Edison Investment Research

Saudi-led market share war with US producers continues

In a recent blog post, we focused on US shale production dynamics, and highlighted the impact of continued rig productivity improvements on US shale production.

Shell posts a blowout quarter in downstream

Shell beat consensus expectations by ~30% in 1Q thanks to a blowout quarter in refining & marketing (where BP and Total also beat on Tuesday). Its downstream division posted the best quarterly earnings since the ‘golden age of refining’ in 2006-07. R&M profits were buoyed by strong global refining margins, cost savings initiatives and a healthy contribution from trading. Other majors with high exposure to downstream such as Exxon should also benefit from the current favourable refining environment, highlighting the value of integration.

Review of US onshore - Inventories, rig productivity and production rates

Stocks

The slow down in the growth of US crude inventories has continued this week, with stocks starting to flatten out. At some point the sharp cut in rig count was going to have an effect, and this is now actually starting to be felt.

BP’s 1Q results show refining strength + tax one-offs

BP’s first-quarter results came in slightly better than expected; however this was largely thanks to one-off positive UK tax effects (as BP booked the benefit of the North Sea tax reduction in the quarter) rather than stronger underlying performance.

A look at sentiment

Investors in E&Ps have suffered over the last few years as poor exploration success has exacerbated reducing returns (caused by increased capex and higher costs of capital). Sentiment in the sector has fallen, but is this measurable?

First Falklands well in two years looks positive

An oil discovery at the 14/5b-5 well is a successful start to the four well North Falkland Basin campaign for Rockhopper (RKH 24%), Premier Oil (PMO 36%) and Falkland Oil & Gas (FOGL 40%). The well sits immediately to the south of Sea Lion in PL004b and was testing the extension of the F2 sands that represent the existing discovered resources at Sea Lion, as well as the the deeper untested F3 sands. All seven predicted reservoirs were encountered with oil in the primary target, Zebedee, and gas in the shallower Hector target. Good oil shows were recorded in the F3 targets, but the sands were not well developed at this location.

Nigerian elections 28th March

Nigeria turns out to vote in the 2015 Presidential election on Saturday 28 March. Incumbent President Goodluck Jonathan is campaigning against Muhammadu Buhari, a former Major General who ruled Nigeria from December 1983 to August 1985. It is a repeat of the 2011 election, in which Goodluck Jonathan won 59% of the vote. Current polling is difficult to come by, but media reports suggest a close race.

Hit guidance and stocks fly - the crazy world of junior E&Ps

Last week, EnQuest delivered some solid numbers in its 2014 results presentation. They were nothing spectacular but the company reported production, revenues and EBITDA inline or marginally above previous guidance from January.

Ophir results - Acting counter-cyclically… or not?

We attended Ophir’s FY14 results presentation at 10.30am today. Surprisingly - even if Ophir was clashing with EnQuest’s results at 9am - the room was only half full… (I remember a time not too long ago when people had to stand at the back of the room!)

UK Election Budget: Impact on the UK oil & gas industry

So we had an interesting budget at last for the North Sea as Osborne finally puts back taxes to where they were pre-2011 when he massively shook up the market with increases to the supplementary charge. Reducing the supplementary charge and PRT to 20% and 35% respectively may just arrest the dramatic underlying flight we have seen from the industry in recent years.