Yahoo Finance Malcy's Oil Report - CNE, IGAS, PMO, PVR
WTI $50.00 +39c, Brent $58.53 -$1.20, Diff $8.53 -$1.20, NG $2.68 -16c
Oil price
A very quiet day according to my trading contacts, even the Chinese trade data which provided a huge surplus of $60.62bn was explained away as 'bad data' given that Chinese New Year happened in January last year and exports over the first two months of the year were subdued.
WTI for once outperformed Brent as the Genscape inventory report suggested that the build up in stocks at Cushing may be tailing off, we shall see what the API and EIA say tonight and tomorrow. Retail gasoline continues to climb in the US, having reached a recent low of $2.04 per gallon it has now reached $2.49, those economic stats from last week, along with the refinery maintenance season might push that number up again.
Figures today from Cairn which show that last year the world class discovery in Senegal was a game changer for the company. Having said that the company reacted fast to the fall in oil prices with a 40% headcount reduction despite the company being busy in Africa, on Kraken and Catcher and having the distraction of India into the bargain. Senegal is clearly going to be were the company concentrates this year and over the next year or so they plan three firm wells, three options and a 3D seismic shoot.
Cairn has net cash of $869m and an undrawn RBL facility of $575m which will cover the 2105 exploration budget of $185m and development capex on Catcher and Kraken of $590m between now and 2017. By then I expect free cash flow from those developments, India is an unknown so not worth speculating on but the company remain unrepentant.
Cairn was one of the first on the notepad for the bucket list primarily due to Senegal but also due to the fact that the company is in a strong cash position, its current developments will enable it to take advantage of significantly reduced industry costs and will benefit should oil prices recover in the longer term. As such it remains a favourite and despite the rally from 143p the stock is significantly undervalued. And finally, Happy Birthday to Simon Thomson with whom I thus share the day, albeit him being much younger than me…!
Probably not one of the most difficult predictions I ever made but certainly the most accurate as IGas farm-out some of their UK acreage to Ineos who have made no secret of their ambitions in UK shale exploration. They have farmed-in to certain licences in the North West, the East Midlands and PEDL 133 in Scotland entirely, taking the operatorship here. Ineos will pay IGas £30m in cash along with a funded work programme of up to £138m of which Ineos pay IGas's £65m. IGas now has $285m of total spend from third parties on its acreage from Total, GDF and of course now, Ineos.
This looks to be a pretty smart move by IGas as apart from bringing in another major player into the UK unconventional play it also prints a valuation on its remaining assets. With 145 TCF in place and the transaction coming at $2.4m per TCF, plus the cash from the deal and what I can estimate is in the bank the number is well above the current share price. With the company's production of conventional oil more than servicing the debt even at current prices then the company has the breathing space to de-leverage if appropriate and of course the market's worries about an equity raise should now be abated. This is a step change for IGas as the last year or two have been harder than anyone might have imagined, but the Infrastructure situation is clearer, they have less exposure to Scotland where big Jim has more sway and the next 4/5 years is now pretty much paid for by others.
At the time of the Dart potential float, then potential listing, I said that Ineos might have stepped in and bought it out, this deal has meant that they get most of what they would have wanted and IGas are proved right about buying it themselves last summer when valuations were attractive, leaving them with parts of the portfolio that they now keep. As I suggested a few weeks ago, IGas well and truly come off the subs bench…I will tweak all these numbers when the maps and figures come out.
Sundry
Premier has announced first gas from Pelikan in Block A of the Natuna Sea offshore Indonesia. I have said before that I'm not sure Prems get the due credit for the work they do in this area or how well they sell the gas into Singapore and into the domestic markets. Clearly the Stock Market doesn't either but as they say, patience is a virtue…
Things go from bad to worse for Providence Resources as they note that Cairn have announced that the appraisal/exploration well on FEL 2/04 scheduled for 2015 has now been deferred with all sorts of reasons given. Provvies can of course change all this by announcing a farm-out deal for Barryroe but even I am not holding my breath for this one particularly as the farminee still has to raise the money….
And finally…
Ireland lost by plenty to India this morning but can still go through I think if they beat Pakistan, either way with the grown-up teams in the process looking fantastic the next rounds will be great to watch. Just think what an embarrassment England would have been, I hear that the selectors have come home to pick a squad for the West Indies test series in preparation for the Ashes summer, my heart sinks.
Arsenal dutifully beat Man Who last night in the FA Cup and avoid the HubCap Stealers in what will inevitably be the final unless you know better… Utd have looked to flatter themselves for the last few weeks and one might sell a few points and a Champions League place if one were brave…
And so, the Cheltenham Festival is on us and we have four days of watching Willie Mullins winners and Ruby Walsh's backside for most of the other jockeys. If you are down there have a pint of Guinness for me and as they say, enjoy the craic…
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