Market Prognosis

A concise summary of the major macro events of the past 24 hours, and selected UK company-specific news.

December 7, 2023

Financial conditions ease, UK bids continue & Energean enters Morrocco

Macro & Overnight

Oil prices continued lower overnight, with Brent now 22% lower than its September high. This decline indicates slowing demand from a weak global economy, a lack of OPEC+ unity, and a boost to consumers in oil-consuming countries.

The $ was up and the £ weaker while US and UK 10yr yields lowered further, converging on the 4% level, which is 80 bps lower than the August highs.

Together, these data points indicate a continuing easing of financial conditions globally.

China’s reported trade data are mixed but offer no respite from the deflationary feel evident elsewhere.

UK Company News

Smart Metering Systems has received a recommended offer from PE giant KKR at a 40% premium, valuing SMS at £1.3bn. The relentless takeover of the UK mid-market continues.   

Publisher Bloomsbury updated that its revenue is now expected to be comfortably ahead and profit materially ahead of current market expectations. 

Energean, the oil and gas producer focused on the Mediterranean, announced its entry into the Morroccon offshore market via a farm-in agreement over AIM-listed Chariot’s gas development and its associated exploration acreage. This new country entry is well-aligned with Energean’s strategy. The deal includes a $10 million upfront with an option to increase its working interest to 55%.

The conflict in Israel and Gaza has impacted Energean’s share price amid concerns that the conflict could spread. Its main Karish offshore Israel gas asset has remained operational. It derives most of its income from fixed-price commercial offtake agreements with Israeli utilities, thus protecting it from the lower oil price. This new country entry is a welcome sign of a sensible long-term growth plan and path to diversifying risk in its capital allocation policy.   

The Kelso THG debate rumbles on today, with Kelso issuing another announcement urging the larger THG to break itself up, citing evidence of much higher nutrition business valuations elsewhere.  

SDI has reported that its H1 revenue increased marginally despite the expiration of profitable COVID contracts. SDI acquires private companies at discount values to those on the quoted markets. These subsidiaries are then encouraged to grow for the benefit of all stakeholders. It reports that it has several new acquisition opportunities under review. So, despite headwinds, it remains confident about the future. Note here

Prognosticator 

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