Member Info for Boyobach

Broadland 158
Boyobach 165
Hawkey 175
Bunks 178
Hasiba 185

In an effort to make some of my comments a bit less opaque - for JL and anyone else - here’s how I use the simple comparison chart between Brent and G since Oct 3 (peak oil price this year). Hopefully anyone should be able to use the chart I post daily to help them do their own method to guesstimate how G might move the next day, my daily comments are just a reflection of how I think things may go.
https://invst.ly/9netd

Key points about this chart are:
G (red) and Brent (green) have dropped at a very similar rate since October 3rd.
The straight lines roughly filter out the deviations (JL hates squiggles).
G and Brent are set to 100% on Oct 3rd - the reference point.
They are therefore now at 100% minus the percentage drop given on the chart.
So at last close, G = 100-34.6 = 65.4% of Oct 3rd’s price and
Brent = 100-38.17 = 61.83% of Oct 3rd’s price.

Despite some notable ups and downs over the past three months, G’s price has always moved back to closely track Brent’s rate of fall. I use a quick ‘rule of thumb’ to get the theoretical G price relative to Brent which is OP*158/55. This is close enough (it's 152.5 based on the above) for my purposes and saves a lot of effort reading off the percentages every day. However, the accurate but tiresome way to calculate what G’s price would be if it exactly matched Brent’s fall, based on the chart numbers is this:

If G had dropped exactly as much as Brent at the last set of numbers then, from the above percentages, G’s price would have been:
61.83 * Actual sp/ 65.4 = 61.83* 162.2/65.4 = 152p.

Because, at Friday’s close, G was 10p more than this theoretical value at 162p I conclude that G’s underlying value (after deducting the fall due to Brent) has moved up by 10p since Oct 3rd.

Using the above ‘Brent based component’ and ‘underlying component’ of the sp, it’s possible to estimate what G’s sp should be for any value of Brent. Obviously, though, the numerical relationships will change with time and market circumstances so they have to be checked and re-calibrated as time passes - I use a spreadsheet to do that work for me.

Yes - Congratulations JustinD. Well done and a good motivational speech! I'm so glad it wasn't either of the bottom two! (sorry Broadland- nothing personal).

I came across this (link at the bottom) yesterday, having stumbled on various sources discussing the US shale industry, why it continues to produce even though it makes little money and the huge bubble of credit that keeps it going. It's an interesting view apparently from a 'conventional' US oil Producer. Lots of stuff on this site that might interest people who've worked in the industry. Here's a taste of what he says in this piece:

Now, on the left... I have the United State shale oil industry; over the past 5 years I've learned to mistrust it as much as OPEC. Its reserve estimates are just as phony, in my opinion. They are fiscally irresponsible and can't make any profit. The price of oil is secondary to how much low interest money they can borrow to stay afloat and the public and private shale oil industry has almost as much long term debt as the national debts of Russia and the Kingdom of Saudi Arabia combined [1][2]. Debt has now become synonymous with "free enterprise" and economic growth in America and that is not good.

https://www.oilystuffblog.com/single-post/2018/12/14/Cartoon-Of-the-Week

Boyo...you continue to dumbfound me....

Sorry JL. Today I was just trying to say that closing prices for Brent are established a few hours after G, which can give a misleading impression to folks who expect G and Brent prices moves to match too closely.

The rest was just pointing out that G is actually doing better than might be expected given the poor oil price.

Hi JL.

I don't pretend to understand the SETS auction, which results in the UT and apparently the closing price, but this seems to explain it:
http://www.theel1tetrader.com/2013/01/lse-closing-auction-how-it-works.html

Not for the first time, I discover I've written some total bollx. Apologies. The general point I was making about G's closing prices occurring at a different time to Brent's was correct, however they do not occur on different days due to a the OP continuing to trade elsewhere during a UK Bank Holiday - that was rubbish (sorry). The corrected section is:
So the closing lows (or highs) shown on the comparison chart for Brent can occur at a different time compared to the equivalent closing price shown for G. For example, Dec 25th and 26th are missing from the chart because the London market was shut. The striking divergence between Brent and G that appears on this chart on the 24th (highlighted) actually happened whilst G was not being traded.

For Friday 28th December
https://invst.ly/9n1ms
Given some of the recent gloom here about G’s daily sp performance, please do remember that comparisons are better made over several days or weeks rather than by the hour. Which is one reason I’ve stopped posting the ‘week to date’ comparison chart. Since the OP fell from $86, G (at -34%) has performed slightly better than GKP (at -38%) with both rather worse than DNO (at - 27%). Over the whole year, however, those positions are reversed. Either way, G is roughly holding its own. But first let’s understand what we are looking at on today's comparison chart.

Whilst G may possibly bottom out around 151, there are some distorting factors to be aware of. Not least the fact that G’s daily trading hours are much shorter than Brent’s especially when Bank Holidays interrupt the pattern for G whilst the OP continues to move. So the closing lows (or highs) shown on the comparison chart for Brent can occur at a different time or even day (when there’s a UK Bank Holiday) compared to the equivalent closing price shown for G. For example, Dec 25th and 26th are missing from the comparison chart because the London market was shut, so the OP closing low of the 25th has been placed as the closing low of the 24th and, therefore, the striking divergence between Brent and G that appears on this chart on the 24th (highlighted) actually happened whilst G was not being traded.

It could well be that in reaching its Xmas low of $50.80, Brent has performed the 'usual' overshoot in its fall and that we are now seeing the second 'shoulder' of this sometimes symmetrical reversal pattern forming around $54. We won’t know for sure until we can look back with the gift of hindsight. But, If this is the case, then G, too, should begin forming a base upon which the sp can start to rebuild. Today’s move up to 166+ was an encouraging sign of this, as it was a full 11p above G’s theoretical level based purely on OP. The rising red line on the daily chart (at about 152p) https://invst.ly/9n1mt might become rather more significant as a genuine base level if OP has indeed reached the bottom. Fingers crossed.

Well JFT, I can't but agree that you have a point about 'jam tomorrow', this has too long been the mantra with G. It is certainly time they started to deliver. Seven years of SFA and seven years of excuses. I don't necessarily need the management to explain every dip and turn of the sp. Nor should they waste time concocting empty PR statements and Presentations. They now have a steady flow of revenue, a recovering balance sheet (sadly not nearly as strong as the one Tony oversaw) and some resources they really need to get on and make good use of. With you on all that.

Should have added, re G's performance - it's a similar profile over 12 months to RDS in reality. What goes up more tends to come down more....https://invst.ly/9msbl

Regarding critique of Murat: Did Tony do better ? The seeds of G's problems were sown whilst he was head gardener. Murat hasn't been CEO for five years yet has he? 2015 moved into that role? SP already halved and about to get smashed again by the Taq Taq downgrade (was that his fault really?)
G supposedly turned the corner in August 2017, mainly with the Receivables deal, albeit with a bit of a set-back when the KRG inadvisedly chanced their arm with the Referendum that no international allies backed. So far there's been insufficient cash to do much development without raising more (from me? on the track record? Ha!). Results should be improved for 2018 so let's judge him on the FY.
He does get paid handsomely, apparently - so, on that basis, I'd have to agree with the sentiment that the FY should be spectacular!

For Thursday 27th December

Given OP towards the close ($53.4), G ended about right by that measure at $155.20, as can be seen here - where G is almost smack on the Brent line.
https://invst.ly/9mqyv

GKP, btw bunks, is still a tad lower than G if you are measuring performance since Brent was $86. It was actually a surprisingly resilient day for G - hanging onto the blue line - given the blip in Brent yesterday!
https://invst.ly/9mqz0

Wake me up when OP starts to rise - which it is bound to do as the US tight-oil guys reel their cap-ex plans back until drilling more holes actually earns more $. At $42.5 yesterday, WTI was not making money for a whole bunch of them. Lucky for those guys that Trmp is working hard to make 'em great again.

For Monday 24th December

Merry Christmas all - hope you have a good one!

Comparison since Peak Oil, Oct 3rd: https://invst.ly/9lvwy
A nice kick up for G today, although the convergence of G, GKP and Brent in terms of % drop from Oct 3rd broadly continues, with G around -35% and GKP around -40% , compared to Brent’s -37%. DNO, meanwhile, has only dropped 27% and remains less tightly linked.

Deviations from G’s ‘straight line’ relationship with Brent do occur (for example the period around 3rd December, highlighted) but are becoming less frequent and are soon corrected. When they do occur they may present a trading opportunity.

The build up and spike on the 3rd December seems to illustrate how quickly G can react to small hints of positive news - presumably the anticipation of OPEC+ cuts on that occasion.

G daily: https://invst.ly/9lvwp
The lower blue line on G’s daily chart is effectively the slope of Brent’s fall, so we can be pretty sure that G will follow it, regardless of the red rising support, if Brent continues downward.
It was good to see a lift in G today! My ‘rule of thumb’ formula for G’s Brent-related sp is
Gsp = OP *158/55
and today, for an OP of 54, that gives an expected sp of 155, which puts G about 6p up on where I’d expect it to be based purely on OP.

Saudi and OPEC+ are not really in control of OP at the top end. Once the WTI price rises to $60 (Brent $68) it stimulates the tight oil producers in the US to spend cap-ex to increase production. At $50 WTI (Brent $58) it's too close to break even for many of them to commit to increased cap ex.

The Saudi strategy must be to somehow bring the price up to the levels they need but not sufficient to trigger the big increases in production that the US tight oil guys are capable of. One possibility is to alternate cuts with production boosts - drawing the US producers into spending cap-ex then driving the price back down.

Whatever they do, I cannot see Brent at $80 in 2019 - and if it does reach that level then I'd expect another collapse in price next autumn.

JL said: Boyo can interpret those nos better than me...

Those numbers are a bit different to the ones I'm seeing so I can't really comment - I know that G shot up about 30p whilst OP was flatish between 23rd Nov and 3rd December, which was subsequently lost, so that makes G's fall in November look better and the fall in December look worse than each other. although they averaged out about the same. The main thing to remember is that both G and OP have each lost about 36% since October 3rd, when OP reached it's peak - it's been a 1 for 1 fall percentage wise overall.

However, I do agree that $70 Brent should give us a minimum 200p for G and $80 Brent would give us a minimum 230p G. I say minimum because the current market pricing with respect to OP has G at September 2017 levels in relation to OP - obviously the sp should reflect the progress made and cash accrued etc since then. Maybe the trading and ops update will provide a boost but, failing that, I'd expect it to happen at the FY results

Boyobach 155
without 165
Hawkey 170

This linked article is also much more encouraging than the headline suggests, bear in mind they are talking about WTI - add $8 for Brent
$50 Oil Won’t Kill U.S. Shale
https://oilprice.com/Energy/Crude-Oil/50-Oil-Wont-Kill-US-Shale.html
U.S. shale is set to continue to raise crude oil production, but as WTI prices dipped to below the psychologically important threshold of $50 a barrel, analysts started to calculate which areas may have already fallen into the red with spot prices lower than breakevens.
To be sure, U.S. oil production is expected to continue to increase next year, but the longer the U.S. benchmark oil price stays below or around $50, the slower the growth will be.

For Friday 21st December

Comparison Since October’s Peak OP: https://invst.ly/9lbz4

Whilst Brent continues to slide, this is by far the most accurate and useful comparison chart, and I’m consequently going to stop routinely posting the other two (the weekly and the ‘since June’) unless there’s a particular reason for doing so.. Unfortunately DNO’s data seemed to be corrupt after about 4pm - maybe due to the Oslo market closing - so the DNO line has been removed from the chart for today.

The correction with respect to Brent (G around 6p too low, as I mentioned yesterday) happened during the morning and G appears to have ended the day slightly up on what I would have expected - not that I’m complaining!

G’s daily chart: https://invst.ly/9lbz9

Today’s restoration of the proportional link to Brent placed G back above the blue line at the close which is a happy end to the week after yesterday.

Itsaponzi asked: Will this see under a pound if Brent drops to $45 ??

Just to explain my quick reply:

ln simple terms that’s about half what it was at October's peak, when the sp was 248, so, based on market behaviour since then, the sp should be in the region of 124p under those circumstances. Of course, as others here rightly point out, that would take no account of any improvements in asset value, including cash, since the H2 report. I’m wary about using that to talk the sp up because, obviously, the assets in the ground are potentially reducing in value as they are pumped out and as OP declines, so we won’t really know the position until the fy results. Meanwhile, Ocelot has placed the NAV at over 400p per share, which makes for a persuasive argument to hold/buy if correct.

Will this see under a pound if Brent drops to $45 ??

No.