WTI $101.58 -9c, Brent $107.76 -31c, Diff $6.18 -22c, NG $4.37 -11c
Yet again its a quiet old market with not much going on, my friendly traders haven’t even got any April Fools Day spoofs lined up. They tell me that Brent fell sharply off the intra-day high of $108.20 but bounced nicely off $107.10, WTI was quieter but remains the preferred benchmark at the moment. Inventory stats tonight are expected to show a build of around 2.5m barrels with imports up a bit although refiners are still subdued due to spring maintenance. I am getting the distinct impression that refining margins are looking quite perky especially in Asia and they are seeing good OECD demand so watch out for the 1st and 2nd quarter downstream numbers from the majors. The China March manufacturing PMI numbers were a touch better than expected at 50.3 vs consensus of 50.1.
Reuters has reported that Paolo Scaroni has been sentenced to three years in prison for violations of “ environmental norms” whilst CEO of ENEL, a charge he strongly denies.
I met with Rory Scott Russell the new (7 weeks) CEO of Range Resources last week having not seen the company for a long time. Although I have always kept an eye on the stock it has not in recent years been ‘of investment grade’ to me with a disparate portfolio of assets, hideous debt and poor management.
So what has changed? Well clearly the CEO is new which in itself doesn’t mean much but there are already new hires and a solid commitment to a complete restructure of the portfolio. Make no mistake, this won’t be easy, the company has been left in a proper mess and management do not have the luxury of any cash or time and the assets won’t fly off the shelf either. I am encouraged that there are two new non-executives, one of whom I know personally, as well as two new operational hires, both experienced and one with form in Trinidad. Expect more changes at board level as the revolution continues and assets leave the portfolio, hopefully along with a restructuring of the debt. Mr Scott Russell is a former Shell man with experience primarily upstream and in senior finance and commercial positions mainly in Europe, Russia and the Former Soviet union.
The current Range portfolio is geographically very diverse as well as having a varying risk level and goes from onshore Texas, through Trinidad, Guatemala, Colombia, Georgia in the FSU and ends up with onshore assets in Puntland in the Horn of Africa. The main focus is clearly going to be to concentrate on Trinidad which is a ‘world class’ onshore project already providing solid results, a waterflood ( I have to say that I’m not a big w/f fan) project and a decent bit of upside into the bargain in the portfolio.
As I have said there is a massive sale process going on in the portfolio, the Texas sale process is proceeding albeit it looks like the original buyer may have fallen through fortunately at no loss to Range. In Guatemala the process is hindered by the interest being held through the Citation and Latin American Resources stake but again I believe that if at all possible this will be exited. For Colombia there is a farm-out process under way and this should minimise the risk and the costs of developing these exploration assets. Finally in Georgia the sale process is proceeding and whilst in any other circumstances the CEO would like to keep this asset he doesn’t at present have such a luxury. That leaves Puntland which has a low level of commitment and to be fair at the moment, any sale would just be pointless not to mention virtually value-less.
That leaves Trinidad which is undoubtedly the core of the portfolio, it has 17.5m barrels of proved P1 reserves, is low risk, relatively low cost and is producing around 600 barrels a day of 25-35 API oil. As you know I am a big fan of Trinidad and I feel that with the recent change in approach by the Government the tax environment is improving and that Range has a real opportunity of proving up some very decent exploration prospects.
In summary, Range is now certainly worth looking at, something I have not done for some years as mentioned above. I feel that the non-execs are working very hard and having found a new CEO, backed him with operational hires and the scope to find other ways of developing the company, things are looking up. Life will not be easy, some of these disposals will be difficult to close and the debt situation is horrific but if that is manageable and the servicing costs can be brought down then there may be a glimmer of light at the end of the tunnel. Puntland is a wildcard but in for nothing and the Horn of Africa, despite being wrought with strife, is attracting notable interest (Soma, Genel to mention just two). With so much baggage and even a ‘Range Investor Group’ giving the management plenty of advice, the pressure is on but they seem to be up for it. As I have mentioned things will not be easy and this is by no means a buy recommendation but I think at this stage it is worth giving the new team the benefit of the doubt and there is I think, a modest jewel in the crown in the Trinidad portfolio, accordingly it is definitely one for the watch list and I will write more after an in depth meeting with the company.
The company announced this morning that WGP Group had received a service order to perform a survey in the North Sea starting this month which the Chairman states will make a ‘meaningful contribution to the growth that the board anticipates this year’. I am doing some work on Thalassa at the moment and meeting with the Chairman next week which I am very much looking forward to.
Story in The Times this morning that Weir Group (LON:WEIR) is about to bid for Metso Oyg a Finish company in the same pumps space as it is. If this is true hen Weir will bid 30 Euros a share and pay up to 4 billion Euros for the company, watch this space…
Matra (LON:MTA) has caused me many problems over the years and to see today that it was applying for a cancellation of its Aim listing takes away just one of the blots on the oil and gas landscape for good!
West Ham delivered a nasty surprise to Sunderland last night making the relegation fight every bit as exciting as the top of the league. Tonight there could be a bloodbath at Old Trafford as Bayern arrive, having been beaten at home by the Baggies, what chance have they…?
Interesting to see an interview with the legendary Pep Guardiola this morning where he said he might have been offered the Man U job by Sir Alex Ferguson whilst on sabbatical in New York. The trouble is that they didn’t have a translator, not to put Spanish into English but Pep couldn’t understand Sir Alex and accordingly never knew if he was being offered the job or not…!
And whilst the England cricket team slide back into the country they will be pleased to see that Jonathan Trott is playing for Warwickshire today ready to slip back into the England team as if nothing ahd happened…