Good Morning and a Happy New Year.
Its with no surprises that oil's "yet again at an all time low" with the doom-mongers being validated for a more realistic view of the world. Save for a supply crisis or correction in Saudi it doesn't bode well. So it's over to those bean counters to remind us of how high the oil price has to be to balance those budgets, it's simply irrelevant at this stage, albeit Algeria. Angola, Iran, Libya, Nigeria and Venezuela would disagree. (Implications for debt?)
To put it simply, there will have to be a budget reconsideration (spending review) in light of the over reliance on oil revenue, which for some was significantly ahead of what the price was 3 months ago anyway. Perhaps other forms of taxation would be a wiser bet in the short to mid-term. Its en par with Australia's reliance or expectation of the Iron Ore price. Speaking of which, having been absent and enjoying the break, it would appear the "told you so brigade are back (Atlas Iron) with every man and his dog being aided by the mass closing of shorts; its near doubled since the Christmas break!
Long may Atlas Iron et al's share price appreciation continue. Unless one is mistaken and still omitting fumes from the Christmas pudding, the over supply of circa 200M tonnes (target end 2017) and 115Mt's (end 2015) has not disappeared. In fact, my fag packet (+some decent research of my own) calculations may need revising near 50% upwards. So for the longs enjoy this belated Indian summer with a few swallows, the worst is not over because it has not come yet so enjoy it whilst it lasts. Market share, economies of scale and quality count, if you're absent in any domain some repositioning will be required.
By my estimates, Atlas Iron with the recent spate of redundancies and costs savings should be able to drive down there costs a further 11%, plus some oil related benefits on costs should be targeting near $62.50 a tonne as a best case but more than likely $65.40/t, but the all in figure will still be circa $68.60/t to $70/t. These are my estimates so please email me if you can show otherwise.
What will GLEN (Glencore) think of next for Thermal Coal, Glencore says restarting Australia coal mines shut to fight glut. With the price of thermal coal ahead of the curve compared to iron ore and oil, the expectations may soon change. One would be wise to watch what protectionary measures the Chinese Government introduce for exports and support of native coal producers. There's a massive amount of debt attached to those costly mines producing at a loss. Save for the Chinese seeing the need to allow a few to become casualties of their own economics don't expect the trend to change much. It did provide a welcome relief to the price, what will the reopening do?
LGO Energy (LGO) Joint Broker one will leave it to those able to read this early in January to make their own opinion on the reasoning for the broker appointment..."We are delighted to team up with FirstEnergy in a year when the Company will be looking to expand its coverage and shareholding base. The LGO Group exited 2014 with over 2,000 barrels of oil per day of net production and we look forward to a busy and exciting year ahead." At some point I hope to be able to work out LGO's cost per barrel, suffice to say with the CAPEX developments/requirements and lower pricing the margins are shrinking.
As some side thoughts as I ease myself into 2015 with a busy schedule, copper has reacted predictably but may have some new year cheer (fumes) from iron ore. The star performer of commodities for last year had to have been uranium!? With a lot of hope built in to the price re: Japan and back door trading into China one wonders how long it will continue in the absence of the Japanese sorting out their infighting, legal issues and public wider views. The wise should have taken profits...the slide is on.
Little time to tuck in to Purecircle (PURE) trading update, with little information to work on bar the net debt and no inventory levels one wonders how this "high leveraged" model will work at these valuations.
The final thought goes to the poor service offered by the press for those BHP Billiton (BLT) holders whom have been left wondering why their price is getting a kicking. Its no wonder when iron ore (albeit moderate recovery (circa 6%) is down on its luck but worse, BLT's other main earner Oil is having a rough time of it too. So expect the analysts to come out with some welcome drivel about short32/south32 being a welcome relief in the carnage.
South32/Short32 aka the spin off has no choice but to get paying a dividend from the word go or it shall be sent to Coventry sharpish. The model will need to appear to prove itself (read as support itself) from the word go, so those taking the brave view to short it from the off, be prepared for those in denial to favour the stock and back it.
One hopes that Waterlogic's (WTL) offeror (Poseidon Bidco Limited) hasn't had a change of heart...
Atb Fraser
Fraser- Hi- Welcome back from the land of mince pies and port (maybe gin in your case) :-))
ReplyDeleteYes- major oversupply in oil, iron ore and some demand issues re coal so perhaps those holdings long should reconsider if they get dead moggie moves... I hope your Xmas deliveries of mirrors to certain parties got through in time and are being used now.... some miners cant cope with the new dynamics, despite the oil moves being in their favour. Perhaps Altas holders need fag packet and pens....
Re Xmas trades- some action re PFP based in court disclosures (positive again, but now in recess for 2 months) and the end nearing for the OXS judgement meant that I had some work to do over the holiday period. The irrational exuberance at ARMS re their arb decision lead to a spill over into OXS for a day or so-- ARMS are desperately pursuing assets re the judgement and the fact that were stonewalled re a $30m pursuit earlier doesn't exactly bode well re their new target of $173m plus.. still some ordered superyachts that morning, so perhaps Mr Roeslani has posted the cheque already... and that could help with the $450m they need to cough up in the summer... hmmm... more mirrors needed I suspect and fag packets too....and pens....
Cheers. The Leggie
Yes PFP Pathfinder was a sell on the news again and OXUS was a close of positions (the forced working). ARMS Asian Resources adding to the speculation. I still maintain trading off the moves on arbitration stocks is more fruitful than the binary outcome. The main reason for selling down OXS.
DeleteThere's concern that Mr Roeslani is only a beneficiary and not the owner of the assets, albeit if this was completed post an agreement to settle it means he's liable either way.
All good sport though! Does anyone know what's happening over at AMI (African Minerals) with a resignation over the Christmas period hmmm...
TC F
Fraser- Yes- some tradable moves re PFP (in, out, in, out, shake it all about- a hokey cokey trade???) and that OXS spike to 3p was tradable too, with 2p or so coming back as it reenters its normal trading range. AMI looks like it wont come back in the same form- perhaps a private company would be best if Frank merges his inv co with some AMI (and some LOND) assets. They would need to see what they could supply product at first, as I suspect it would be v marginal even if sold into Europe at current prices.
DeleteCheers. The Leggie
HNY fraser. yes I get the humour with the Water logic bid and suspension being today. I had thought it was a later and should have paid attention. Thanks for the polite reminder. AJ
ReplyDeleteAJ it did say in black and white http://www.investegate.co.uk/waterlogic-plc--wtl-/rns/result-of-court-meeting-and-general-meeting/201412161554539441Z/ just amusing that was all..:-) Cheers F
DeleteLGO energy announced it today Fraser.
ReplyDelete