WTI $43.39 +4c, Brent $45.64 -22c, Diff -$2.25 -26c, NG $2.46 -3c

Oil price

Hurricane Laura has arrived onshore on the Texas/Louisiana border but has already been downgraded from a category 4 to a 3 so whilst it still maybe ‘unsurvivable’ it appears to be weakening.

Having said that it will have already had an effect on GoM production to the tune of around 1.56m b/d, some 84% of offshore production and the refining ‘cluster’ from Houston to Lake Charles has reported a 50% reduction in output.

The EIA inventory stats will now be all over the place for some weeks but last nights number will stand as being very positive everywhere except for distillates which shouldnt surprise.

Crude stocks drew by 4.7m barrels and gasoline fell by 4.6m whilst distillates rose 1.4m barrels. Refining capacity was 82% and inputs were 14.7m b/d up 225/- b/d w/w with gasoline up to 9.5m b/d. The big plus was that total US product demand was up by 2.46m b/d to 19.6m b/d.

IOG

Today’s interims from IOG are pretty meaningless in the big picture but the strength of the balance sheet is worth noting, cash of £104.1m (£31.6m unrestricted, £72.6m restricted) gives a group net cash position of £9.2m. With the CalEnergy carry IOG only pay 10% on Phase 1 capex.

Elsewhere the presentation concentrated on the safe and effective execution of Phase 1 as the company advances towards the target of first gas in Q3 2021. Key contracts, a focus on costs and the schedule still remaining on time, leads to a lean and efficient process which is helped by a ‘constructive partnership’ with CalEnergy and for IOG cashflow over the coming year.

Progress updated today included two Phase 1 platforms for Southwark and Blythe on time and scheduled to be completed in Q1 2021 and installed in Q2 2021.

SURF activities are in good shape since the contract award to Subsea 7 in May 2020. The company are in the tendering process for a jack-up rig to drill 5 Phase 1 wells which is ‘well advanced’ and a contract award is imminent.

Onshore, refurbishment work is underway at the Thames Reception Facilities (TRF) at Bacton Gas Terminal (BGT) and tie-in activities are scheduled for the BGT regulation shut down later this year.

The value creation slide is busy but worthwhile spending some time studying. It covers the Core Hub Development, technical evaluation of discoveries in the knowledge that there is plenty of space in the pipeline, as well as possibility of 32nd round gains, redevelopment of nearby shut-in fields and finally potential acquisitions.

IOG continue to tick all the required boxes, in their own gift is operational hard graft with its contractors, at present leading to delivery targets remaining on time. Outwith its gift is the gas price which you wouldn’t want to predict until next week let alone Q3 2021 but at the moment a combination of events has the gas price back up to $2.50 as forecast…

There is no reason to believe that the salient parts of its model will not work in its favour and so a low carbon offering of domestic gas for the country’s power by next year has considerable appeal.

If that is the case then a market cap of C. £70m looks like its been overly discounted by the market, this could be the poster boy of the green, green gas of home…

Hunting

There is no doubt that it has been a grotty time for oilfield service companies where the perfect storm in March has left a trail of grief in its wake. With its exposure to the domestic onshore drillers and the rig count falling exponentially it didn’t look good but yet again Hunting are sounding cautiously optimistic.

The interims don’t make pretty reading but are in line with management expectations with revenues of $378m ($509) leading to a reported loss of $183.6m ($41.1m profit) but a very creditable positive EBITDA of $28.4m. ($77.4m) I suspect that it was this that encouraged the payment of a modest 2 cent dividend for the period.

The company had cash at the bank at the end of June of $48.8m and the $160m revolver is at present unused. Given that Hunting has continued to trade at or near to break-even at the EBITDA level since March 2020 it will be able to ‘respond rapidly to improvements in activity and market improvements’.

The company continue to manage those business inputs that are in their
control, which include tight controls over our cost-base, cash flows and inventories, all of which continue to move in the right direction. Hunting are past masters at cutting costs whilst at the same time continuing to invest in new products or production facilities.

With the comments at the meeting that the onshore market in the US ‘could be the bottom of the market’ with signs of improvement in the 4th quarter, as well as their ‘re-balancing of the product offering  to areas of the market that are less sensitive to movements in commodity prices’ Hunting look well placed.

The company has flexibility and resilience and with its strong and competitive balance sheet is on a robust footing financially. I would back Titan to get back into profitability any time soon, if there are better businesses out there I havent seen it…

Getech

A pleasant surprise from Getech today with its pre-close update, costs are down 26% wef May 1st and the order book continues to unwind to revenue without negative revisions.

1H revenue is expected to be c. £2.1m (£2.5m) and new forward sales totalled £1.4m (£1.6m). These sales have ‘almost completely’ replenished the order book which totalled £2.9m at 30th June. For sales read both annual and multi-year license renewals, as well as new customer wins.

As a result Getech expects to report a ‘modest EBITDA profit in H1 2020’ which is a very fair performance in this market. Cash at 30 June totalled £2.8m and the company raised invoices in June and July so cash is currently £3.4m with £0.5m in receivables due. The shares celebrated with a decent rise after these better than expected numbers.