BP-28 days, DNO/RAK, Genel/DNO, Gulf Keystone, Cairn, Faroe, Aurelian, Amec, and Hunting

WTI $101.31 -25c ; Brent $111.92 -1.14 ; Natural Gas $3.01 -5c

Good morning

The oil price has actually increased a bit overnight and is about a dollar higher than the above which are Nymex close numbers. As we mentioned a while ago there are changes being made in the commodities indices that shift money from WTI to Brent and will take place over the course of the week. The weightings in the S&P GSCI and DJ-UBS indices have been altered to reflect the international importance of the two crudes and the historic over-weighting of WTI.

President Ahmadinejad of Iran is on a trip to South America in an effort to rustle up some friends in its battle with Washington and the EU, I’m not sure that much can come of the visit but apart from Chavez and a Cuban or two they probably won’t change the world. The UAE pipeline which would circumnavigate the Straits still isn’t ready and word is that it will be another 6 months before crude will flow through it.

In the US, apart from the consumer credit number being much higher than expected, we anticipate some odd inventory figures over the next week or two. After the end of year paring back of stocks by the refiners to keep the taxes down there will be a rise in the next two or three sets of figures. Interestingly in the weekly gasoline and diesel prices from the US, last week saw a rise in gasoline of 8.3 cents a gallon and 4.5 cents in diesel which doesn’t sit with the weak demand picture being painted, although the Christmas and New Year holiday may have been an influence.

In international company news the DNO/RAK merger has finally completed after all the court injunctions and hysteria have been sent packing, at least now we will be able to judge the new vehicle with changed management.

On the subject of management Nexen parted company with its CEO Marvin Romanow and EVP Gary Nieuwenburg today with immediate effect.

Genel and DNO have announced that they are planning to double the production from the Tawke Field in Kurdistan by the end of the year after a recent report raised the 2P reserves by 78%. With a plant and pipeline upgrade the company is expecting the production to rise to 100,000 b/d by the end of 2012. It is interesting to note that Genel have a big analysts visit to Kurdistan next week so expect more bullish comments from the company and the analysts who are going.

While we are talking about the KRG, it is worth noting another good rise for one of our favourite stocks, Gulf Keystone Petroleum who have announced this morning that their PSC agreements remain valid and exercisable. Whilst this won’t change the views of the bears of the Kurdistan region of Northern Iraq we still believe that in due course significant value will be unlocked in this area and investment, albeit not without risks will be rewarded in KRG, Genel and probably the likes of Petroceltic as well.

Cairn has announced how it is going to return cash to shareholders following the Vedanta deal. It will return $3.5bn via a B share scheme of £1.60 per share and a share consolidation of 13 for 33 to keep the comparisons and EPS numbers the same. Has the underperformance been overdone? Although it may be a bit much the only upside is next year’s drill bit in Greenland and possible farm outs of the acreage at some stage, reluctantly we still prefer Tullow.

Faroe Petroleum has announced that the sidetrack that they have been drilling on Butch South West has gone wrong due to ‘hole instability problems’ and no one likes that. The good news is that despite this disappointment the prospects for Butch are still excellent and they will drill the area again before too long. Faroe is a real favourite of the blog and with a host of interesting projects to drill over the next few months, all of which are meaningful it remains one of our top picks in the E&P sector.

Aurelian Oil &Gas slipped out a revised company update yesterday while no one was watching! The company say that they have six wells due to spud this year in an active exploration programme which should de-risk a number of other prospects in their portfolio. We are also expecting results soon from Siekierki, the tight gas project, as well as Krzesinki and Bieszcady exploration.

Over to service companies, Amec has been awarded two asset support contracts by Sabic UK Petrochemicals worth £70m. Both contracts are at the Wilton and North Tees in the North East of England and run through to 2014. We are watching Amec like a hawk as if they don’t make enough acquisitions there must be a chance of a significant special dividend in March.

One of our strongest recommendations in the service sector has been Hunting and you will have seen me publishing their chart a lot recently as it looked a banker to get out of the 700p area which it has dutifully done. The next resistance level is right here and right now and I am showing two charts below, firstly the one year chart which is great but technical specialists may have doubts about further breakouts, the five year chart offers more room for manoeuvre and I am sticking with my strong BUY recommendation.

And finally… I have only one thing to say about the next French Presidential race and that is……………Oooh Ah Cantona, say ooh ah Cantona!