about the scandal of his $20 million pay packet, for which responsibility must lie with the non-executives and the committees upon which they serve. Not suitable for a major, if that is what BP are trying to be…
Egdon Resources
Interims today from , which, for some reason, the market hasn't initially liked the look of. The numbers themselves are not that relevant and I would suggest that the nine licences received in the 14th round, which increased their acreage by some 50% in favoured areas, were good news.
Wressle is also set to proceed this year, achieving production in the second half, which will be helpful. Drilling at Holmwood is imminent and, as it is adjacent to the Horse Hill oil discovery, it will be closely watched.
The company has £5.26 million of cash and no debt - so about ok there - but they rarely miss a chance to raise money if the ducks are quacking, albeit not necessary at this stage.
A minor point is that I would prefer to see the statement by Mark Abbott, who knows what's going on - but the chairman has to do something occasionally, I suppose.
Although the Egdon price has been in the doldrums lately, the company is doing all the right things; Wressle will bring in revenue, Holmwood adds some exploration and the portfolio is now full of things to work on.
Victoria Oil & Gas
I reported last week on operations outlook, but commented that I was meeting the company, so would come back with more after that.
I met with Kevin Foo, Laurence Read and Ahmet Dik, who is the CEO of Gaz Du Cameroun, VOG Director and seemingly heir-apparent. With such an array of main board open to me, I have to say that it was a very good meeting and we fleshed out a number of points from the statement during the session.
Dik seems very impressive and just who the company needs to be in control in Cameroon - very much "hands on" and, if there was any complacency from suppliers or contractors before, I strongly suspect they have been disabused of it in pretty short order.
Work on the Bonaberi pipeline continues apace, with speed increasing, especially as they move out of the city; a perfect example of cutting costs is the use of open trenching and sharing expertise with road builders.
To go with this expansion, the company has signed more Gas Sale Agreements and are approaching all sorts of potential clients for their gas; this area looks very promising.
The key to providing feed-stock is the drilling campaign on the Logbaba field; the large photographs of the site show just how much work has already been done in preparation and the scope for further expansion.
VOG looks in a good place to me and appears extremely undervalued on most any yardstickThese wells are very important and, as with other areas of the industry, costs are down dramatically. There has been significant renegotiation, leaving VOG with very favourable terms indeed.
The advantage of drilling success is not just to supply gas, it will move 2P reserves into the 1P category, thus increasing the value of the portfolio.
Drilling should start in late second-quarter; expect 180 days in total and at a cost of less than $40 million, substantially less than previous estimates. In addition to all this, the Logbaba gas plant, which is adjacent to the drilling site, is already expanding and in stage one of the process.
The recent purchase of the Matanda block from is significant in that it shows that the company's plans for the future are very much underway.
Matanda dwarfs Logbaba and is two-thirds onshore and one-third offshore; I suspect that the offshore bit will be farmed-out or at least stay on the back-burner for a while.
The onshore part, though, is already seeing some action, although the company points out that it is very definitely to be done after Logbaba. Having said that, by the end of this year, there will be a good idea about seismic work and other activity, making first-quarter 2018 a likely probability for drilling the prospect.
Financially, VOG are in good shape: revenues will rise again modestly in the second quarter and, although there will always be wet season/dry season factors, they are doing all they can to mitigate that.
At the quarter end they had net cash of $4.6 million and since then they have signed a $26 million debt facility with BGIFI Bank, of which around half has been drawn down.
In conclusion, I would say that VOG looks in a good place to me and appears extremely undervalued on pretty much any yardstick; as an explorer, a pipeline operator and a utility selling to a wide range of customers in a market where there appears to be no end to potential demand, what's not to like?
Ithaca Energy
recently hosted a trip to the shipyards of Gdansk, where the infamous FPF-1 modifications are being completed. I say "modifications" but, if you look at the "before" and "after" pictures, they might have virtually rebuilt the rig from the legs upwards.
After all sorts of delays, the current programme remains on track for a May or June sail away and first hydrocarbons in second-half 2016.
Ithaca is an absolute favourite in the bucket list due to its outstanding management, rigorous cost control, effective hedging policy and resultant strong cash flow. With a placement raising $66 million to Delek last year at a 39% premium to the share price, IAE exhibits all the characteristics required to remain right at the top of its peer group - and more.
Sundry
Expecting results from yesterday? They're now on 3 May; all sorts of skulduggery is being surmised as they try and rescue the bid…
has announced that it has raised $5 million, at 52.05p, from LLC Gusar, as it accelerates its Russian roll-out - which manages to avoid any sanctions.
The area is, along with the Middle East, still showing some growth and, with partners Gusar and Konar, Plexus are addressing the wellhead market, with an additional licence to enter the larger and more active platform production wellhead equipment markets.
Finally I notice that , which I mentioned last week, has increased the London private placement from $6 million to $8.25 million; I find this stock most interesting to keep an eye on.
And finally…
So, have Spurs blinked first after they dropped points in their one-one draw with the Baggies last night? Not completely done, but Leicester will probably get more than one bite at this particular cherry yet…
Tonight it's the Noisy Neighbours taking on Real Madrid in their semi-final first leg, certainly one to watch…
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.