Opinion

Oil price, Egdon/Europa/Union Jack, Trinity Exploration & Production, Range Resources, Sundry- Amerisur-Ascent Resources- And finally...


Oil price

The conflicting pressures on the crude price at the moment remind me of the rhyme, Patience is a virtue, virtue is a grace, Grace is a little girl who didn't wash her face. At the moment the bears are winning as the downward pressures are mainly short term, Libya (which will surely go wrong again), Nigeria (ditto) and of course the ‘C' word. Which is of course cheating and figures out have shown that adherence, which is a much nicer way of putting it, has come down to 90% and the Russians are getting the blame…

The bulls news is all rather longer term although the API inventory stats last night did help and after hours and this morning crude is up around 60 cents. Crude drew 4.2m barrels v a forecast of 2.3 and the gasoline draw of 1.9m b's appeased last week's bears. Let's see if the EIA is comparable tonight. The other longer term bull argument is that with demand still pretty strong I expect to see a decent draw in world stocks 2H this year, particularly if the agreement is rolled over on May 24/25. Let battle commence…

Egdon/Europa/ Union Jack

Not new news but the participants in Wressle wanted us to know that after the disaster that was North Lincolnshire Council throwing out the planning application, it has now been re-submitted. With a wave through expected we are told to expect validation in a couple of weeks as the specific concerns have been addressed.

Trinity Exploration & Production

Results yesterday from TRIN which as is always the case, old news, however there were a couple of points worth drawing from the numbers which make the investment going forward an even more interesting one. Production numbers are fine, indeed being down only 10% at 2,542 b/d on no spend, is nothing short of remarkable. Guidance for this year is 2.6-2.8/- b/d and the target is 3/- b/d. I think that this is very achievable as with recompletions and swabbing as well as four wells to be drilled this year and four next should easily cover production. 2P reserves were up at 21.3m bbls even after 0.9m of production and 0.8m of divestments which again is creditable and shows the quality of this portfolio.

Cost cutting, like others in the industry is impressive although I am sure that TRIN had a greater incentive than most to make cutbacks, they must be paid less that one of Diane Abbott's coppers at this rate. Opex is down 29% at $15.6m and the G&A cost is down 61% at $4.2m, whilst the most impressive is the, ahead of target, cut in operating cost per barrel from $47 to $29.

Recent history at TRIN doesn't do the company justice and its roots in country go back further than most, some assets onshore go back to 1998 and the company have drilled many wells and will drill many more. It is probably wise to treat the last couple of years as a watershed in the company's life, without the support of its workers, stakeholders and of course the Government, lesser companies  would have undoubtedly folded, it has come back stronger as a result of it all. That leads to the recapitalisation  in January where the company raised $15m in equity and convertible and settled its outstanding debts, thus transforming the business. It now has a hugely supportive shareholder base and a strengthened board although credit should mainly go to the Dingwall/Mackenzie team for ultimate survival.

Perhaps because of the recent difficult times, which is entirely understandable, the valuation of Trinity is way below a number of its peers and is out of kilter, I will reassess this stock after it has tripled which is no less than it deserves…

Range Resources

Still in Trinidad I notice that in my absence yesterday RRL put out a notice that they had signed an SPA for the repurchase of the RRDSL drilling company. The deal looks even better now as the repayment terms have been amended significantly making them less and later than planned, payments starting in 2020 give Range every chance to succeed with this business pretty soon. The shares remain suspended as this is an RTO but should return a good value play.

Sundry

Also yesterday Amerisur took the chance to publish April production figures which at 4,845 were around 500 b/d up on March. With production and reserves increasing all the time and the OBA now taking over 5,000 b/d the economics at AMER look better and better, just think what it might be like if a few of the planned wells come in…

Ascent Resources also announced that they were preparing to produce gas from the Pg-11A well at Petišovci, this should take around four weeks and be a modest but important step in the right direction.

And finally…

Not doing a blog on a Monday puts the sports report right up the swanny, I will miss most of it out i'm sure.

Despite Spurs beating the Gooners to finally confirm North London supremacy, Chelski winning as well has pretty much won them the title. With both Manc clubs dropping points the HubCap Stealers are set fair for a Champions League place proving that no midweek football helps something rotten.

The GP was fun to watch and may be a thing for this summer, having three potential winners at every race certainly makes it competitive…

And a great card at Sandown for the Whitbread Gold Cup saw Nicky Henderson with the trainers title on the last day of the season, Dickie Johnson had the jockeys equivalent sewn up weeks ago. Would you believe that next weekend it's the Guineas…?



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