Kentz, Sirius Petroleum, and Fastnet

WTI $93.99 +2.96; Brent $102.55 +3.12; Natural Gas $4.06 -27c

Good morning

I mentioned yesterday that BG in its conference call talked about cost pressures in Australia, this time costs are moving down rapidly as contractors find that work from the miners has evaporated in the blink of an eye. BG talked about Queensland where prices are falling sharply, my spy in Perth is going to do some investigating but already he has seen mining engineers on roll-over contracts reapplying for jobs at a third of previous rates.

My chat on the CNBC Squawk box on BP and our cautious view on the oil price is up on our website www.vsacapital.com so do have a look!

Oil Price

The market turned on a sixpence and rose on the back of an unexpected fall in jobless claims in the US whilst in the Eurozone the ECB cut the refinancing rate by 25 bps. Another Thursday good showing which is becoming catching, bouncing off the support levels, particularly in WTI which is solid, traders tell me Brent is now the wobbly one.

In Russia, as already speculated here, oil output for April reached recent highs at 10.47 m b/d, of that figure exports are just over half so that is another modest increase of supply into the market.

Opec have left output unchanged in the last four weeks saying that European demand was “glum” but Asia’s consumption was rising.

Kentz Corp

An IMS from Kentz today for the period since 1January 2013. The company confirm that trading is in line with expectations and news is positive across the board.

New contracts have been awarded in all three business units and expansion is continuing in new territories as proved by the recent win in Colombia. The backlog continues to grow, it is now $2.8bn having won $700m of business in the first four months of 2013. In addition the pipeline of prospects has grown to $13.7bn and with Kentz excellent conversion rate bodes well for the future.

The company has net cash and is soundly financed, modest acquisitions are being contemplated to add to their engineering skillset and double digit earnings growth is forecast by the company for this year.

All in all a rock solid performance by Kentz who deserve a higher rating, we continue to believe that this operational performance should be rewarded by a much higher share price.

Sirius Petroleum – From Daily Flow Test- JS

The company has entered into an off-take agreement with Glencore for 60,000bbl/d for three years in return for a conditional pre-financing facility of US$65m at its off-shore Nigerian assets. It will also be issuing 900m warrants to raise an additional £60m after receiving shareholder approval in February.

The initial focus will be on the re-entry of the Ororo-1 well in which Sirius has a 40% interest and an 88% cash flow entitlement while net invested. This well formerly produced c2,895bbl/d of light crude (43 API) when tested by Chevron in 1986.

This looks like a transformational deal given the £33m market cap and the stock will be one to watch today. It also shows the continuing trend of companies sources alternative means of finance given the difficulty of raising money in the equity market.

Fastnet

Fastnet continue to expand and today have announced that they have been awarded a licensing option covering a number of part blocks offshore Ireland. The license option is 13/3 which is now going to be called Mizzen East contains wells that were drilled in 1975. Initially Fastnet will reprocess existing 2D and then depending on results, can extend the option.

And finally…

In cricket the England selectors have recalled Ravi Bo Peep in a move that can only be described as a breath-taking move into reverse gear, I hope that since his last hundred recalls he has learned to bat, bowl and field, none of these skills he has demonstrated in an England shirt before on a regular basis.

Chelsea won easily last night as expected and now have an appointment in the final of the Boropa Cup with Benfica which should also be a doddle….

Coventry City have been locked out of the Ricoh Arena and are looking for other premises to play their matches. They should never have gone there in the first place if you ask me!

In the Premiership there are still a couple of things to tie up, notably three teams in top five going for two places and one relegation spot still up for grabs. The Mickey Mouse derby and Man U vs Chelsea are both on Sunday and almost all the other fixtures have an interest.

In the Championship almost everything is still up for grabs so most of these games are vital as well.

Sir Bradley kicks off his summer programme tomorrow in the Giro d’Italia which along with the Tour de France is the most gruelling test in cycling.

And finally… It’s the last day for voting in the Extel Survey, nudge nudge… see below.

Kind regards

Malcolm

Extel Survey

Voting is now open for the 2013 Thompson Reuters Extel Survey (http://www.extelsurveys.com/). Please vote for us in the UK Small and Mid-Caps: Oil and Gas (and Mining) category. Your recognition of our work is valued and very important to us.