Oil price, Scirocco, Coro, Lamprell, Cycles Analysis. And finally…
WTI $35.79 -28c, Brent $37.94 -32c, Diff -$2.15 +6c, NG $3.35 +5c
The sharp fall in the oil price over recent days is clearly directly aligned with the huge rise in COVID cases particularly in Europe where lockdowns are being enforced thus slamming demand for oil. Interestingly, looking at the factory sector data from China it is showing that the economy and the market recovering strongly when given any chance. This has even been visible in the USA despite the continuing rise in virus numbers.
Friday’s Baker Hughes rig count showed a rise of 9 units overall to 296 with oil showing an increase of 10 to 221 units.
Scirocco has relaunched today with a new website, a webinar to remind us of the company’s strategy and a detailed presentation setting out the focus from the board. The strategy is to build a portfolio of cash-generative assets which will allow the company to be self-funding. They also indicate that the transition energy market is going to be a core focus of the business moving forward where the Board see excellent opportunities that meet their strategic criteria.
Scirocco has a very strong board with ‘significant industry experience’ with which I concur, and the board has plenty to be getting on with. First of which is to assess what to do with regard to the Ruvuma PSA now that Aminex has completed its farm-out and that ARA has taken on the operatorship. Shareholders are assured that the board ‘will not entertain any offer that does not reflect its value’.
In a similar vein the company are keeping their options open with regard to their investment in Helium One, also based in Tanzania and with a significant strategic resource. The key factors are that it is funded for the drilling programme expected in 2021/22 and that the company plans for a listing of its own. This indicates that while Scirocco will not be putting any more money into it they believe that it is worth substantially more than current investment.
Drilling down into the strategy leads to a slant towards the European transition energy market (of which the CEO emphasised was inclusive of the gas market) which is similar to before but with more realistic gas prices and growing opportunities in cash-yielding energy assets should be more rewarding should the right target be found. Within this broad strategy it is clear that the company believe that the major changes in this market has led to opportunities being created.
Scirocco is continuing to make cost reduction a key priority and so far it has been highly successful on this front. Shareholders are aware that operating costs are low and the board has skin in the game and with options available across the board in both sides of asset transactions there appears to be substantial upside.
It is worth considering, as mentioned by the CEO today that the for sale businesses are only worth what buyers will pay for them, nor are Scirocco price takers in the process. It is also obvious to me, looking at some recent investor comments that there may be some unrealistically high expectations of what assets might realise. A guide to the difference between the valuations of Aminex and Scirocco is, on a very rough basis, the value of the ARA carry, currently c.GBP15m.
Finally it is an exciting time for Scirocco shareholders, a repositioning of the company should deliver significant value for them. In the Q&A the issue of a special dividend was raised and whilst not drawn on comments of previous management, the company was at pains to point out that it has an active focus on returning value to shareholders, remember I certainly expect to see most of any proceeds received to be re-invested as per the programme.
Coro has acquired a 20.3% stake in ion Ventures a South East Asian and UK focused developer of clean energy projects.
ion Ventures is a UK incorporated, privately owned clean energy developer, with a strong pipeline of potential projects in South East Asia (principally Thailand, the Philippines and Indonesia), along with a large shovel-ready pipeline in the UK and multiple near term value inflection points. ion Ventures has a strong presence in South East Asia with a regional headquarters in Singapore and established strategic partnerships with utilities and Independent Power Producers (“IPPs”) across the region. The funds injected by Coro will be used by ion to develop its core projects and for general working capital purposes.
James Parsons, Chairman, commented:
“We are delighted to have hit the ground running with this transaction, which significantly accelerates our evolution into a regional low carbon energy company. The transaction delivers a pre-populated funnel of already high graded investment opportunities in our target region, access to an aligned team of regional experts and multiple near term value inflection points. We look forward to updating shareholders, as appropriate, over the coming months.”
Lamprell has announced a new ‘medium sized’ ($6-50m) contract from partners IMI for engineering design services over three years and starting with an initial phase incorporating full detailed design engineering, followed by the production design phase.
Christopher McDonald, CEO, Lamprell said: “Working closely with our IMI partners, we are delighted to be starting this key piece of engineering work. It complements and builds on the two jackup rigs we were awarded at the beginning of the year. Also, it further expands our remit for being able to welcome Saudi nationals into our facilities as part of supporting IMI’s local capacity building. When completed, the maritime yard in Saudi Arabia will become a major contributor to the local economy and we are proud to be associated with such a strategic vision.”
The roller-coaster ride that is Lamprell’s share price has been rewarding recently and I expect this to continue, the company are doing all the right things and investors deserve to be provided with a follow through in the rating.
US Election Forecast and Market Update:
Lewis again cantered to victory as if Valterri wasn’t even there, stayed out for tyres and increased by enough to come in, then fluked the safety car into the bargain.
A busy weekend in the Prem, Wolves went to the top of the table on Friday night then on Saturday saw Liverpool, the Noisy Neighbours and Chelski all won. Yesterday it was a goal fest at Villa who eventually lost 3-4 to the Saints, the Magpies beat high flying Toffees, the Gooners beat the Red Devils and Spurs beat the Seagulls 2-1. Tonight the Baggies visit the Cottage and Leeds host the Foxes.
Finally after Wales lost to Scotland and England beat Italy all Ireland had to do was to beat France with a bonus point to win the 6 Nations Rugby. France won and that gave England the title…