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Markets live transcript 6 May 2008

Markets live chat transcript for the chat ending at 12:15 on 6 May 2008. Participants in this chat were: Paul Murphy (PM) Neil Hume (NH)

PM:

Welcome to Markets Live

PM:

This is FT Alphaville’s daily stock market discussion.

PM:

And first thing to say is a big Thank You – for all your Webby votes – which have ensured that we have won not just one – but TWO – awards.

PM:

The People’s Voice award

NH:

Morning

PM:

And the Judge’s Panel award

PM:

All down to your comments

NH:

We could not have done it, without you the readers. thanks

PM:

Some very very funny entries in the Acceptance Speech competition

PM:

The Webbys are famous for five word acceptance speeches

PM:

So special competition for people to come up with the right words

PM:

So special we haven’t got a prize yet

PM:

But it will be good!

PM:

And YES we will have a party to celebrate

PM:

Details to follow

NH:

and I think we are taking ML to New York

NH:

it’s debut on Wall Street

PM:

Rude not to

NH:

or midtown - that’s where the FT offices are

PM:

But people dont want to read about us pating ourselves on the back

PM:

patting even

PM:

Let’s get on

PM:

PM:

So what is going on this Morning??

NH:

well, one way or another it is all related to oil

PM:

Price of crude is currently up 18 cents at 118 — that is Brent

NH:

but WTI for June delivery rose above $120 a barrel

NH:

so agains that backdrop it is a good day to announce a big oil find

PM:

Who has that come from?

NH:

Tullow Oil

NH:

been following this one quite closely

NH:

rumours around for a couple of weeks about a big oil find

NH:

first it was said to be in Uganda

NH:

and then off the coast of Ghana

NH:

and this morning we got confirmation of a big find in Ghana

NH:

this is the Jubilee field

NH:

Tullow’s biggest discovery to date

NH:

when it last updated the market it said there could be between 500m and 1.5bn barrels of oil

NH:

but it now looks like it will be at the upper end of that range or even above

NH:

here’s what Tullow’s CEO Adian Heavey had to say this morning

NH:

“The confirmation that Mahogany-2 is in communication with both Mahogany-1 and yedua-1, reinforces our interpretation that Jubilee is a major discovery and is
likely to lead to a material upgrade of current resource estimates. We will
continue our appraisal and development programme over the remainder of 2008 with
the overall objective of achieving first production in 2010.”

PM:

Hmmm that sounds bullish

PM:

V V bullish

NH:

yep it is

NH:

look what it has done to the price

NH:

shares up 166p at 927p

PM:

Jeepers — 22%

NH:

that’s a gain of 22% and a record high for Tullow

PM:

I remember this when it was a penny and pray Irish punt

NH:

now it’s a FTSE 100 company

NH:

with a market cap of…

NH:

oh, I can’t tell u because the new reuters screeen does not have an interenet connection

PM:

Waiting for that to get fixed — which i am sure it will be soon

PM:

NH:

anyway, analysts are saying that Jubilee could contain as much as 1.8bn barrels of oil

NH:

got a really bullish note from Cazenove on the find

NH:

they have upgraded to “outperform” this morning, and note that there could be further upside when the results of the Uganda drilling campaign is announced

NH:

think that well has just been spudded

NH:

Recommendation changes
Tullow Oil - upgrading recommendation to IN-LINE[TLW LN 760p], Sector OVERWEIGHT

Tullow Oil has announced that the Mahogany-2 appraisal well, offshore Ghana, has intersected a significant column of light oil (West Cape Three Points Licence, TLW 22.9%)

NH:

Tullow’s CEO, Aidan Heavey, commented ‘confirmation that Mahogany-2 is in communication with both Mahogany-1 and Hyedya-1 reinforces our intrepration that Jubilee is a major discovery and is likely to lead to a material upgrade of current resource estimates’.

Management guidance is that the P90, P50 and P10 estimates will increase from 170m, 480m and 1.38bn to 500m, 1.0bn and 1.8bn respectively.

Updating our numbers to reflect the P50 estimate of 1bn barrels increases our core NAV from 371p to 500p. The P10 case of 1.8bn barrels would increase our core NAV to 700p.

NH:

Given today’s very positive results, we upgrade our recommendation from UNDERPERFORM to IN-LINE. In our opinion, the shares still look expensive but given near term drilling potential in Uganda and Ghana and this substantial NAV upgrade we must acknowledge that the shares are very unlikely to lag the sector.

NH:

thanks AM

NH:

Tullow - almost £7bn

NH:

wow

NH:

NH:

and sticking with the oil sector

NH:

seen Regal Petroleum this morning?

PM:

No way

PM:

Up 25.5 at 194

PM:

gain of 15%

PM:

what’s caused that?

NH:

you probably won’t believe this, but Merrill Lynch have started coverage

PM:

what of Regal?

PM:

you can’t be serious

NH:

well, they have and they are telling clients to buy

NH:

in fact they have set a 390p target price

PM:

I am speechless

NH:

you shouldn’t be

NH:

regal has slowly been getting its act together

NH:

a couple of weeks ago, we got the company to admit that it had an offer for its Ukranian gas fields

NH:

the offer, we are told came from Lukoil and is worth $1bn

NH:

that’s from

NH:

the company has also brought in a heavyweight chairman

NH:

Mr Keith Henry, previously chief executive of National Power

NH:

he was also chairman of Burren Oil when it was acquired by Eni

NH:

and on top of all that they have got mad Frank Timis to sign a non-interference agreement

PM:

The idea that this company is suddenly going to normalise is laughable

PM:

IMHO

PM:

Who has written this note at ML? junior?

NH:

no, Andrew Knott and Mark Iannotti. think they are the top guys.

PM:

so tell me, why is Regal worth 390p a share?

NH:

Highly credible management team

NH:

good portfolio of assets

NH:

and it’s cheap

PM:

is it??. Company produces next to no oil and has a market cap of £350m

PM:

not sure I would call that cheap even with oil at £120 a barrel

PM:

Its just a punt

PM:

And not even a cheap one

NH:

OK, OK. You don’t like this company but Merrill do

NH:

here’s the note

NH:

Initiating with Buy, 390p/sh Price Objective
We are initiating coverage of AIM-listed Regal Petroleum, with a Buy
recommendation and 390p/sh Price Objective, suggesting some 138% upside
from current levels. Bottom line, we see Regal as combining: (1) a high quality
appraisal and development asset; (2) a highly credible management team; and
(3) an exceptionally attractive absolute and relative valuation. BUY

NH:

MEX-GOL & SV a high quality appraisal & development asset
Regal’s flagship appraisal and development asset, the MEX-GOL and SV fields in
north-eastern Ukraine, have current resource estimates ranging from 170mboe (in
the 2P reserve case) to 350mboe+ (in the most aggressive indicative resource
upside case), implying associated peak production levels of between 53kboe/d
and 100kboe/d+.

NH:

Highly credible management capable of delivery
However, despite having owned this asset since 2000, Regal has historically
made little progress in delineating and monetising it, due to a combination of poor
management, legal ownership issues and capital constraints caused by the failure
of a now-infamous Greek appraisal well. With these latter two issues now behind
the company, we see the recent appointment of David Greer as CEO (formerly
Shell Director of E&P projects) as the final piece of the jigsaw which should see
Regal finally realise this asset’s significant potential.

NH:

Exceptionally attractive absolute and relative valuation
Even allowing for significant future Ukrainian tax creep, Regal is currently trading
at a level offering investors 138% upside to our NAV (versus peer average 15%)
Further, assuming the 170mboe 2P reserve case and a conservative 4-rig
development scenario, we estimate Regal to be trading at 6.3x – 0.0x EV/DACF
2010E - 13E and 7.3x - 1.6x P/E 2010E - 13E.

PM:

Thanks for all that

NH:

quite an amusing note

PM:

NH:

full regal history including a biog of dear old Frank Timis

PM:

Oh do share the biog

NH:

The Early Years!!!!

PM:

Frank TImis: The Movie — coming soon

NH:

Regal Petroleum was founded in 1996 by
Romanian/Australian Entrepreneur Frank
Timis.

NH:

Regal Petroleum was founded in 1996 by Romanian/Australian entrepreneur
Frank Timis, as an Eastern European-focused E&P company. In furtherance of
this strategy, the company conducted reviews of a number of oil and gas projects
in Ukraine between 1996 and 1999 which led to Regal participating in an
exploration joint-venture agreement with the state-owned Chernihiv exploration
and drilling company. Under the terms of this agreement, Regal acquired an initial
75% interest in the largely un-appraised/developed Mekhediviska,
Golotovschinska and Svyrdivske (MEX-GOL and SV) fields, located onshore
north-eastern Ukraine. As part of the JV agreement Regal agreed to cost carry
Chernihiv’s 25% interest through an initial exploration and appraisal phase.

NH:

Regal IPO’d on AIM in September 2002 at an initial price of 60p/sh, raising
c£10m, which the company ear-marked for the appraisal/development of the
MEX-GOL and SV fields and new venture activity. The company came to market
with a 2P reserve base of 185mboe (split 148mboe gas/37mboe condensate) with
an associated gross production profile certified to rise from c3kboe/d in 2002 to a
peak of c31kboe/d in 2011 by independent reservoir engineering consultants Troy
Ikoda.

NH:

Ukrainian legal issues: eventually resolved in Regal’s favour
Post-IPO, the company invested in its Ukrainian assets, spending a further
cUS$12m drilling new wells, working over a portion of the existing well-stock,
expanding gas processing plant capacity and investing in pipeline capacity linking
the fields to the international export trunk line to Western Europe. This investment
resulted in the Ukrainian government declaring the field commercial in December
2003. Following this declaration Regal applied for, and was subsequently
awarded in mid-2004, two 100% production licenses covering the MEX-GOL and
SV fields. As a result of this, the company’s exploration JV with Chernihiv was
legally dissolved later that year.

NH:

it goes on and on for pages

NH:

some stuff of the Greek oil find that never was

NH:

the Russian litigation and the curious payment to a local lawyer

NH:

the numerous management changes

PM:

Ah yes. Unfortunuate that

NH:

to today’s inspiration new management

NH:

under David Green, who was last at Shell firing off motivations messages cribbed from war hero Patton

PM:

Which may have cost him his job

PM:

certainly cost regal its relationship with Shell when they suddenly hired Greer

PM:

Maybe the next thing to happen will be that Regal changes its name

PM:

Suggestions anyone?

PM:

Republican Oil

PM:

?

PM:

PM:

What’s happening in the wider market Neil

NH:

after Friday’s barnstorming run, we are off a touch

NH:

FTSE 100 down 30.3 points at 6,185.2

PM:

Oh dear

PM:

What has caused this weakness

PM:

When the financial world was supposed to be on the mend

PM:

The Crunch is over - dont you know

NH:

Vp - like TP PLC

NH:

has a certain ring to it

NH:

back to the market

PM:

Then ML could run ntoes entitled TP tips

NH:

looks like financials weighing the market down

NH:

as the oil and miners all good

NH:

except for big oil that it - BP and Shell not responding to the high oil price

PM:

PM:

To some points/questions below…

PM:

Grayder — Buffett put is a long-dated affair, no? Accounting rules caused booking issue

PM:

Allegedly

PM:

As for the Crunch being over — be good to what Teun Draaisma has to say about all this

PM:

Will post when we get it

NH:

NH:

got some interesting flashes coming out of Merrill Lynch

PM:

They seemed to have moved half their assets from mark to market to mark to model

NH:

*MERRILL LYNCH LEVEL 3 LIABILITIES $57.6B VS $39.9B IN DEC
*MERRILL LYNCH LEVEL 3 ASSETS AT MAR 28 $82.4B VS $48.6B IN DEC
*MERRILL LYNCH GLOBAL LIQUIDITY AT MAR 28 $210B VS $200B IN DEC
*MERRILL LYNCH RESIDENTIAL SUBPRIME EXPOSURE WAS $2.7B AT DEC 31
*MERRILL LYNCH RESIDENTIAL SUBPRIME EXPOSURE AT MAR 28 $1.4B
*MERRILL LYNCH LEVEL 3 DERIVATIVE PACT LIABILITIES $25B :MER US
*MERRILL LYNCH LEVEL 3 INVESTMENT SECURRITIES $4.3B :MER US
*MERRILL LYNCH LEVEL 3 DERIVATIVE PACTS $20.6B :MER US
*MERRILL LYNCH LEVEL 3 TRADING ASSETS AT MARCH 28 $9.3B :MER US

PM:

Dont know whether they are freshly characterised as Level 3 assets

PM:

Helen’s just complaining about their website

PM:

Cant get the detail as yet

PM:

Come back to that when we have more info

PM:

NH:

just want to have a look at Marks & Spencer quickly

NH:

shares under pressure this morning

NH:

off 16.25p at 382p

NH:

a drop of 4%

NH:

smart money bailing out ahead of figures in a couple of weeks

NH:

prompted by a note from Tony Shiret at Credit Suisse

NH:

he is really bearish

PM:

Shiret was once the fastest analyst on two legs

NH:

set a 320p target price and cut forecasts for this year and next

NH:

Mr Shiret does not think M&S will make £1bn in profits, in fact by 2009/10 he thinks it will be just £735m

NH:

here’s a quick summary of the note for retail watchers

NH:

Event: In anticipation of the forthcoming prelims we are taking a more realistic view of our profit estimates in light of the
deterioration seen in 2008 in the UK clothing market and CEO Stuart Rose’s recently expressed view that these conditions
are likely to continue into 2009. We have reduced our 2008/09E profit estimates by 8% to £830m and our initial 2009/10E
PBT estimate of £735m indicates a further 11.5% decline in profits for that year

NH:

These forecasts benefit from a strengthening
gross margin in food and increased contribution from the International division as well as the negative effects arising from the
scenario described above. Please note that our note also critiques the company’s executive compensation scheme and its
effect on management behaviour/strategy.

NH:

• View: M&S is changing its non-food trading stance in the face of an extremely difficult UK clothing market. If we are right and
the shape of longer term forecasts begins to indicate a relatively full valuation in 2009/10 with the possibility of further forecast
cuts (we have not been very severe in our assumptions here) we would expect further share price vulnerability.

NH:

• Catalyst: Next reports its Q1 on 8th May. M&S reports its prelims on 20th May. The former is likely to alert investors more
explicitly to the scale of problems the mid market clothing retailers have faced in 2008, the latter likely to introduce the
cautious shape outlined here into profit guidance.

NH:

• Valuation: On our revised earnings estimates one can see that a seemingly low near term valuation becomes more
understandable as profits fall away. The 2009/10 valuation appears more extended and as we regard forecasts as still
vulnerable we are reducing our target price by 9% to 320p (previous 350p) to acknowledge this risk.

PM:

“note also critiques the company’s executive compensation scheme”

PM:

Shiret certainly knows how to catch the attention of a passing journo

NH:

don’t have the full note yet, but will report back with it

NH:

the compensation stuff sounds fascinating

PM:

Tomorrow’s lead biz story in the Telegraph and Guardian i think

PM:

PM:

Interesting letter in the FT letters page this morning

PM:

From Mr G.W. Lawson.
Sir, I note that the Financial Services Authority has stated its intent to police alleged insider dealing, with reference to takeovers (”Watchdog vows more bite amid rising signs of insider trading”, April 30).
Surely two of the most blatant cases of market abuse recently were the two large rights issues by Royal Bank of Scotland and HBOS.
In both cases there were leaks in the press several days before the actual announcement. The banks involved have committed themselves to “underwriting” the rights issues, even though both are at large discounts to the share prices which had both fallen considerably due to the press leaks.
I have no qualms about banks charging fees for being at risk, but if the risk has been priced into the market, why are the shareholders being charged this fee and shouldn’t the FSA investigate these leaks?
G.W. Lawson,
London SW19 7PT

NH:

it was saturday actually

PM:

Ah yes, sorry

NH:

but I agree, interesting

PM:

Mr GW Lawson

PM:

Assume that is Mr Gordon Lawson — some time super-shrewdie

PM:

Used to run Pendragon hedge fund — bid arbitrageur

PM:

Before retiring to play with helicopters and such

NH:

non executive at Blue Oar Securities

PM:

A lefty hedgie

NH:

which is involved an interesting bid battle for WH Ireland

PM:

Anyway — he’s got it in for the FSA which gets a

PM:

from us

NH:

NH:

right, we had a question earlier this morning about the impact of the oil price on the airlines

PM:

(V funny wehn wewwereyoung)

British Airways (BAY:LSE): Last: 239.25, down 9.5 (-3.82%), High: 245.00, Low: 235.50, Volume: 6.97m

EasyJet (EZJ:LSE): Last: 304.50, down 19.75 (-6.09%), High: 319.50, Low: 303.25, Volume: 1.54m

NH:

right, aside from the oil price, JP MOrgan has stuck the boot in this morning

NH:

British Airways Neutral
$110 oil - estimate downgrades 239p
01 May 2008

NH:

• The oil price has continued to rise, and we have moved our oil
assumption here up from $100/bbl to $110/bbl.
• On last disclosures, BA was very broadly half-hedged for the new
fiscal year to 3/09, and with relatively little for the year after.
Pushing oil up by 10% hence has a big effect on that year to 3/10.
• From having earnings stalled around 20p, we now move to
earnings falling through 3/10.

NH:

• We see this as having real significance for the consensus view that
an 8p dividend will be restarted with the 3/08 year-end results,
due on 16 May.

NH:

• We can now see the real possibility that a prudent board will
decide not to commence a dividend stream, only to regret it in a
year’s time if crude is $120+ (leaving little EPS to cover it).

NH:

• This is our third big cut in BA estimates for this cycle - our
experience is that it takes 3 or 4 to find the trough.
• We suspect that what might be the last cut could come when all
the bearish economic trends show up as premium traffic weakness.

PM:

No divi. That will go down well!

NH:

PM:

any Raw market info this morning??

NH:

A few bits

NH:

story floating around earlier that Kazakhmys might look to sell its 15% holding in ENRC

PM:

wow, that would be a way to knock takeover talks on the heads

NH:

indeed

NH:

ENRC have got until May 16 to decide whether to bid or not

NH:

I reckon they will let things lapse

NH:

but given the run ENRC have had since they listed in December at 540p

NH:

I would not be surprised to see Kaz knock out their holding once the PUSU deadline has passed

PM:

Sensible thinking

Kazakhmys (KAZ:LSE): Last: 1,725, up 52 (+3.11%), High: 1,729, Low: 1,695, Volume: 487.89k

Eurasian Natural Resources Corp (ENRC:LSE): Last: 1,194, down 6 (-0.50%), High: 1,219, Low: 1,192, Volume: 302.48k

PM:

PM:

Anything else under done?

NH:

a couple more pieces of RAW - these have only had the slightest contact with the grill

PM:

NH:

Whitbread

NH:

shares up 48p at £13.25

NH:

the only non-commodity stock on the FTSE 100 leaderboard at the moment

NH:

apart from Tui that is

NH:

anyway, the rise in WTB is down to speculation that a strategic investors is about to announce a 3%+ holding

PM:

any idea who??

NH:

the usual names doing the rounds, the Reubens, Tchenguiz, Dubai International Capital

NH:

apparently the mystery stakebuilder already has 2.7% stake

NH:

and is in the market buying more

PM:

So he / she could soon have a notifiable interest

NH:

thanks Tuna - had not seen that. ML been bulls on WTB for ages. got some outlandish target price - like £22

PM:

one to watch

PM:

NH:

good point from Lemmy below

NH:

right some more RAW

NH:

flooding in now

NH:

and we are going to take a look at bulls semen

NH:

company called Genus

PM:

Lovely

NH:

yep, world leader in bull semen

NH:

which is apparently in demand at the moment

NH:

farmers need cows producing as much milk/meat as possible

PM:

Perfect bull stock

NH:

stock has had a good run since Xmas. wobbled a bit last week after results and a downgraded from house broker Panmure

NH:

also written down in the Sunday Tel

NH:

however, some very shrewd guys are taking a look - despite the fact that the stock is trading on 25 times prospective earnings

NH:

story is of a bid approach

NH:

we have a name but have not checked it out yet

PM:

PM:

This is RAW

NH:

but suffice to say it is not from a rival.

PM:

As in uncooked bull

NH:

but some wealthy guys who know the value of this sort of technology

NH:

we will report back when we have some more

PM:

Interesting — thanks. One to watch carefully

NH:

I knew we should have mentioned Genus

NH:

too many opportunities for puns

PM:

PLEASE — no more

PM:

We will get unplugged

PM:

PM:

Neil says that the M&S note has arrived from CS

PM:

What’s the pay stuff?

NH:

OK, CS are saying that the M&S compensation schemes have been set up with too much emphasis on short term profit delivery

NH:

Both the main Annual Bonus Scheme for directors
and the Performance Share Scheme focus exclusively on profit targets

NH:

in the latter case
an eps target. Total Shareholder Return is not included in these schemes

NH:

Why are we
concerned with this? TSR makes potential award recipients focus on the same things that
investors do as well as profit delivery – longer term prospects principally.

NH:

The current Annual Bonus Scheme, under which 60% of executive bonus is paid in shares,
which have to be held for 3 years, gives some degree of common interest between
executives and investors. But the separate Performance Share Scheme is purely an eps
based scheme with no subsequent lock-up and immediate (share based) payment on the
vesting date.

NH:

Under this scheme the directors can attract up to 4x their base salary in a PSP “bonus”
depending on where eps falls within a range determined by eps growth rates (in excess of
RPI) over a 3year period. We set out below our understanding of the levels involved based
on the available public information (mainly the 2006/07 Annual Report & Accounts pp45-6,
Remuneration Report).

NH:

We are not fundamentally against driving for superior profit delivery, but this has to be
balanced against how it is to be achieved, the risks involved and whether the model is
sustainable. We also show below the levels of PBT consistent with the lower and upper
achievement levels of the PSP set against our new estimates to reinforce this point.

NH:

In the near term one can see from this chart that buy-back activity might look attractive in
relation to the 2006 programme where on the assumption that the company is probably
not as negative as us it could achieve improvement of eps delivery within the minimum
and maximum levels by this means without underlying performance improvement.
One can also see why management decided to embark on a relatively aggressive opening
programme in light of these charts. Historically there has been a strong belief among retail
managements that opening programmes are good because they tend to deliver a rapid
payback on investment (and thereby enhanced eps growth) where leasehold premises are
involved and scaling benefits to the existing estate through enhanced buying scale and
overhead spreading.

NH:

The trade-off is clearly in terms of the effects of overall capacity growth on existing store
returns. But as opening programmes tend to be embarked on when trading is going well
management tends to disregard this in our experience. Arithmetically there is also an
argument that you are going to take the hit anyway from other peoples’ openings and your
own programme is not going to affect the overall capacity position that much.
Individually one could perhaps justify this type of thinking. Unfortunately retailers tend to
act in the same way at the same time. This is because of the retail profit cycle and more
especially the retail property development cycle where capacity tends to come on stream
in large chunks through the opening of large retail centres

NH:

So in M&S’s case the confluence of site availability, the recovery of its own profits and the
need to generate superior profit growth relatively quickly because of the senior
management compensation scheme appear to us to have been at the root of the current
strategic issues.
Clearly these issues have been exacerbated by the slowing of overall demand. But
probabilities should have suggested to management in our view that there would be some
form of slowdown during the period of its strategy.

NH:

We understand that it is easy to appear wise after the event (even though our opposition
to the accelerated physical expansion is documented). Our point is that the strategy is
clearly at best challenged and at worst failed and as such we do not agree with the
company’s policy of buying back shares to enhance short term earnings even if the
company thinks the shares are cheap – which we do not think they are.

PM:

Sounds like Shiret is analysing banking compensation

NH:

that will give the box tickers at the ABI something to chew on

PM:

PM:

What else has caught your eye

NH:

property stocks

NH:

most of the sector under pressure because of a note from from Martin Allen at Morgan Stanley

NH:

he has had a theory about the property sector, that it would experience three waves

NH:

a big fall, a rally and then an 18-month bear market

NH:

well, he reckon we have had the first two and we are about to enter the third

PM:

NH:

here’s the note

NH:

We close out of our Attractive counter-trend rally call on Pan-European property and return to a more fundamentally Cautious view, pushing out our time horizon for trough discounts to trough NAVs by 18 months to the end of 2009.

This results in major changes in stock ratings and a
defensive shift from UK to continental Europe as we make substantial price target cuts for most stocks.

NH:

We double upgrade to Overweight Gecina (price target €82, cut by 12%) and GAGFAH (target €9.60, cut by 4%), upgrade to Overweight from EW Unibail-Rodamco (€133, 15%), and upgrade to Equal-weight Klepierre (€28, 15%) and DIC Asset (€15, 21%).

Conversely, in UK
property we double downgrade to Underweight British Land (target 560p, 56%) and Brixton (200p, down 49%), and downgrade to Underweight from EW Land Securities (1030p, 40%).

NH:

More bearish than most; look out for debt defaults. While being bearish on property shares in Europe (including the UK) is now a fairly crowded call, we think our estimate of the downside risk to property share prices is significantly higher than consensus.

The four separate valuation techniques we deploy to gauge how much downside there is in property shares to the bottom of the current bear market (which we anticipate will occur around the end of 2009) all support the bearish outlook implied by the weighted 25% potential downside implied by our new price targets.

We think we are now close to the point at which banks in the UK will pull the plug on highly leveraged companies that are in breach of banking covenants, and expect this to lead to distressed sales of properties and hence another upward lurch in property yields.

PM:

Ouch!

PM:

pull the plug on highly indebted companies

Liberty International (LII:LSE): Last: 968.00, down 29.5 (-2.96%), High: 981.00, Low: 961.00, Volume: 705.71k

Land Securities Group (LAND:LSE): Last: 1,535, down 33 (-2.10%), High: 1,548, Low: 1,518, Volume: 458.62k

Hammerson (HMSO:LSE): Last: 1,001, down 17 (-1.67%), High: 1,008, Low: 991.00, Volume: 366.63k

Brixton (BXTN:LSE): Last: 297.25, down 7.5 (-2.46%), High: 302.00, Low: 289.50, Volume: 1.13m

NH:

however, there is one stock that is up in the sector

NH:

Capital & Regional

NH:

shares up 15p to 325p

NH:

now this could be a dead cat bounce because the stock got absolutely shredded last week

PM:

NH:

concerns that its main fund – the mall fund – would break its banking covenants and be forced into a fire sale of assets fall from 435p to 315p

PM:

oh dear

NH:

that fall happened in the space of two days

PM:

But it has bounced back today — why?

NH:

bears closing short positions

NH:

and an upgrade from UBS

NH:

they make the point that C&L is not the biggest investor in the Mall fund

NH:

hermes and Morley are

NH:

so the idea that the banks will come after C&L if the fund breaches covenants look to be wide of the mark

NH:

Capital & Regional is one of the best-established UK property managers. In normal market conditions, property managers should produce above-average returns.

However, the associated off balance sheet leverage, allied with significant capital declines, is placing the model under stress

Significantly above-average leverage, but with strong partners
Equity investors are undoubtedly spooked by the high leverage, and the recent disclosure of the RBS facility shows the risks involved. One cannot predict which course of action best suits a
lending bank in each case of a lending breach, but we believe investors should take some comfort from the fact that Morley and Hermes are the fund managers and, in some cases, the major investor in the three main funds.

NH:

There are some brakes
We believe that Capital & Regional is relatively secure at the group level, with ample undrawn facilities and c£30 million of recurring profits, which should enable it to cope with some of the problems that might occur on the smaller investments. In addition, we believe the group has time to take offsetting measures.

Valuation: Upgrade to Buy
We resume coverage of Capital & Regional, with an upgraded Buy rating. Our new price target of 500p represents a 22% discount to our low-point NAV estimate (December 2009). At that price we believe the shares would yield just under 6%.

PM:

thanks for that

PM:

PM:

Right, let’s have a look at the housebuilders

PM:

I can smell some burning flesh this morning

PM:

NH:

me too

PM:

last week, there were rumours of merger talks between Bovis Homes and Redrow

PM:

so what do we get this morning?

NH:

a profits warning from Bovis of course, and a nasty one at that

NH:

NH:

reservations were down 30 per cent year-on-year since January.

NH:

First-half profits would be “significantly lower” than previously anticipated and that the full-year outlook was difficult to predict.

NH:

just some of the highlights from a throughly depressing statement

PM:

and to make matters worse, there were bid stories around at the weekend

PM:

except it is Redrow merger with Bellway, not Bovis

PM:

this was in the Mail on Sunday

PM:

NH: CONSTRUCTION giant Bellway has approached rival Redrow with plans for a £1.3 billion merger to create the second-biggest housebuilder in Britain.

The deal, prompted by the effect of the credit crunch on business, is likely to send shockwaves through the building industry.

It is understood this is the second time Bellway has approached Redrow with an all-share merger proposal.

At Friday’s closing price, Bellway, with shares at 7161/2p, had a stock market value of £824 million while Redrow, at 2631/4p, was valued at £421 million.

Though Bellway is almost double the size of its target, Redrow has a larger land bank of 25,750 plots compared with Bellway’s 23,000 plots.
Both companies feel their value is not adequately reflected in their current share prices. If the deal goes ahead, they could face complex discussions to decide their respective values within the proposed merged vehicle.

NH:

hmmm

NH:

of course it is always possible that the MoS have the wrong housebuilder beginning with B

NH:

and I would also note that there has been no statement from the company this morning

NH:

and furthermore, from what I hear

NH:

those betting on a deal involving Bovis, which has the best landbank in the sector by the way, are very relaxed

NH:

even if they are nursing some burns this morning

NH:

actually the Bovis share price is holding up quite well, all things considering

NH:

off just 16p at 455p

PM:

OK, let’s have a look at the profits warning in some greater depth

NH:

well, consensus earnings forecasts for this year and next are around 40.1p
and 35.6p

NH:

now, it would not be a surprise to see them cut following today’s statement

NH:

but no one really holds Bovis for earnings

NH:

as I said earlier, Bovis has the best land bank in the sector

NH:

and it worth 595p in the books - and that is at historic levels

NH:

even in the current depressed housing market it would be worth more than that

NH:

so people tend to value Bovis relation to book value

PM:

ok

NH:

unlike Barratt it does not have much in the way of debt

NH:

debt at the end of last week at £92m indicating gearing of 12.5%.

NH:

that said, the dividend could now be under threat

NH:

in spite of insurances from the company that it would be increased to 40p for the full year

PM:

any analyst comment?

NH:

this is from Panmure

NH:

We maintain our Buy recommendation on Bovis, despite a cautious trading
statement from the group this morning. Although sector newsflow remains
weak, we believe that this is factored into the current share price.

Bovis IMS. There is nothing in this morning’s statement which should surprise anyone.

The group comments that market conditions since April have significantly deteriorated as a result of the tight conditions in the lending market.

NH:

In terms of the impact on Bovis, volumes year to date are down 30%, although the group comments that it has maintained gross margins at high levels. Looking at prices, the group has commented that they are maximising revenues in locations where conditions are orderly, but are adjusting sales prices to suit market conditions, which suggests to us that a little pressure is being felt across the group.

Outlook and forecasts. The group has commented that if market conditions persist,
results for the full year will be below the board’s expectations at the time of prelims.
Whilst we have seen two downgrades since then, and our December 2008 EPS of 40.1p and December 2009 EPS of 35.6p are in line with consensus, it would not be a surprise to see a further downgrade to numbers, although we will firm up expectations after the analysts call this morning.

NH:

The positives. Looking at the positives, Bovis benefits from a low gearing position.

The group’s debt currently stands at £92m (the peak position of the year), and compares to the group’s committed facilities of £220m (2010 maturity). Given the strength of this balance sheet, the group will continue to open sites, which should help it to maximise sales revenues. Furthermore, Bovis has the best invested landbank in the sector, with 50% of its holdings delivered from its strategic land bank.

Valuation, target price and recommendation. The shares are currently trading on a
PNAV of 0.78x and yield 8.5%. We believe that this factors in the current negative
newsflow. Our target price is based upon the last reported NAV, and is set at 599p. We herefore maintain our Buy recommendation.

PM:

Thanks for that

PM:

It’s 12.05

PM:

PM:

to finish?

NH:

an April Fools joke from a little telecoms company called Vanco

NH:

this came out on April 1

NH:

Vanco, the global Virtual Network Operator, is pleased to provide a further
update on trading.

Following a review of the working capital requirement of the business, typically
carried out each year at this time, the Company has extended its existing
Revolving Credit Facility by #23m to #123m until 2012 on the same covenants.
This provides good working headroom to meet temporary fluctuations as required
and facilitates the early implementation of the cost reduction programme updated
below. The additional facility is at a margin and fees consistent with the
market.

NH:

On 22 February, Vanco announced a cost reduction and efficiency programme that
improves the cash generation outlook for the business. Savings of #6 million in
the current financial year to 31 January 2009 were identified at that point
which, when fully implemented, should result in annualised savings of #8
million. Vanco is pleased to announce that additional savings of #2 million have
been identified, increasing annualised savings to #10 million

NH:

The programme is
expected to be completed largely by 31 July 2008 with most of the financial
benefit falling in the second half of the year. The cost reduction is largely
being achieved through general overhead control and head count reduction which
has been made possible by the significant investment in software and systems the
Company has made in the last few years, and by moving certain jobs to its low
cost centres in South Africa and Eastern Europe. To date, 105 jobs have been
moved from high cost countries, and that will be increased to 150 jobs by 31
July 2008

NH:

This cost reduction programme will not impact on the growth outlook
for the business, will enable us to maintain and improve service delivery to
customers and, for the first time, will result in the year-on-year operating
costs of the business being lower.

The company is pleased to confirm that current trading continues to be good and
the pipeline of opportunities is strong, with Vanco selected as preferred bidder
for over 20 per cent more new business opportunities as at 31 March 2008 than at
the same time last year (these are all subject to contract).

NH:

so, that came out on April 1

PM:

Right….

NH:

and this came out this morning.

NH:

Vanco plc has today requested that the UK Listing Authority suspend trading in
its securities pending clarification of its financial position.

NH:

A further balance sheet review is being undertaken and further provisions
against the carrying value of certain assets are expected. The profitability of
the business for the year ended 31 January 2008 is also being reviewed and may
be the subject of revision. The Company is therefore unable to update the market
accurately on its historic financial results and inform the markets accordingly

NH:

In view of the above it is unlikely that the Company will be able to publish its
audited results for the year ended 31 January 2008 by 30 May 2008 as is required
by the Disclosure and Transparency Rules. A further announcement will be made in
this regard in due course.

On 1 April 2008 it was announced that the Company had agreed an extension to the
Company’s revolving credit facility (”RCF”) with its syndicate of banks in the
sum of #23.3m, taking the total available under the facility to #123.3m. The
Company has limited headroom under the RCF and other facilities. The Company is
in active discussions with its banking syndicate in respect of its financial
position.

NH:

The Board of Directors is discussing the Company’s financial and strategic
options with its advisers and bankers.

Directorate change

Allen Timpany, Chief Executive Officer and founder of the business, has resigned
with immediate effect.

Andrew Coppel, the former Chief Executive of Jockey Club Racecourses and Queens
Moat Houses plc, has joined the Company as Chief Restructuring Officer.

For further information contact: -

NH:

Andrew Coppel - 020 8636 1700

John Mumford (Senior Independent Director) - 020 8636 1700

Katie Tzouliadis - Biddicks - 0207 448 1000

Morten Singleton - 020 8636 1700

PM:

Jeepers

PM:

Very funny.

PM:

how can things go that wrong, that quickly?

NH:

not sure

NH:

here’s another disturbing stat

NH:

and the start of the year

NH:

Vanco had debts of £60m

NH:

but an overdraft facility of £120m.

NH:

and that is now used up

PM:

so in three months it has spent £60m

NH:

not even SCI could do that

PM:

NH:

and sorry we did not get an answer on Shire

PM:

We ahve got to go

NH:

but the latest missive from Draisma has landed

PM:

We will do a post on that a little later — so check back on the main AV home page

NH:

and a couple more bits of Raw

NH:

we hear Emerson could be one of the companies look at battery maker Chloride

NH:

and Xstrata - we hear they are itching to do another deal

NH:

but it is not McAurthur Coal

NH:

but this lot

NH:

Oxiana

NH:

which has just bid for something else

PM:

Zinifex

NH:

A$6.2bn offer

PM:

Looks like a defensive local deal in melbourne

NH:

all go in the Aussie mining sector at the moment

PM:

So you reckon might try and break this up?

NH:

that’s what I am hearing

NH:

actually on the subject of Oz, the BG bid for Origin Energy is getting loads of stick

NH:

basically the local press saying that BG is acquiring the biz on the cheap, despite paying what looks to be a big premium

PM:

Ok

PM:

Throg — i want to go — but neil is looking for something he wants to print

NH:

Alan Kohler Business Spectator
BG wants free gas

BG Group’s bid for Origin Energy is beginning to look like another
example of Australian institutional investors selling resources assets
too cheaply to foreign buyers.

At $14.70 cash per share, the price is a 40 per cent premium to Origin’s
last sale. However, Origin’s share price is now sitting around $14,
instead of trading above the bid price as usual, because no hedge fund
is prepared to bet on a higher price. The impression you get is that
it’s all over bar the shouting and Origin’s shareholders are falling
over themselves to sign the acceptance forms.

Not so fast. Origin’s board should - and, I believe, will - reject BG’s
first offer and the British firm will have to pay more for a board
recommendation.

The bid is focused on Origin’s coal-seam gas reserves in Queensland,
which BG wants to convert to LNG at a new plant in Gladstone and export
to Asia. Those reserves are about to be substantially upgraded.

Moreover, the price BG is offering is well below what the existing
reserves are worth.

Including debt, the enterprise value inherent in the bid price is $16.4
billion.
Ivor Ries of Baillieu Stockbroking puts a value on Origin’s holding in
Contact Energy (the New Zealand gas company) of $6.5 billion and on its
non-coal-seam gas businesses of $7.9 billion.

That means BG is offering a bit less than $2 billion for the coal seam
gas reserves, which currently total 3,500 petajoules and are likely to
be increased to 4,900 PJ.

At current reserves BG is paying 57c per gigajoule (there are million
gigas in a peta); on the expected increased reserves figure for 2008,
it’s 40c per gigajoule. And if, as expected, reserves increase to 6,000
petajoules in two or three years, the price being offered for the gas by
BG falls to zero.

The average of recent gas transactions is around 90c per gigajoule.

In other words, BG is trying to get Queensland coal-seam gas via Origin
at half price or less. Fair enough: nothing wrong with that.

What would be wrong is selling it at that price.

NH:

I’m done

PM:

Ta

PM:

Thanks for joining — adn thanks for all the comments!

PM:

We will be back tomorrow at 11am

PM:

This entry was posted by Paul Murphy on Tuesday, May 6th, 2008 at 11:02 and is filed under Uncategorised. You can follow any responses to this entry through the RSS 2.0 feed. Responses are currently closed, but you can trackback from your own site.

1. May 06   13:48 Posted by Hawkeye [report]

   Welcome back Neil

   Great session today, after that pair of amateurs last Friday

2. May 06   12:37 Posted by taxloss [report]

   From 10-Q:
   “In the first quarter of 2008, pre-tax losses of $1.6 billion from derivative contracts were principally attributable to declines in equity indexes, declines in the value of the U.S. dollar versus the Euro and Japanese Yen, as well as a widening of credit default spreads in the United States.”
   Who’s willing to bet that most of the losses come from CDSs?

3. May 06   12:18 Posted by sceptic [report]

   @fitz: OTC, what would stop you from writing a contract on any index you wish? (US regulations?)

4. May 06   12:15 Posted by Harry Hindsight [report]

   Lunch is for wimps or winners ????

5. May 06   12:14 Posted by Monkey [report]

   post webby euphoria - they dont want to end the session!!

6. May 06   12:13 Posted by Fitz [report]

   Cheers, anyway. Can you sell short puts on China?

7. May 06   12:13 Posted by Throg [report]

   Blimey - you lot still here!

8. May 06   12:12 Posted by sceptic [report]

   Sorry, no.

9. May 06   12:11 Posted by Fitz [report]

   @sceptic. Any idea which foreign indicies Buffet sold puts on?

10. May 06   12:08 Posted by sceptic [report]

    On Buffett:
    “”Excerpt from Berkshire Hathaway Inc.’s 2007 Annual Report – Chairman’s Letter
    Last year I told you that Berkshire had 62 derivative contracts that I manage. (We also have a few left in the General Re runoff book.) Today, we have 94 of these, and they fall into two categories.
    First, we have written 54 contracts that require us to make payments if certain bonds that are included in various high-yield indices default. […]
    The second category of contracts involves various put options we have sold on four stock indices (the S&P 500 plus three foreign indices). […]”

11. May 06   12:07 Posted by VP [report]

    “..Despite a cautious trading statement..”. Hmm.

    Land banks going to have to be written down across the sector.

12. May 06   12:06 Posted by andy pandy [report]

    Merrill Lynch’s Level 3 assets have increased 70% in the first quarter - interesting to find out why there has been such an increase in their valuation.

13. May 06   12:03 Posted by bsb [report]

    i have a question on housebuilder’s accounting practices - how many of them will book previously made off-plan sales into their profits. and then have to unwind those profits when those off-plan sales fall through due to people walking away from deposits etc?

14. May 06   12:02 Posted by grayder [report]

    On Buffett- S&P500 higher and volatilty lower implys a short put position should be profitable

15. May 06   12:01 Posted by Harry Hindsight [report]

    the split directions of mining stocks versus banks/builders just continues

    must be putting some end-investors / instits under real pressure………at what point do the sector boys stop out ???

16. May 06   12:01 Posted by taxloss [report]

    re buffet:
    Res tantum valet quantum vendi potest

17. May 06   11:59 Posted by andy pandy [report]

    Re the Berkshire Hathaway/Warren Buffet losses

    The $1.6bn loss had to be recorded under accounting rules because the market value of the derivatives held had changed.

18. May 06   11:57 Posted by Monkey [report]

    Compensation scheme is not going to be an issue for M&S as they can take it out of their 5p bag tax profits. Can’t believe they have the nerve to introduce that tax when excess packaging means it takes 5min to get into one of their take-away sandwiches

19. May 06   11:55 Posted by wheniwereyoung [report]

    Even though its RAW it doesnt semen-tirely true…. [schoolboy giggle]

20. May 06   11:54 Posted by t2k [report]

    raw - australian style?

21. May 06   11:53 Posted by TheHoof [report]

    It could of course turn out to be a load of bull

22. May 06   11:53 Posted by John Monaghan [report]

    re Webby - well done.

23. May 06   11:53 Posted by grayder [report]

    You guys could have the seed of a good story!

24. May 06   11:53 Posted by PC [report]

    Sur-mounting operational challenges

25. May 06   11:52 Posted by z [report]

    loaded

26. May 06   11:52 Posted by maximus [report]

    coming from behind?

27. May 06   11:50 Posted by anon [report]

    RE SHP ..SHIRE …See PHE US comments ..

28. May 06   11:50 Posted by y [report]

    Genus: trading cum dividend presumably

29. May 06   11:50 Posted by cjf [report]

    @harry - i agree. think it was o’leary wanting to cause trouble for management/gain free publicity

30. May 06   11:48 Posted by Harry Hindsight [report]

    thanks…..always looked like a macho/impulsive move

31. May 06   11:47 Posted by Greenback [report]

    anything on Shire Plc?

32. May 06   11:47 Posted by cjf [report]

    @harry - ryanair made a bid which wasnt accepted by aerlingus sharesholders so prohibited to make a fresh approach for a year.

33. May 06   11:47 Posted by Lemmy [report]

    When DIC or Tchenguiz appear on a share register, it can be profitable to leave!

34. May 06   11:46 Posted by bsb [report]

    MLCO et al will just move all their structured products to level 3 eventually, when they don’t like the mtm valuations. who needs truth when you can lie so easily…

35. May 06   11:46 Posted by tuna [report]

    wtb to merrill europe 1

36. May 06   11:43 Posted by Harry Hindsight [report]

    what happenend to Ryan Air purchase of stake in Ireland airline ??

37. May 06   11:41 Posted by VP [report]

    RNS = Regulatory Newspaper Stories

38. May 06   11:40 Posted by VP [report]

    What’s happeninng with BDEV, is it for real?

    Co’s don’t seem to think it necessary to RNS these days.

39. May 06   11:40 Posted by maximus [report]

    Whats happening at Bellway /Redrow? Is ist for real?

40. May 06   11:39 Posted by wheniwereyoung [report]

    Altogether now!

    Tullow Oil had a field
    E-R-O-I-E
    And in that field they found some oil
    E-R-O-I-E
    With a dig-dig here, a dig-dig there
    Here a dig, there a dig, everywhere a dig-dig

41. May 06   11:39 Posted by Monkey [report]

    wheniwereyoung - don’t forget the flagship Virgin 1 channel. That has repeats of “Fresh Prince of Bell-Air” from 6.30 - although I did like The Sarah Jane Chronicles and Blade: The Series … but I digress. I dont really care whether it works for BSkyB to be honest - I am more interested on how it affects Virgin. But agree with the comments about BSkyB investing in the wrong platform and fighting a rear-guard action.

42. May 06   11:37 Posted by PC [report]

    bsb - thanks. Useful google keyword eroei. Temperate latitude bio-ethanol is 1.2 apparently. So not great…

43. May 06   11:35 Posted by Monkey [report]

    Harry Hindsight - you would just mark-model using a very very large monte-carlo simulation - the result will probably be meaningless as your inputs will undoubtably be unreliable estimates/assumptions but I am sure it will be good enough for the banks/FSA. They have a history of doing this sort of thing and it’s never gone wrong in the past …

44. May 06   11:34 Posted by wheniwereyoung [report]

    @Monkey - so…they’re buying channels full of BBC re-runs for their platform… the one that is getting knocked round by Freeview.

    Dont forget - FreeSat is being launched soon too. Fighting a rearguard action.

    If they put some money into producing decent, UK based content, supported the industry, instead of hiring expensive and clueless suits they might have somethign to offer. No wonder they are so rattled by the BBC - at least they have product other than US cop shows….

45. May 06   11:32 Posted by bsb [report]

    PC according to my google search for ‘tar sands eroei’

    it takes 2 barrels of oil in energy to produce 3 barrels of oil from tar sands.

    compare that to a gushing onshore well in iraq where it takes almost no energy whatsoever…

46. May 06   11:31 Posted by bsb [report]

    PC according to my google search for ‘tar sands eroei’

    http://resourceinsights.blogspot.com/2004/10/tar-baby-oil-sands-and-peak-oil.html

    takes 2 barrels of oil in energy to produce 3 barrels of oil from tar sands.

    compare that to a gushing onshore well in iraq where it takes almost no energy whatsoever…

47. May 06   11:30 Posted by Anonymous [report]

    “I thought there were no silly questions”

    There is no such thing as a stupid question but the world is full of inquisitive idiots.

48. May 06   11:30 Posted by Harry Hindsight [report]

    v long-dated options so sensitive to vega / implied volatilty

    don’t know how you mtm that far out

49. May 06   11:29 Posted by Monkey [report]

    anon - They are just buying the channels. Looks like The Observer ran the story yesterday

50. May 06   11:29 Posted by t2k [report]

    re crunch - 25% of US car loans underwater.
    http://www.rgemonitor.com/roubini-monitor/252560/negative-equity-in-auto-loans-and-the-bust-of-the-auto-bubble/

51. May 06   11:28 Posted by cjf [report]

    congrats on the webby - well deserved!

52. May 06   11:28 Posted by Anonymous [report]

    @bsb/SQ - correct its hardly anything really… but dont let the truth get in the way of a good share ramp…

    @Monkey - BskyB trying to buy their way out of trouble again? They have a crap record of buying duff tech - remember Open… What are they buying - Virgin channels for the satellite platform or buying a cable platform.
    The problem for Sky is they dont have a decent return path infrastructure, cable does. They currently have a large-ish revenue stream from ‘dial-up’ return path infrastructure - how will they replace that without putting down cables and becoming a triple play telco? Too expensive they punted on the wrong tech and it’ll cost them a fortune to replace it.

53. May 06   11:27 Posted by rose [report]

    thanks for that, and isn’t the price of gas set to rocket anyway due to some EU regs?

    personally i’m glad oil sands aren’t viable, cannot even imagine the environmental damage,

54. May 06   11:27 Posted by PC [report]

    bsb - do you have an efficiency figure for tar sands extraction - like 5%, 10%, 20%?
    Also anyone know what the efficiency of bio-ethanol is?

55. May 06   11:27 Posted by Greenback [report]

    the worst is yet to come … the Crunch is not over as such. We were just passing through The Eye of the Storm!!!! there are more crunches to show up.. consumers pulling the plug and then the commodity bubble blowing up!!

56. May 06   11:25 Posted by VP [report]

    Timis Petroleum

57. May 06   11:25 Posted by grayder [report]

    Buffett- I thought he sold puts on the S&P500. This trade should be showing a profit…the loss’s must have come from something else

58. May 06   11:24 Posted by bsb [report]

    rose - problem with the oil sands is not the monetary cost of extraction but the energy cost - uses almost as much energy in natural gas to convert the tar into liquids than you actually get out at the end.

59. May 06   11:24 Posted by VP [report]

    Rose - Shell reckon viable at $40 , so well in the money. Trouble is, takes enormous energy to extract, & of course the price of that tends to rise with oil.

60. May 06   11:24 Posted by Greenback [report]

    guys..congrratulations. Anything happening in Shire Plc today? shares getting hit ..top faller on Footsie as of now.

61. May 06   11:23 Posted by rose [report]

    any idea on that brazillian oil field that BG/petrobas are into, isn’t all that oil basically impossible/impractical to get to the surface?

    what about the canadian oil sands? when does the price of oil increase enough to make it viable to extract that stuff?

62. May 06   11:23 Posted by Silly Question [report]

    I thought there were no silly questions, just silly answers? Dammit, school lied to me again it seems……

63. May 06   11:22 Posted by Gordon B [