Good morning
Hopefully an earlier blog today after yesterday’s meeting filled day, today half of us are on the road with a client roadshow, the others are at The Oil & Gas Council Africa Assembly in Paris, you’ve guessed that I am here in London!
The Africa Assembly is even bigger and better attended than last year and shows just how much interest there is in the region, its line-up of speakers is formidable as they say in gay Paree.
http://www.oilcouncil.com/event/africa
Oil Price
The oil price dropped after weaker Chinese data showed a slowdown in industrial production, output only grew by 9.2% what a shocker!
The EIA report on global shale may have impacted slightly, they reported that resources are large enough to cover more than a decade of oil consumption, or 10% of global crude supplies. This may have surprised the oil trader known as “God” who only recently predicted that the US shale revolution was ‘temporary’, at least there is another side of the bet now and Opec may have to reconsider its view that the shale revolution does not endanger the cartel in any way.
For the UK the EIA said that “within Europe, the United Kingdom stands next after Poland in pursuing its shale…potential” and gauges our resources at 700m bbls oe. It also points out that the UK has ‘limited domestic service sector capability for shale extraction’ so that calls for our esteemed service sector to get its act together….
Wood Group
Wood has announced that it has won another duty holder contract extension, the second this year. Valued at around $200m this life of field contract from Ithaca Energy is for Wood Group PSN to operate and deliver managed services to the Beatrice offshore platforms and the Nigg onshore terminal for Ithaca Energy.
Another company building on good, long term relationships with its key clients to complete life of asset contracts ending eventually with the decommissioning phase in due course.
John Wood Group 1 Year chart
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Amec
Amec has announced a framework contract by BP to provide environmental and related consulting services for all of BP’s assets in their upstream, refining and marketing, alternative energy and shipping businesses worldwide. Whilst there is no value of the contract announced this award is interesting on two counts. Firstly it forms a global Master Services Agreement for environmental services between the two companies and secondly it endorses the recent restructuring within Amec that enable cross-selling opportunities to result in achieving sales to existing clients of a range of services not hitherto possible.
So not a mind blowing contract but proof that big international clients can be grown with an integrated approach on a comprehensive basis.
Kentz
Kentz has been awarded a $100m largely reimbursable contract for the underground electrical and instrumentation package for the Ichthys LNG project in Darwin, Australia. The contract from Leighton Contractors will last 17 months from mobilisation to handover in Q4 2014.
For Kentz followers there is much more to this than meets the eye and the market have reacted as if it were a modest stand-alone contract. It should be borne in mind that the Ichthys project has a total cost estimate of around $34bn and that this is Kentz’s second contract win here, with the company bidding on up to $1.5bn worth of other work on the development then we would expect further good news in due course. The relationship with the client is obviously good and with Kentz’s excellent reputation in LNG, work here and in many other major developments must be more than a possibility.
At 375p Kentz is seriously undervalued and with regular additions to the order book as well as a big bidding pipeline if the market don’t value the stock appropriately before long someone else will.
Kentz Corp 1 Year chart
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Primeline Energy
Primeline has agreed to issue US$21.7m of convertible bonds, split between Chairman and President Victor Hwang (US$6.7m) and Hong Kong private equity manager GEMS (US$15m). GEMS’ share will be issued in three tranches over the next nine months and will have interest payable of 7% pa. Mr Hwang’s allotment is to settle an existing working capital loan and is largely under the same terms.
The funds will be put towards the company’s acquisition of 3D seismic and will also provide a healthy dose of working capital as it moves from first gas sales in H2 of this year. In our opinion, Primeline has been completely overlooked by the market and is now offering potential for sizeable rewards with first cash-flow just around the corner. Much of the applicable infrastructure is largely in place which means any additional discoveries in the company’s acreage could be tied-back and monetised in a short time period.
Kind regards
Malcolm
