WTI $47.82 +20c, Brent $51.08 +32c, Diff -$3.26 +12c, NG $2.68 n/c.
Oil rose yesterday on the back of EIA stats that were markedly better than the API numbers the night before. Crude drew by some 3.1m barrels, better than the scribblers guess of 1.9m. With a major winter storm ravaging the North East there will be few sensible inventory numbers for a week or three now.
Whilst many commentators are still negative on oil, and the short term numbers are still somewhat negative to be fair, I am taking a much more positive view for next year. I think that the vaccine cavalry is coming over the hill and expect significant growth for crude oil next year from booming economies in the far east which is happening now and followed by the EU and the USA.
The Bucket List from yesterday was to a large extent predicated on a modestly better oil prices, my forecasts have not changed for 6 months but now, whilst $40 for 2020 doesnt need much change I am going from $50 to $55 for next year.
A year-end update from Hunting this morning and to the end of November revenue was as expected, slightly lower with cautious client capital spend and the usual seasonal slowdown. (Markets traditionally close post-Thanksgiving).
Jim Johnson, Chief Executive of Hunting, commented:
“As the Group approaches the year-end, market indicators including the WTI oil price, the onshore rig count and the number of active frac crews in the US, have all shown modest increases throughout the quarter which will support activity levels going into the New Year. With this market backdrop, coupled with a significantly lower cost base, where c.$81m in annualised savings have been achieved in the year to date, management anticipates an improving performance for the year ahead.
“The Group’s actions to restructure our global businesses during 2020 will also lead to further efficiencies being recognised as activity levels ramp up. With the closure of our Canada manufacturing operation and partial divestment of our Drilling Tools business, coupled with further consolidation in Singapore and USA, our business footprint is leaner and better positioned for the forecast return to growth. Our year end headcount will be below 2,000 employees, or a reduction of 34% since the start of 2020.
“Hunting continues to develop and launch new products and technology to clients. In the year, 39 new patents were successfully issued globally, supporting the Group’s strong intellectual property portfolio. As highlighted previously, efforts to develop non-oil and gas related sales continue throughout the Group.
“Our efforts to reduce working capital in the year have been successful which has led to a cash and bank position of $94m as at 30 November 2020. Inventory levels continue to decline, and will likely result in a closing position at the year end of below $300m.”
Hunting remains a key pick in the oilfield services area and although US onshore is expected to remain relatively subdued next year I expect the strong management to deliver the company’s quality product offering across the globe in 2021. With cash of $94m in the balance sheet, enough to cover a modest buy-back Hunting is as good as it gets in the area.
Echo has secured a new contract at a premium to prevailing spot market rates with a key gas customer from the producing Santa Cruz Sur assets, onshore Argentina for four months until end April 2021 pursuant to which the Company will supply the customer with approximately 1.8 MMscf/d gross (1.3 MMscf/d net to Echo) of natural gas.
‘In the absence of the new contract these volumes would have been sold to the spot market. The gas price under the contract is a flat $2.00 per mmbtu representing a significant 26% premium to the prevailing local spot price in November 2020’.
I notice that the company has announced an indicative proposal from Remus Horizons PCC Limited at 2.1c per share. Having only just seen Remus on the move in PetroTal the company is clearly opening its shoulders.
Trinity has signed an MOU with the NGC of Trinidad & Tobago to ‘explore and develop new projects to enable energy transition in Trinidad and, potentially, in the wider Caribbean and Latin America’. This collaborative initiative is part of Trinity’s and NGC’s wider growth strategies; aiming to derive further value from existing licences, to establish a broader portfolio of energy assets via acquisition and partnerships, and to challenge and further reduce carbon output.
Bruce Dingwall CBE, Executive Chairman of Trinity, commented:
“Our traditional core onshore and offshore production assets provide a strong foundation for growth, but this partnership with the NGC potentially introduces new ways of operating, powering and monetising those assets which are truly exciting. This partnership is expected to be a great ‘enabler’ to Trinity becoming a new type of energy business which is at the forefront of the Energy Transition agenda.
“Automation and transition technologies are bringing a new dimension to our existing operations, and we will continue to advance opportunities to broaden our portfolio and create further value as we further scale the business. We believe that this MOU is an important milestone for the Company, and look forward to working alongside the NGC on these exciting new initiatives.”
Cairn has announced as a result of their departure from Senegal that they are to pay a 32p per share special dividend. This is around $250m or GBP188m of the proceeds.
A pre-close update from PFC yesterday morning, trading was in line with expectations for 2020 in a difficult environment and challenging market conditions were mitigated by ‘swift actions to protect margins and conserve cash’. New order intake of US$1.4 billion in the year to date reflects ‘broader industry dynamics’ but the company remains strong with liquidity of c.US$1.0 billion at 30 November 2020.
Petrofac has cut an extraordinary amount this year, and is taking additional measures to increase 2021 cost saving target to c.US$250 million a significant cut. The company are truly focused on conserving cash for when the recovery happens. Whilst orders have inevitably been low this year at 1.4bn there is an incredible $42bn in the pipeline by 2021.
Ayman Asfari, Petrofac’s Group Chief Executive, commented:
“The COVID-19 pandemic and collapse in oil prices have had a material impact on our industry in 2020. Notwithstanding these unprecedented challenges, we have continued to deliver for clients whilst doing everything within our control to protect the health and wellbeing of our people. We have also taken decisive action to protect our balance sheet, liquidity and the long-term health of the business. All these actions have protected margins and cash flow, and the Group is trading in line with expectations as we approach the year end.
“Of course, the near-term economic outlook remains unclear. Clients are delaying awards and adopting tough commercial positions. In this environment, our strategic priorities are clear. We are focused on conserving cash, cutting costs and rebuilding backlog, while delivering operational excellence. In the very near term, we are taking additional measures to reduce costs further in 2021 while preserving our core capability. These measures – together with a strong bidding pipeline, our long-established position in attractive markets, our track record for delivery and a sharp focus on competitiveness – will position us well for opportunities when the market recovers”.
United Oil & Gas
I spoke to UOG CEO Brian Larkin on my Core Finance interview yesterday, a fascinating chat and Brian and the company has had a good year with more to come in 2021. Here is the link…
Core Finance CEO interview: Brian Larkin of United Oil and Gas
Bucket List 2021-Erratum…
Thanks for the feedback after the Bucket List yesterday and of course the awful mistakes! I can just about forgive making Union Jack Energy not Oil, apologies David but making Scirocco part owners of Lithium-1 not Helium-1 was signs of a scrambled brain, apologies guys!
Plenty of midweek footy, on Tuesday Wolves beat Chelski 2-1 and the Noisy Neighbours drew 1-1 with the Baggies. Last night the Gooners drew 1-1 with the Saints, Leeds beat the Magpies 5-2, the Hammers and the Eagles drew 1-1 and in the top of the table match Liverpool snatched a last minute winner, 2-1.
Tonight sees the claret and blue derby between Villa and Burnley and the Blades entertain the Red Devils.