The Oil Man: Tullow, IGas, Range Resources, BP/Ineos
17th March 2017 11:17
WTI $48.75 -11c, Brent $51.74 -7c, Diff $2.99 +4c, NG $2.90 -8c
All quiet on the oil price front, although the IEA report was marginally positive, suggesting that OPEC is at 98% of quotas and although they cut their world oil demand growth for this year a touch. The main supporter of the OPEC output fall is the KSA who are leading by example having reduced way more than their quota and the Russians are taking their time to adhere fully.
Tullow Oil
has come to the well again, this time the equity market, where it has announced a 25 for 49 rights issue at 130p to raise £607 million. At a 45% discount the shares were fully underwritten which is no great surprise, a good deal of hands being rubbed together at the long list of associated investment banks.
The money will shore up the finances which are now looking a lot better than they were and, with the debt restructuring and asset sales, the balance sheet is almost unrecognisable; it even has cash coming inwards.
On the subject of asset sales, the company announce that CNOOC has exercised its pre-emption rights in the farm-down to Total in Uganda and will take 50% of the deal which, of course, doesn't affect Tullow.
Tullow came out of the bucket list in January at 315p having been one of last year's best performers, up 203% on the year. I didn't see this coming, but did feel that such a performance in a £3 billion market cap stock would be difficult to repeat.
It won't go back in yet, but shareholders who sold at that price would find it easy to buy back at this morning's 202p, those who didn't sell can take solace by being offered fully underwritten stock at 130p, knowing that part of their money is going to underwriters, what a scam.
IGas
After all the traumas of the past year or two there will be a modest celebration at today and it will be fully deserved, it could have gone the other way.
The company has completed its refinancing with the final terms being a raise of $55 million at 4.5p of which Kerogen accounted for $35 million and to totally mix all the currencies there was another €5 million raised from existing shareholders under an open offer.
It is good to see that IGas has received support across the board, although the equity holders have suffered incredible pain during the process. The UK onshore has taken a long time to deliver, but with all participants still just about in the game drilling these prospects may actually start to pick up this year.
Range Resources
Nothing in the interim update that we didn't already know. Revenue was in line and the loss after impairments as expected. Production remains at 495 b/d, but is increasing fast particularly as the waterflood projects are moving ahead with one in production.
The shares are suspended at present owing to the recent rig deal being a technical RTO, but the management are still talking about making 'value enhancing acquisitions' which, should they come off, make Range a most interesting prospect for 2H 2017. With the balance sheet in much better shape after this deal, which should increase efficiency and reduce costs, the outlook looks increasingly optimistic.
Sundry
The FT reports this morning that Ineos is in discussions with to buy the Forties pipeline system, historically an extremely important part of the North Sea infrastructure that carries 40% of all UK oil production. The deal makes sense all round as Ineos needs certainty over supplies to Grangemouth and BP are looking to sell such assets.
And finally…
It's a huge weekend of sport starting today with the Gold Cup at Cheltenham appropriately on St Patrick's Day, and very best of luck to you all down there, wish I was with you!
And, of course, it is the denouement of the Six Nations rugby Championship where England travel to Dublin already in possession of the title but, as ever, with much to prove. Before that Scotland host Italy which is the most improved side versus the worst and you couldn't really believe that the Jocks have sacked Vern Cotter after such a good run. Sandwiching those games Wales are in Paris and as the master used to say, I love Paris in the Springtime…
As for footy, the Red Devils went through in the Boropa Cup last night and along with the Foxes are the only representatives in today's draw for either cup. Who would have believed it?
In the Prem this weekend the outstanding fixture is the Noisy Neighbours taking on the HubCap Stealers, god only knows what that will provide for the fans. Elsewhere, Spurs host the Saints, the Gooners are at the Baggies which they love, Chelski are at the Potters and Boro host the Red Devils.
This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.
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