WTI $53.95 -$4.63, Brent $60.50 -$4.55, Diff -$6.55 +8c, NG $2.20 -3c
And with one mighty text, the President blew the modest froth off markets and the oil price was no exception except that by strengthening, the dollar meant that oil suffered more. Yup, trade wars are back as the President slapped a 10% levy on another $300bn worth of goods, effective 1st September, there can’t be much left now without new taxes on them. This is hardly going to go down well with China who is currently still buying Iranian crude oil even if it is held in bond.
This morning we have regained a fair bit of the fall with as I write, WTI up $1.26 and Brent rising by $1.61 but will it hold? There is ample evidence that the Middle East is still a tinderbox waiting to go off so the downside is probably somewhat limited.
Just reporting an error in Wednesday’s blog in which when discussing the arbitration hearings I messed up. In its update the company made it perfectly clear that a ruling was expected ‘at the end of the year’ and I wrote that it would be in September. As pointed out below it is the post-hearing submissions and responses that should be in September not the ruling, my apologies.
The end June quarterly report from Far is out and makes good reading pretty much across the board. They went into the 2H stronger financially after a raise of $31.5m at 5.5c, a discount of only 1.8% and showing continued support from major shareholders. This gave the company $35.8m of cash at the quarter-end. Right now the fast and furious work on the Senegal FEED is happening and the FID for the development is expected in Q4.
Planning and purchasing of long-lead items for drilling in The Gambia and Guinea Bissau is being undertaken with plans for drilling in 2020 and the company are finalising the seismic operations on the NW Shelf permit. Arbitration hearings took place in July and post-hearing submissions and responses should be in by the end of September with a ruling currently expected by the end of the year.
With Senegal pushing ahead nicely and FID expected this year along with a massive two rig development drilling programme scheduled to start, Far are in a strong position. With at least three other targets as mentioned above for exploration prospectivity there is plenty of upsides and once the bits and pieces of news from Senegal are tidied up there can be a newly structured financing plan for the SNE development. At 6.5c the shares have significant prospective appeal and provide an attractive entry point for what is still a very ‘hot’ area in worldwide oil and gas, viz West Africa.
A mixed report from Lamprell this morning, whilst there appears to be quite a lot of work it is yet to be quite enough, certainly not to make any progress this year at the bottom line. The final Belfast based assembly of the final jackets for East Anglia One is now completed and all 60 are installed and discussions are ongoing about closing the contract.
The Moray East project is progressing well and in line with schedule and benefiting from recent project efficiencies. Rig refurbishments continue to attract a good flow of work, 1H 2019 saw 9 projects completed and 8 rigs are in the yard for various works while 2 contracts have been made for the second half. With 12 rigs stacked, mainly warm stacked, a gradual ‘albeit small’ increase in the scope of work performed is expected.
Construction at the IMI yard in the KSA is progressing and all four fabrication zones are expected to be commissioned for operations in late 2022. Net cash is down to $50m at 30th June but should improve by the year-end due to the timing of payments on current projects whilst the imminently expiring debt facility has been extended to December whilst a new one is negotiated.
Revenue guidance has been ‘narrowed’ to $275-350m with the low end 100% covered and any upside is ‘contingent on new awards’ which may be optimistic. as a result ‘there will be no year on year improvement in financial performance due to contract award delays and ‘the retention of the capability to execute the expected pipeline of new business’ whatever that means. (getting more orders?)
The bid pipeline is still strong at $6.3bn but the pace of new orders remains slow hence the caution, but in renewables and from Middle East customers inland rigs and jack-ups the company have seen some early interest. Lamprell has always been a roller coaster ride, nowadays it is less so but still incredibly dependent on what can be a flaky order book. With the Saudi yard bringing long term stability there is still plenty of hope for the future and those going on the company visit in October will hopefully bring back better news.
Glorious Goodwood continues, today sees the King George Stakes where the flying sprinters run down the hill, probably headed by Battash. Tomorrow sees the Stewards Cup as well as the Group 2 Lillie Langtry Stakes.
And the last F1 GP before the summer break at the Hungaroring where surely there can’t be as much carnage as last week in Germany. In practice this morning Lewis is fastest with the Ferrari’s behind him and Bottas still in the garage looking at a new engine.
And yes, it had to happen, football is back this weekend. In England, the ‘showpiece’ Community Shield is between Liverpool and the Noisy Neighbours on Sunday after a full championship fixture list on Saturday (and Luton v Boro tonight, I know there are Hatters out there!). In Scotland, the SPL gets underway with the mighty Saints having an easy start away at Celtic.
And the Test match continues at Edgbaston, yesterday Smith got the Aussies out of a bind and this morning as I write England are 64-1.
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