WTI $54.18 -88c, Brent (Jan) $59.62 -60c, Diff -$5.44 -11c, NG $2.63 -6c
I feel that yesterday things might have been worse, numbers from major producers, viz Saudi Arabia and the USA showed strong signs of growth. The Saudis to be fair are only back to their pre-Houthi strike numbers of 9.9m b/d in line with quotas bringing OPEC to 29.59m b/d whilst the USA, according to the EIA are now at 12.4m b/d.
December Brent expired with the January contract holding up pretty well under the circumstances.
A trading and operations update from Genel this morning, net production averaged 36,530 bopd in the first 9 months up 12% y/y and in line with guidance. Q3 was 34,720 due to reasons explained yesterday and 11 wells have been placed on production this year so far with another 5 to come in the remainder of the year.
What this means is that cash is pouring in with $287m proceeds received as of 30 September with $120m in Q3. This gives free cash flow of $121 million in the first nine months of 2019, with capital expenditure of $110 million with the 2019 number guided to the top end of the $150-190m range. This means cash of $413m (281) at 30th September with net cash of $115 million at 30 September 2019 (net debt of $16 million at 30 September 2018). The company are paying an interim dividend of 5c a share on 8th Jan 2020 and the company ‘reaffirms its commitment to growing the dividend’.
Despite this substantial capital expenditure, and a growing dividend that gives the shares a highly attractive yield of c. 7% the company are still able to continually look at opportunities for ‘value accretive additions to the portfolio. Genel, as we saw in the recent visit to Kurdistan is in a very strong position indeed, with the works at Sarta already completed and the CPF cracking on production here is likely to be mid 2020. The company has already announced a rig for Qara Dagh and is continuing to negotiate with the MNR with regards to Bina Bawi.
It is difficult to argue with CEO Bill Higgs who comments today ‘rapid payback from our low break-even assets gives us resilience and significant flexibility in regard to future capital allocation. The sustainability of our cash-generation provides opportunities to deliver material shareholder value through investing in growth and increasing returns to shareholders.’ Genel is uniquely placed with massive and growing cash flows capable of investing in the portfolio, engaging in M&A and paying a substantial dividend, what’s not to like?
News from President this morning that they are ready to start deliveries of gas through its own pipeline as well as building a new 16km pipeline to increase capacity. They will then be able to pipe gas from the Estancia Vieja and Las Bases fields and, permitting agreed will also take gas from the recently acquired Angostura block come January. This would be 30,000 m³/day from EV and LB blocks rising to 100,000 m³ in due course.
In Louisiana the company report that after floods shut-in production down to 75 boepd remedial work has now tripled production to 275 boepd as the Triche well stages a recovery. Chairman Peter Levine states that ‘ the significance of gas from EV and LB should not be understated’. Operationally President is doing very well but politically it has been affected by all things Argentine, it really does deserve a break and with this increased production the shares are woefully too cheap.
It is worth taking a look at the Block Energy share register after another TR 1 this morning where Jon Fitzpatrick, a well known predator in the oil and gas sector has announced that he has taken a 3.82% stake in the company. If you then go to the shareholder list of Block you will see that Alistair Ferguson has a holding of 5.21% which together finds them now holding around 9% of the company. Watch this space…
Mr Fitzpatrick is known as a keen M&A practitioner and of course also has a large stake in Solo (Scirocco) where Mr Ferguson is the Chairman…might there be something going on, we shall have to wait and see….
An uninspiring weekend of footy, Liverpool are at the Villa, the Foxes are at the Eagles, the Toffees miserable form may continue as they host Spurs but the one to watch is the Noisy Neighbours entertaining the Saints who after shipping 9 last week at home must be bricking it.
Its the US GP in Austin on Sunday, Lewis must surely clinch the title this time…
Jump racing is properly back in business now and the rain has helped, tomorrow there are good cards at Weatherby and Ascot.
And of course it’s the RWC final in Tokyo with England taking on South Africa. The 3rd/4th playoff was was won convincingly by the All Backs by 40-17.