Malcy's Oil Report - HTG, CAZA

Friday, Nov 13 2015 by
1
Malcys Oil Report  HTG CAZA

WTI $41.75 -$1.18, Brent $44.06 -$1.75, Diff $2.31 -57c, NG $2.26 n/c

Oil price

Another bad day at the office for oil market bulls, the prices are now well back through the longer term moving averages and looking vulnerable to more weakness. December Brent expires tonight and at a two month low doesn't look good, indeed with the Fed increasingly likely to raise rates in December crude will remain in a battle with a strong dollar for a while.

The EIA inventory report didn't help, stocks were up 4.2m barrels which was well above estimates and at Cushing up 2.2m barrels, also higher than forecast. Opec came out with an interesting comment, ‘the build in inventories is due to an increase in total supply outpacing growth in world oil demand in the first 9 months of the year’. Never…..! Their demand for Opec crude next year is 30.78m b/d against current production of 30.2m b/d apparently and with the Saudis at 10.3m, unchanged and Iraq at 4m b/d there is little room for Iran in the new year. The IEA is out this morning and it should be noted that these three reports may carry a little more weight than usual as they are the last before the Opec meeting on December 4th.

Hunting

I had an update with Hunting earlier in the week and whilst things are pretty grim in the market place the team are hunkering down and patiently hoping to see out the stormy weather. Operationally, margins are expected to see some degradation as stocks are wound down but with exciting  kit such as the new perforating gun available the sales force will be able to offer this at old levels.

Financially, the company are concentrating on watching and reducing debt whilst aiming to build the EBITDA number through next year sufficiently to ensure no breach of covenants. I don't expect an equity issue as this would be much more expensive than existing debt and the company are being highly disciplined on Capex. Continued expenditure this year has been sanctioned by the board as it is pointless to keep customers waiting for products or worse, subcontracting and outsourcing kit. With Cape Town and Mombasa up and running, business can grow steadily there and in Singapore building the new facility has been moved to the right slightly to ensure that capex next year stays at around $50-60m.

Finally, regarding takeover stories I would…

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Hunting PLC is an international energy services provider to upstream oil and gas companies. The Company's segments include Well Construction, Well Completion, Well Intervention, and Exploration and Production. The Well Construction segment provides products and services used by customers during the drilling phase of oil and gas wells, along with associated equipment used by the underground construction industry for telecommunication infrastructure build-out and precision machining services for the energy, aviation and power generation sectors. The Well Completion segment provides products and services used by customers during the completion phase of oil and gas wells. The Well Intervention segment provides products and services used by customers during the production, maintenance and restoration of existing oil and gas wells. The Exploration and Production segment includes its oil and gas exploration and production activities in the Southern United States and offshore Gulf of Mexico. more »

LSE Price
638p
Change
-0.5%
Mkt Cap (£m)
1,065
P/E (fwd)
15.7
Yield (fwd)
1.4




  Is LON:HTG fundamentally strong or weak? Find out More »


1 Comment on this Article show/hide all

marben100 14th Nov '15 1 of 1

Hi Malcy,
Thanks for another useful update on the "oil patch". Sadly few readers as, unsurprisingly, most are now terrified of the sector (which makes it worth watching in my eyes ;0)).

You say, with respect to Nighthawk Energy (LON:HAWK) : "...and interestingly after my recent comments, have now only one broker name at the foot of the RNS, has the night of the long knives been extended to advisors I wonder?" Yes it has, they announced this in their RNS of 4th of this month: http://www.investegate.co.uk/nighthawk-energy-plc--hawk-/rns/borrowing-base-redetermination-and-hedging-update/201511040724274910E/

"In order to save further costs, the Company has decided to go forward with a single broker and accordingly Canaccord Genuity will no longer act as joint broker to the Company. Nighthawk would like to thank Canaccord for its past services to the Company. Westhouse Securities Limited remains as the Company's nominated adviser and broker. "

Cheers,
Mark

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About Malcolm Graham Wood

Malcolm Graham Wood

Malcolm has over 30 years' experience in the Oil & Gas sector and is a widely used media source. He often appears in print and on screen, and also writes an acclaimed daily blog read by much of the resources industry as well as investors both institutional and retail.Malcolm is a Founding Partner of HydroCarbon Capital, which provides independent advisory services to the Oil and Gas sector. He is a Director of the Maven Income and Growth VCT 4 PLC, a venture capital trust listed on the Premium segment of the main market of the London Stock Exchange.He started his career at Wood Mackenzie in 1979. He was an inaugural member of the No 1 Extel rated James Capel Oil & Gas team and also headed up corporate broking, acting for the Government in sales of British Gas, Britoil and other utilities. Subsequently he became Head of Equities and main board Director at Williams de Broe before moving to Teather & Greenwood. Following that, he ran his own consultancy for several years, acting for a number of quoted and private companies as well as being a board member and advisor. He has been a Director at Noble and then Westhouse Securities and has extensive contacts in the Oil & Gas sector globally. More recently Malcolm has been the lead advisor to an HSBC Zurich trust on oil, gas and energy investments as well as working with the oil team at VSA Capital.- See more at: http://www.malcysblog.com/about/#sthash.Jdn1d7dK.d... more »

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