Energy Policy, Alkane, Continental Resources, BP, Northern Petroleum, and Kentz

WTI $92.37 -59c; Brent $107.09 -1.30; Natural Gas $3.93 -3c

Good morning aspiration nation

With apologies for yesterday’s short and late blog, meeting after meeting and it even meant I couldn’t make the Taylor-DeJongh LNG seminar which I was looking forward to.

Energy policy

SSE, one of the ‘Big Six’ energy suppliers have re-ignited the discussion about the UK ‘s energy policy (or lack of it) saying that it was cutting capacity and delaying investments in gas-fired electricity until at least 2015 leading to concerns about ” the lights going out”.

Regular readers will know that this is a bugbear of mine and not just the lack of energy policy, SSE intend to close 2,000 megawatts of thermal generation capacity in the next year. It also said it would not take final investment decisions on building gas-fired power stations until at least 2015, “unless there is a significant change in government policy” on electricity market reform.

The announcement echoes a similar move by Centrica last month. “It appears the government is significantly underestimating the scale of the capacity crunch facing the UK in the next three years, and there is a very real risk of the lights going out as a result,” said Ian Marchant, SSE’s chief executive, in a statement.

I’m sure that you have all looked at Alkane Energy, a favourite stock of mine and who will continue to supply power to the grid and will grow very strongly over this period, a natural hedge against rising electricity prices or power-outs………………………..

Oil Price

The oil price is looking rather jaded at the moment and with supplies from Buzzard increasing the Brent price may come under further pressure in the short term. In the longer term Dougie tells me that Premier and others are forecasting increased production from the North Sea this year which may exert downward pressure at some times.

The chart is approaching a really interesting point so the next few sessions might be really interesting.

Continental Resources

Is there a change of ownership on the way at Continental, one of the US oil industry’s foremost producers in the Bakken in North Dakota? According to news reports, Chief Executive Harold Hamm is ’embroiled in divorce proceedings that could threaten his control’. In this case control is his 68% of the company which is valued at $11.2bn.

BP

From the Daily Flow Test – DY

After market close, BP announced that it will return US$8bn to shareholders via a share buy-back. The US$8bn is equivalent to the original investment in TNK-BP and is designed to counter the dilutive effect of the TNK-BP sale and portfolio reduction as a mechanism to strengthen earning per share.

This is a positive move by the company and will be welcomed by long suffering shareholders. It will not be a quick process and by the company’s own estimates could take 12 to 18 months to complete depending on market conditions.

Northern Petroleum

Yesterday I attended a meeting at Northern Petroleum where the senior management explained the company’s updated strategy to roll out their commitment to acquire low entry cost exploration, in order to add high value to shareholders over the longer term. Following the French Guyana success the company is intent on branching out and increasing the value of the business.

So the first leg of the value enhancement is to buy acreage in Northern Alberta and up til now they have 9,300 acres and a team of highly experienced local operators. This suits the Northern model of starting at a low entry cost exploration and with hopefully plenty of upside.

The second leg is in Italy where Northern already have significant exposure so there is no spreading the risk here, more adding to the geographical bet as it were.

Now the company wouldn’t let us take the presentations away with us but I think I can whisper the words Southern and Adriatic without being sent to the Tower. Relinquished by a major, Northern are confident that this field is better than originally thought and is ” so large as to be uncomfortable”.

So the market must now wait to see how these two assets perform for the company, I suspect there is no hurry as Alberta seems to be a 2/3 year plan and in Italy nothing ever happens very quickly. The share price has decided to mark time and I suspect the next spicy event will be news from Guyane.

Kentz

Monday sees results from Kentz when CEO Christian Brown presents the first year of his reign as CEO. The figures should be no surprise after a very positive trading update on the 18th of January and two exciting and rewarding contracts since then.

Away from current trading one of the reasons for the hand brake being applied to the shares is the overhang of the holding by Kerbet Ltd who hold 13.5% and can be deemed ‘loose holders’ as when they last sold stock they didn’t agree to be tied in for any length of time. Accordingly, the market worries that any time results are out and the Chairman out of purdah they might sell some more and if they do it as badly as last time, harm the share price. We really want this holding out of the way and if it does come on Monday you should buy it all.

Apart from that little problem, for which we have significant sympathy for the executive board, Kentz is firing on all cylinders, is expanding the order book geographically and sectorally and is very cheap on any comparable grounds.

And finally…

Thank goodness I didn’t stay up late watching England’s bowlers toil in New Zealand as their batsmen reached 250-1, in India, Ashes opponents Australia batted under stand-in skipper Shane Watson and were 231-8 at the close.

The British turf flat racing season starts today and Doncaster passed an inspection after heavy snow had fallen, it will hit more sport this weekend as more snow is forecast.

Scotland really do play Wales tonight, apologies and England are away at San Marino whilst Northern Ireland play Russia.

And of course it’s the Malaysian Grand Prix at the weekend as well.