Posted by Malcolm Graham-Wood - Malcy's Blog
WTI $47.20 +96c, Brent $57.24 +98c, Diff -$10.04 +2c, NG $3.73 -11c
A rally yesterday after a handy set of inventory numbers but oil is down again today after world markets did not like the rate rise from the Fed. The EIA announced a crude draw of around half a million barrels which after the API number looked good even though Cushing built somewhat. The highlight was the big draw of 4.42m barrels in distillate which pushed heating oil up sharply. When bears are thinking of huge US onshore production it would serve them well to look at last week's product demand, in the USA alone it was 23.33m b/d, something to keep the home fires burning I suppose.
Faroe have produced their response to the DNO bid, unsurprisingly ‘substantially undervaluing their high quality full cycle North Sea business'. They point out that the bid is only at a 1% premium to the undisturbed 3 month VWAP and at half the average premium paid on all UK takeovers in the last ten years. More telling is that is at a 45% discount to 2P reserves per barrel when taken against comparable portfolios traded recently.
They also point out that they have one of the best exploration track records in the NCS and that the Iris/Hades find is one of the largest discoveries in the world in the year to date. With the company fully funded to triple near and medium term production and a value creation record second to none, FPM has more potential upside than pretty much anything in its peer group. The company provides more details on the recent Equinor swap deal which is very positive and shows that Faroe can do M&A work with the best in the business.
This bid is indeed at best highly opportunistic but one can't blame a company for trying to improve its looks by buying a prettier rival. But the bid at 152p is derisory, bordering on insulting to its shareholders who have watched as the Faroe team build a proper business. There will have to be a significantly higher counter to succeed in this bid and given that the DNO stake was bought very cheaply, any bid for the remaining 72% odd would have to be well above 200p in my opinion and even then the logic for FPM holders to sell out would be pretty scant….
PPC has announced the formal signing of the Puesto Prado and Las Bases concessions and first oil is already being produced from the two Puesto Prado reactivation wells. Also, first gas from Estancia Vieja has flowed to Puesto Prado and will totally power the field by January, followed by testing of the next section of the pipeline which will enable commercial sales from EV including a reactivation programme at Las Bases commencing in the new year.
The good news just keeps on coming from PPC, recent operational success is now matched by M&A work being closed and leading the way to opening up of significant new opportunities for the company. Chairman Peter Levine calls it a sign of ‘diversity' and a ‘balanced platform for growth' as he describes the new assets and adding gas sales into the mix and he is not wrong. President is fast becoming a company with critical mass in Argentina and should be a requisite for oil and gas portfolios.
Range has agreed that it will pay its annual interest bill due on its convertible loan ($1.6m) by way of shares in the company. This preserves its cash position and issues around 1,684,140,384 shares subject to the 90 day VWAP. Overall this is probably in the best interests of both the company and LandOcean as the money is to be spent on the ground increasing production and cash flow.
Comment on Wentworth which also got lost in the South Western railways disaster that was Monday…
Wentworth has finally announced that it has relinquished its Tembo block in Mozambique. This comes as no surprise as whilst it had shown some potential it was no longer a place where one could do business, a view shared by other potential partners in the oil industry. WEN has also exited the country and after the market has settled down after all the recent changes in domicile etc will move on, from what I have seen of CEO Eskil Jersing 2019 should provide interesting on the corporate front.
In the Haribo Cup last night Spurs beat the Gooners and earned a semi final against Chelski, Burton get to play the Noisy Neighbours.
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