Governments need to adapt to the oil price too
The oil price is having a huge effect. Falling cash generation means oil companies are cutting capital expenditure to balance the books. Not even this is enough - many IOCs are paying dividends out of debt.
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Exploration Watch - West of Shetland
West of Shetland remains the least-developed area of the UKCS despite the first significant discovery occurring there almost 40 years ago. A combination of technical challenges means the region has remained relatively immature, with an estimated 95% of resources yet to be developed. Until recently only three fields, the BP-operated Foinaven/Loyal and Schiehallion, were in production. Joined in early 2016 by Total’s Laggan-Tormore gas field and Premier’s Solan project, only the latter is a notable successful development by an independent to date. However, recent independent activity includes Hurricane Energy’s appraisal of the 207mmboe Lancaster discovery and Chrysaor’s Mustard discovery within tie-back distance of Solan.
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Profits expectations declining as fast as 2008
It is well known that analysts’ profits forecasts start out over-optimistic and decline throughout the year. But we do not think this phenomenon is being given sufficient attention – 2015 was the worst year for earnings revisions since 2007, Exhibit 1. One could have been forgiven for thinking that a recession was on its way given the pace of the declines.
Read more...Why the Spanish election is being largely ignored by investors
This weekend, Podemos shattered the 40-year political duopoly between the Spanish Popular Party and the Socialists. Taking previous public commitments at face value, there is limited chance of any block or coalition securing a parliamentary majority, Exhibit 1, and the likelihood is that new elections will have to be held in early 2016.
Read more...FED flips, flops, flips?
Though seemingly days away from what would be the first increase in US interest rates in a decade, data points which indicate a significant turn in the credit cycle could already be underway keep turning up.
Read more...ECB: Sins of omission
The sharp declines in European markets after the ECB’s policy announcements show the dangers of talking the talk without following through. If you talk extensively about “size, composition and duration” – and then go on to highlight duration as the primary monetary policy change, then markets expecting fireworks will be certain to be disappointed. For the crowds of investors conditioned to push up equity prices and go short the currency on QE announcement days, size matters.
Read more...The grow slow years
For the past three years in the US and Europe, the bulk of equity returns have come from a re-rating to higher valuation levels rather than sales-led profits growth. In an environment where returns on cash and high quality government bonds are likely to remain low, investors continue to look to equities to deliver the returns required to cover long-term liabilities.
Read more...FOMC October minutes - No surprise; No reaction
Today’s FOMC minutes indicate a rate increase is clearly on the cards in December; the minutes state that most FOMC participants now believe the conditions for a rate increase “could well be” met by then. The signal could hardly be clearer.
Read more...100% success rate continues offshore Mauritania/Senegal
Kosmos Energy’s play extending gas discovery well Marsouin-1 continues the 100% success rate seen offshore Mauritania and Senegal in the last year. Kosmos’ success follows on from its Tortue gas discovery earlier this year, while Cairn Energy had back to back oil discoveries to the south in Senegal towards the end of 2014. Now both companies are undertaking full appraisal and exploration programmes that will see activity continuing in the region into 2017.Together these two programmes offer the potential of up to twelve exploration and appraisal catalysts over the next eighteen months, a rare occurrence in the current low oil price environment.
Read more...Paris terror unlikely to be a market event
With more than one hundred people dead and many more injured, last Friday’s terror attacks in Paris rank among the deadliest in the developed world.
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