RE: May BH fun6 May 2025 18:09
Rolf1001,
I can only answer with my opinion.
In terms of the oil price, I donât think itâs Saudiâs aim to flood the market. I think there is a lot going on behind the scenes with Trump/Russia/Iran etc and Trump is visiting the Middle East soon so there will be all sorts of politics at play. Itâs interesting that oil has bounced back over the past 24 hours despite the doom-laden headlines at the weekend, and the reality is that at current prices shale production will drop and Iâm sure that Trump will be made aware of that if he doesnât realise already.
Will it affect Navitas and RKH? The main consideration for me is whether it affects funding and/or a partner joining. It will affect Navitasâ cash flow to some extent although both Shenandoah and Sea Lion have low breakeven prices so they both still make very good profits at these levels (and lower). In fact there is a strong argument that developments with low breakeven prices like Sea Lion ($25/bbl) become even more attractive in times like these. Navitas have an office in Houston and there are a lot of US companies whose breakeven prices for new wells exceed $60/bbl - they could become more interested in diversifying in the current market climate.
I canât predict what Navitas will do - my gut says they will secure funding and press on with FID regardless but I might have a rose-tinted view of it as a shareholder. I think they will have stress-tested everything to lower oil prices and wonât make major decisions on todayâs spot prices anyway (unless it was a Covid-type situation). Itâs encouraging that RKH are only a few pennies off their highs despite all the negativity around oil in recent weeks and perhaps that tells its own story and I donât think the share price is as correlated to Brent as you suggest. There are quite a few people who sold out recently thinking the share price would drop and they could get back in lower - that hasnât happened (yet) so they may have a decision to make soon.
In terms of what happens should FID go ahead, Iâd be very surprised if the share price didnât keep rising. There hasnât been a single Holdings RNS in recent months which leads me to believe that the recent share price rise is down to Israeli money coming in, and possibly those in the industry who are aware of whatâs happening behind the scenes. Should Sea Lion get the green light for development then although oil has become a dirty word for many institutions in recent years, the potential returns will be too big to ignore and I think weâd see some much larger players wanting to take a stake. The question is - what price would they have to pay? Iâm still of the opinion that fair value should FID occur would be a minimum of 70-80p and I wouldnât be at all surprised to see ÂŁ1+.
There are still risks, as recent weeks have highlighted, and nothing is guaranteed but if any company can do it, Navitas can.
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