PROACTIVE NEWS SUMMARY: Royal Dutch Shell, Global Market Group, Xcite Energy, RBS, Barclays, Lloyds, Cobham, QinetiQReported by Proactive Investors on Friday, 22 June 2012 (on June 22, 2012)
*Royal Dutch Shell (LON:RDSB) *was among the most followed stocks today after it was reported that the supermajor had been given the all clear to begin drilling for oil off the coast of French Guiana after temporary moratorium was imposed by the ecology minister, Nicole Bricq.
However, French government spokeswoman Najat Vallaud-Belkacem is quoted by the Bloomberg newswire as confirming the end to the drilling embargo.
Shell is the operator of the Guiana exploration project, while the two other major shareholders are Total and *Tullow (LON:TLW)*. Two smaller explorers, *Northern Petroleum (LON:NOP)* and *Wessex Exploration (LON:WSX)*, hold a combined 2.5 per cent.
The hiatus follows a period of great excitement, driven by the Zaedyus discovery well, the first to be drilled on the licence area.
Tullow, the original operator in Guiana, uncovered 72 metres of net oil pay in two turbidite fans.
A comprehensive follow-up exploration programme was planned for the potentially world class oil basin, which is believed to be a carbon copy of the Jubilee field, off the coast of Ghana.
Proactive Investors also covered today’s news form Shell’s sector peer *Xcite Energy (LON:XEL)*, which operates in the North Sea.
The group has secured a US$155 million reserves based loan facility.
This finance will provide a substantial part of the funding required for the Phase 1B development of the Bentley oil field - which will establish commercial scale production.
The five year arrangement has been arranged with a consortium including Royal Bank of Scotland, Societe Generale and General Electric’s finance arm.
"We are very pleased to have secured the facility from such a high quality banking consortium with considerable experience in reserves based lending,” chief financial officer Rupert Cole said.
“The process to secure the facility has involved a further rigorous, independent technical assessment of the Bentley field, the company's field development plan for the Bentley field and the route to market for the Bentley crude.
“Having secured the facility in the current, difficult banking and financial market conditions, the company has demonstrated a further substantial de-risking of the Bentley field and its proposed development plan."
With this additional US$155 million now secured Xcite says it will now pursue its other options to fund the balance of the Phase 1B programme. This could be provided by the potential farm-out of project equity in the Bentley field, it added.
This would be after the completion of the Phase 1A programme in the fourth quarter, it explained.
Additionally Xcite says other funding options include other forms of industry participation, convertible debt, mezzanine debt or equity based funding.
The US$155 million loan is conditional on the successful completion of certain aspects of the Phase 1A development programme – which comprises the drilling of two lateral well’s and a number of tests.
Two other main stories by Proactive Investors were dedicated to Online marketplace* Global Market Group (LON:GMC)*, which started trading on the AIM market today and* Royal Bank of Scotland (LON:RBS)*.
RBS launched a scathing attack on Moody’s this morning after it was one of 15 global banks to be downgraded by the ratings agency.
The state-owned bank disputed the ratings change after it was cut by one notch, calling it “backward-looking”.
The company said: “Moody’s ratings change… does not give adequate credit for the substantial improvements the group has made to its balance sheet, funding and risk profile.”
The bank said that the amount of collateral that may have to be posted could be as much as £9 billion as of the end of May this year.
It criticised Moody’s for its “negative outlook”, but added that the impacts of the downgrade are manageable given its £153 billion liquidity portfolio.
The bank clAIMs it has made “significant progress” in strengthening its credit profile since 2008, which it pointed out had been recognised by other ratings agencies.
Both Standard & Poor’s and Fitch Ratings have RBS down as an ‘A’ and have upgraded the standalone rating by more than one notch over the past 18 months.
Elsewhere, Moody’s cut *Barclays’ (LON:BA.C)* credit rating by two notches, while *HSBC (LON:HSBA) *and *Lloyds Banking Group (LON:LLOY)* were knocked down by one notch.
Meanwhile, Global Market’s debut on AIM today marks the arrival of the largest Chinese company this year to the London exchange.
Shares began trading at 8am today, under the symbol GMC.
The company raised £9.7 million at admission through a placing of around 7.4 million shares at £1.30 per share.
This gives the web-focused group a market cap of £127.1 million.
Today the shares began trading in London at 134.5 pence - representing a 3.5 per cent premium to the placing price.
The company formed a decade ago and since, has grown into a cashflow positive and profitable e-commerce business.
Through www.globalmarket.com, the company connects manufacturers in China with buyers from across the globe.
But the Chinese manufacturers are quality checked by Global and receive an accreditation so western buyers can use the service with confidence.
There are now nearly 904,000 western buyers using the service.
Proceeds from the placing will be used to further expand the sales office and team within China, allow for continued technological development of the website and brand, and finance potential new acquisitions, the company revealed.
In other news, concern over possible further cuts in US defence spending allied to eurozone instability has prompted downgrades to a raft of defence companies from broker Investec.
Political indecision in the US could impact trading near-term while potential for further US defence budget cuts from ‘sequestration’ threatens the longer-term, Investec said.
A decade of annual increases in the US defence budget has come to an end as austerity, budget reform and the wind-down of two major conflicts impacts total spending, it added.
US spending is scheduled to fall by US$487 bln over the next ten years, but investor sentiment will be further affected by the threat of an automatic ‘sequestration’ of a further US$500 bln from next January if there is no agreement on a federal deficit reduction plan.
Slow US orders are likely to persist up to and through the US presidential election, while UK and European budgets are likely to remain challenged, the broker said.
Until visibility improves, defence ratings will remain depressed it believes and so lowered its rating across the sector.
*Cobham (LON:COB)* and* QinetiQ (LON:QQ.)* are downgraded from ‘hold’ to ‘sell’ with reductions in their target prices to 200p from 235p and QinetiQ to 130p from 150p.
*BAE Systems (LON:BA.)* gets its target price reduced to 295p from 360p and is now a ‘hold’ from a ‘buy’.
*Ultra Electronics (LON:ULE)* (PT 1560p from 1850p)* *and *Avon Rubber (LON:AVON) *(PT 315p unch) are also now ‘holds’ from ‘buys’ previously.
*Rolls-Royce (LON:RR)* is Investec’s key pick and remains a ‘buy’ with an increased target price of 920p up from 850p.
*GKN (LON:GKN)* is also a ‘buy’, though the target price for the auto parts group is lowered to 225p (240p).
Links: Full news story
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