WTI $90.99 -2.47; Brent $99.47 -2.34; Natural Gas $4.32 -2c

Good morning

It’s one of those mad days, not content with BG and Shell reporting on the same day (can’t they get their heads together, it wouldn’t have happened in Chris Lloyd’s day?) Statoil have missed the whisper which is unusual for them.

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

Another battering for the oil price as manufacturing growth in the US was worse than expected and Asia was weak on further fears about Chinese growth. The biggest hit was when the EIA inventory figures came out and what a surprise, the Wall Street analysts were totally wrong. The stock build was 6.7m barrels which got the total to 395.3m bbls, the highest figure on record, at least since the EIA have been doing the stats which is 1982.

How long since you saw both WTI and Brent in the $90’s a client asked this morning, the answer is that you have to go back a long way, even last summer when Brent spent about a month under $100 WTI was heading down to $79. The differential at that time, interestingly was quite low, last night the gap fell to $8.48….

Natural Gas

Stays pretty perky and for those who haven’t been reading the blog lately looks set pretty fair, look at the chart below of the outperformance of NG vs Brent crude.

Brent crude vs Natural Gas 1 Year

Brent crude vs Natural Gas 1 Year

Royal Dutch Shell

A pretty reasonable set of figures from Shell this morning as the long term investment programme continues to yield results and will do through this year and next. The number easily passed the consensus and at $7.3bn is probably the best in the supermajors after Chevron. Comfortably better than most upstream, due to exposure to gas and in particular the Pearl GTL plant in Qatar output in the section was in line with last year. Liquids were as expected down on last year but only 2% and the Eagle Ford was very comforting. LNG was a touch off but only due to interrupted supplies from Nigeria although Pluto compensated somewhat.

Downstream was as expected very good and a 5% rise in the dividend confirms our view that distribution is getting much less parsimonious.

The announcement that Peter Voser was leaving came as a slight shock but not a surprise, I thought he might do another year but the Board must think things are in pretty good shape, also when you get awarded that sort of dosh it would be silly not to retire to spend some time with it….

RDS 1 Year chart

RDS 1 Year chart


The 1Q figures for BG were better than the guidance by a smidgeon and news from Australia and Brazil was better than one might have hoped for on timings and budgets. On the longer term strategy front the company are remaining tight-lipped until the annual update on May 14th. Guidance therefore remains unchanged for production and revenues in LNG.

The conference call was particularly positive on Brazil, as bullish as I’ve heard for a while and that includes Sir Frank’s constant optimism, specifically on Iara which is clearly much better than the market gives them credit for. In Australia, despite the bad weather the pace of drilling was good, 73 development wells were drilled in April alone to catch up. The Gladstone harbour pipeline was laid successfully and Curtis Island is now connected to the mainland, on Curtis Island the liquefaction plant and facilities are on track, delivery will be on time and on budget. Interestingly, cost pressures are easing in Australia in a meaningful way, the mining contraction is becoming a rout and civil and contracting resources are now available in a big way and costs are actually falling. In Africa news from Tanzania is excellent as we know and both Jodari and Mzia DST’s were better than expected.

Overall I expect the strategy presentation to be upbeat in two weeks’ time and therefore remain firmly in the buy camp for BG after last year’s disappointments, the turncoat analysts from big euro banks will probably spend the next fortnight working out how to get back into the good books of the company, I can smell it from here!

BG Group 1 Year chart

BG Group 1 Year chart

Ophir Energy Upgrade of numbers – Daily Flow Test – DY

We have updated our model to take into account the drill string tests and resource upgrades at Jodari and Mzia. We have also updated the 2013/14 drilling programme to take into account changes to chance of successes and pre-drill estimates.

We continue coverage with a Buy recommendation and upgrade our target price to 714p (606p previously).

Gulf Keystone Petroleum- Also from Dougie

An update at the Shaikan Field in Kurdistan has been released. Key highlights are:

  • The two new production facilities (PF-1 & PF-2) are nearing completion, with mechanical assembly and connection works on PF-1 expected to complete by the end of Q2
  • PF-2 is also expected to be completed in the coming months and will increase 2013 production capacity to 40,000 bopd. Production then anticipated to increase to 150,000 bopd in 2015
  • The Company’s 18th and 19th wells: Shaikan-7 deep & Shaikan-10 are expected to spud in in May and June respectively

It is very encouraging to see this production coming on-stream. The share price has been very weak due to management moving shares and the misperception surrounding the motivation. Excalibur litigation continues to be an overhang on performance, but the company is funded and making good progress across the portfolio.


A very interesting meeting with Cape in the office this morning, as expected there is a very solid recovery going on here under Joe Oatley. We feel that the recent rally is justified although investors should be cautious about getting too carried away as remedial action continues under the new regime. The contract won in Azerbaijan last week is a sign that the company can win important support contracts from international majors and in this case as a JV with local partners.

Cape PLC

Cape PLC

And finally…

Who would have thought, aggregate score Bayern 7 Barca 0 eh? As we have said before without Messi, Barca appear rudderless, maybe they should sign someone to replace him, I hear Andy Carroll is available at the end of the season.

Sad day for Aldershot Town as they have gone into administration today which is not a great surprise after they were relegated from the Football League last weekend.

Chelsea play Basel in the Boropa Cup tonight, should be a formality in the second leg before facing Benfica or Fenerbahce in the Final….

Joey Barton want to stay in Marseille, that’s good with us….

Warming up for the tests, Joe Root scores 236 and Jonny Bairstow 186 for Yorkshire on a flat track at Headingly.

Kind regards