WTI $102.83 -81c; Brent $121.59 -17c ; Natural Gas $1.98 n/c

Good morning

Back from a few days away and unusually nothing much has happened, at least nothing major league! Indeed the prices above, which are Fridays close are not much different to when I left before Easter, today’s prices have actually fallen, taking Brent to below $120 and WTI to a touch over $102.

Our recent call that the oil price is still too high is very much maintained, we didn’t make the call for the $7 it has fallen so far and expect a more material fall to come. (Chart is very interesting, see below)

The fall this morning is due to a number of reasons, with Iran, Iraq, China and Japan leading the way. The talks over the weekend between Iran and the western parties apparently went better than expected and a new date in May has been fixed for further discussions, the fact that the talks were called to head off a possible Israeli military action can be overlooked for the time being…. Iraq are increasing shipments quite nicely and are up to 2.1m b/d and with the Kingdom producing flat to the boards the physical situation is deteriorating, the next thing even the gasoline price will be coming down! China came out with GDP of only 8.1% which was 0.2 below the consensus leading people to think that easing will continue over there. In Japan the fuel bills are beginning to add up, after all they are buying all the spare LNG around and have been guzzling crude oil like it was going out of style, under these circumstances the nuclear appeal starts to become more attractive and pressure is building to slowly restart the n capability albeit at a slow pace.

On the upside pressure-wise, the activity in the Sudan has escalated since I have been away with stories of military moves from South Sudan at the weekend and Sudan bombing facilities and oilfields in counter attacks, this one really will run and run.

Brent Oil price 1 year chart

Brent Oil price 1 year chart

In company news, Amec announced its IMS which was pretty bland, trading is very much in line with market expectations. The company was chipper in the conference call, expecting double digit revenue growth and is seeing ‘healthy’ demand for its services particularly in oil and gas and in mining, power and infrastructure are less vigorous. The order intake has been good, maintaining the backlog at £3.7bn with orders in the Middle East, the GOM and the North Sea as well as in nuclear. The cash position remains strong despite paying out a dividend and buying back £50m worth of shares by the end of March, a process which has and will continue. Despite stuttering with the market lately, Amec remains a favourite in the sector and will cruise through its targets and I expect forecasts to go up through the year as orders come through, the buy back, not normally a favourite of mine will copper bottom the performance.

Kentz has announced a contract this morning, winning a C$128m project for Syncrude’s Aurora North Mine Relocation in Fort McMurray, Alberta. Although this contract is already in the recently declared backlog figure of $2.4bn, it is pleasing to see the details of what is another good piece of work. Kentz is increasing its exposure to Canada and has opened an engineering centre in Calgary to accommodate its growing Canadian team. With KBR selected as mechanical sub-contractor we would then expect to see the usual expansion of the work on the project which will take a short two years to complete. It will come as no surprise to hear that we remain very positive on Kentz and down here at 430p they are very cheap indeed. However having seen the recent placing, how you say, satisfying short term market demand, it may take a little time to recover but patience is a virtue and virtue is a grace and investors at these levels will be rewarded despite the rather ham-fisted nature of the placing.

To Cairn, where a bit of Andrew Armour’s magic is already beginning to rub off as Agora Oil, the recent acquisition has made a discovery offshore the Norwegian North Sea. The NPD has given a preliminary resource estimate of between 63m and 157m barrels of oil equivalent which beats the pre-drill estimate of 70m barrels into a cocked hat as they say and even for Cairn this is a good find. Having been boring holders of Cairn for ages we recently went more positive and with this and maybe some more acquisitions on the way we will stay positive on the stock.

Fortune Oil has announced that it has established a JV with Tianjin Gas to supply LNG to the City of Tianjin in which Fortune holds 60% of the equity. The scale of these things is important as this city is China’s sixth most populous city with 12 million inhabitants. Fortune continues to roll out investments in the LNG supply area and we would expect to see significant growth in this area and indeed in its natural gas business overall.

Briefly whilst I was away we saw a good pick up from Cove Energy which announced that it would be subject to a 12.8% tax charge on its asset sale in Mozambique and that the formal sale process resumed. The price has picked up to around 225p which falls between the lower end bids and the higher end optimists but patience will have been rewarded when the takeout finally happens.

One deal that didn’t happen was the Total offer for Wessex Exploration where an indicated offer of 10p a share had been firmly knocked back by the management on behalf of the shareholders. With an exciting drilling season to come holders can hang on in there for the ride and the downside doesn’t look too bad from 7.5p.

Rockhopper has rallied ahead of the CPR due at the end of the month and as I said before I went away there is still masses of upside from these levels. Finally Dart Energy International has announced a US$100m borrowing facility with the HSBC Bank, the loan is intended will give Dart under its new CEO John McGoldrick more flexibility to develop its leading position in unconventional gas on a global basis.

Hopefully I can pick up anything else by tomorrow, I’m sure I will have missed something!

And finally I guess the only thing that is really bugging people is that in this season of truly atrocious refereeing and line calls yesterday really took the biscuit as the ref gave a goal it wasn’t actually possible to see in the FA Cup semi-final. Bit of a shame for Spurs fans that the distress was only temporary and despite hauling one back they then shipped 5…………..