Posted by Malcolm Graham-Wood - Malcy's Blog
Another up day yesterday and this time for choice the fundamentals were poor, the EIA stats showed a build of 118/- barrels against a forecast of a draw of 2.2m. Products were better particularly in gasoline which drew 900/- barrels when the API had a 1.4m build. This was partly due to the start of the hurricane season with Cindy and Dora shutting in some production, also domestic US production was down 100/- b/d (45/- b/d from Alaska maintenance) which was better, but temporary news. The vampire squids confirmed their bearish stance by predicting $45 oil through next year or until the market balances. Finally, as I mentioned yesterday with so much of a bear position having been built up, the advent of the end of month, quarter and half and of course Brent expiry must make the chance of short covering more likely.
A pretty grim trading statement from WG this morning which is in effect a profit warning after a half in which a reasonable performance from the west was offset by a poor one from the east, particularly the North Sea. Expected margin pressure (sp NS) and in places like the GoM where prices were being ‘nibbled at' and clients continued to not pay on time…This half was ‘weaker than expected' and the company is now ‘more cautious' than before although the the second half is expected to be better.
Better news also as the CFO on the conference call (which was a shambles as operator hadnt asked any of us who we were before the call!) said that there had been a meaningful pick up in tendering for offshore projects and that this was a WG thing, not an industry thing. The company did announce a contract win for Husky this morning offshore Eastern Canada but it seems that industry conditions remain hard going. With regard to the AMEC deal, subject to regulatory approvals it is still on for 4Q 2017 although I wouldnt be surprised to see that delayed somewhat. Caution is clearly the watchword at Wood Group and although the AMEC deal should be a steal for the company times remain particularly hard and watch that debt figure.
Results today from SRSP which are meaningless but showed a loss, the period and since have been busy as the company carry on with their offshore development strategy. The company have in that respect signed a number of contracts with companies such as Add Energy, COSL, Schlumberger, Polaris and Tidewater Marine so progress is being made. They also commissioned a CPR which has resulted in a NPV10 of $49.2m and during and after the period end raised £3.85m of equity although a much bigger raise will be needed if the Ororo field is going to be drilled. They have done remarkably well so far but this will be the biggest hurdle, the market has a scepticism about Nigeria and the climate is tough but Sirius has done well to get this far.
The Lions team for Saturday has been announced and Gatland has clearly panicked, dropping Teo to bring back an out of form Sexton seems odd but worse the worst lock on the tour, Alun Wyn Jones gets a nod over Kruis, Lawes and Henderson, the All Black camp will be celebrating already…
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