Market opening: Markets are likely to open higher today. FTSE 100 futures were trading 19 points up at 7:00 am.
New York: Wall Street extended losses amid reports showing weak manufacturing growth in the US. Healthcare and consumer discretionary stocks were the laggards. The S&P 500 closed 0.5% lower.
Asia: Markets witnessed light trading amid disappointing global cues and looming concerns over Ukraine. The Nikkei edged down 0.4% and the Hang Seng was trading 0.5% lower at 7:00 am.
Continental Europe: Equities closed in the red, driven by weak manufacturing data from China and aggravating tensions over Ukraine. Germany’s DAX and France’s CAC 40 lost 1.7% and 1.4%, respectively.
Crude oil: On Monday, the prices of Brent Crude Oil edged down 0.1%, while the WTI crude oil prices gained 0.1%. The spread between the two varieties stood at US$7.2 per barrel.
UK small caps: Yesterday the FTSE AIM All-Share index closed 10.67 points (-1.25%) lower at 845.66
Debate over Scotland’s independence still unresolved
Yesterday, a monthly survey by the research group Taylor Nelson Sofres (TNS) revealed that the proportion of respondents who wished to remain in the UK was unchanged at 42%. The share of Scots favouring independence edged down one point to 28%. Around 30% of the surveyed people stated that they were undecided.
Russia suspended from the G8
The remaining members of the Group of Eight (renamed as the Group of Seven) have decided to suspend Russia from participating in the meetings of the group. The Group of Seven has cancelled the G8 meeting which was scheduled to be held in Sochi and has decided to hold its summit in Brussels in June. Besides, these industrial powers have also warned of further sanctions on Russia if the latter escalates military advances in other parts of Ukraine.
Yesterday, Frontier Resources International provided an update on its operations in Namibia and Zambia. With encouraging results from evaluation done over the Block 34 in the Kafue Trough prospect in Zambia and the Blocks 1717 and 1817 in the Owambo Basin in Namibia in 2013, the company is now planning to proceed with the next phase of operations. Frontier holds 100% paying interest and operatorship in both these licenses. In Namibia, Frontier plans to conduct a soil gas sampling survey and acquire 2D seismic data, while, in Zambia, it aims at obtaining airborne gravity and magnetic data. Frontier has put in place an online virtual data-room to facilitate data review by potential farm-in partners for these two prospects, with another one planned for Q2 2014 for the Block 38 in Oman.
Our view: Positive results from geological, geophysical and geochemical studies at the Namibian and Zambian licenses highlight the high-grade prospectivity of these areas. A potential partnership with suitable industry peers is likely to accelerate the progress of these projects through enhanced funding, and knowledge & expertise of the potential partners. In recent months, Frontier has made good progress in its exploration programme at the Owambo Basin, with confirmed presence of oil producing source rocks and extension of the exploration license. In light of these milestones and an aggressive exploration strategy, we remain optimistic about its future growth prospects and reiterate our Speculative Buy rating.
Beaufort Securities Limited acts as joint corporate broker to Frontier Resources International plc.
Yesterday, Oilex reported mechanical issues with the Essar Land Rig #4 drilling the Cambay-77H well. The rig had completed drilling to a measured depth of 1,626m. The rig is on equipment downtime at no cost to the Cambay Joint Venture, while the replacement parts are being procured. The company expects the rig to resume operations in 10-12 days. Meanwhile, Oilex also announced the start of aircraft and personnel mobilisation for the acquisition of the airborne gravity/magnetics survey over Special Prospecting Authority (STP) SPA-0055 acreage in the Canning Basin onshore Australia. The survey is scheduled to start before 31st March 2014 and is expected to take about 10 days for completion.
Our view: The mechanical problem with the rig at the Cambay-77H well has disrupted Oilex’s progress therein amid encouraging set of developments at the Cambay project recently. The current 30% stake in the Cambay PSC translates into ~50 million barrels of oil equivalent (mmboe) of independently assessed 2C contingent resource for the company. On the other hand, the start of exploration programme at the STP-SPA-0055 prospect is a positive development for the company. The upcoming survey results are expected to define the extent of the Wallal Graben prospect into the Canning Basin acreage. Despite strong fundamentals, the exploration setback due to the rig issues at the Cambay project in India and its potential impact on the overall performance of the company, dent the near to medium term prospects of Oilex. Therefore, we revise our rating to a Hold.
Yesterday, San Leon Energy announcement amendment in the terms of its Letter of Intent (LOI) with Horizon General, originally signed in August 2013. As per the modified terms, Horizon would acquire 22.5% working interest (WI) in San Leon’s Cybinka and Torzym concessions at the Permian Basin in Poland. In return, Horizon would provide full funding of San Leon’s working interest share at the Sosna-1 exploration well (up to gross costs of €1.5m), the Torzym well (up to gross costs of €6m) and the concessions targeting the Permian Main Dolomite or production facilities or both (up to gross costs of €6m). San Leon and Horizon plan to frack the Sosna well and drill the initial Torzym well by 31st August 2014. After completion of the company’s work programme and this farm-in agreement, San Leon would hold 22.5% stake in the site as operator, followed by SNGN Romgaz SA (30%), Sceptre Oil & Gas (25%) and Horizon (22.5%).
Our view: This farm-in deal with Horizon is likely to lead to an accelerated progress at San Leon’s key projects including the Sosna-1 exploration well, the Torzym well and the Permian Main Dolomite. The Sosna-1 well is intended to evaluate the commercial prospectivity of the Main Dolomite play and the agreement over the Torzym well would facilitate bringing the well into production in the coming period. The LOI is still conditional upon the approval of San Leon’s partners and would offer material upside to the company once finalised. Of late, San Leon has also made good progress at its other acreages in Poland including the Rogity-1 well. Despite some concerns relating to the probable impact of a downward revision of shale reserves in Poland, overall prospectivity of San Leon’s assets looks attractive. We reiterate a Speculative Buy.
Manufacturing PMI for the Eurozone fell to 53 in March from February’s 53.2, preliminary data from Markit Economics showed yesterday. The reading was in line with the market estimates. Meanwhile, the services PMI came in at 52.4, slightly lower than the expected as well as the prior month’s reading of 52.6. The composite PMI edged down to 53.2 from 53.3, matching economists’ forecast.
Manufacturing PMI for Germany eased further to 53.8 in March from 54.8 in February, as per Markit Economics’ flash data. The reading fared below the market expectation of 54.5. The services PMI also moderated to 54 from 55.9, coming below the expected reading of 55.5. As a result, the composite PMI lowered to 55 in March from 56.4 in February.
Preliminary results from Markit Economics showed that the manufacturing purchasing managers’ index (PMI) lowered to 55.5 in March from 57.1 in February. The reading was below the market forecast of 56.5.