Oxy, BG, Premier, Wood Group, and Chevron/ Martin Lovegrove

WTI $95.80 +19c; Brent $105.44 +1.43; Natural Gas $4.04 -1c

Good morning

The Norwegian Government, clearly with its eyes on an election in September has increased taxes on oil companies with a lot of blurb about cost overruns and has reduced the tax uplift. Statoil has responded rather predictably by saying that changing the tax breaks will threaten the attractiveness of future prospects with particular respect to marginal fields and that predictability and stability of the fiscal framework is important.

Whichever side you consider to be correct two things are worth bearing in mind, firstly when the UK Chancellor did such a thing there was an immediate and noticeable withdrawal of capital particularly when those marginal prospects were re-evaluated under new field economics, the policy had been incorrectly thought through especially with regard to the gas industry. Secondly, the announcement a few days ago by BP when cancelling Mad Dog 2 in the Gulf of Mexico was because oil industry inflation had not yet factored in the fall in the price, making the economics unworkable, changing the tax breaks may do the same in Norway, who knows?

Oil Price

The trouble with Bank Holiday weekends is that you lose sight of your comparisons as it were! The oil price rose on Friday in New York after the non-farm payrolls were better than expected and February and March were restated upwards as well. The differential between WTI and Brent widened again as Brent rallied again on news of Israel’s air strike against Syria whereas WTI is worried about inventory numbers growing again. Counter to the geopolitical worries around, the HSBC China PMI number reflected some cooling off of the service sector activity as a knock on effect of the slower Chinese manufacturing date reported last week.

Occidental Petroleum

After a long shareholder struggle Chairman and former Chief Executive Ray Irani was removed at a shareholder meeting last Friday. The clue as to the voting was that Irani didn’t show up to the meeting and that the price of the shares continued to rise, see chart.

BG

More news from BG of confirmation of the sale of interests in the Queensland Curtis LNG project in Australia. The deal, worth $1.93bn, includes interests in the QCLNG project as well as an additional 5 mtpa of LNG and some costs back since January 2012. NB BG Strategy update next Tuesday.

Premier Oil – From Daily Flow Test – DY

The Luno II discovery (PMO: 30%) has now been flow tested at 2,044bbl/d and was found to have a gas:oil ratio of 1,012cf/bbl. Premier estimates that the field has 75-130mmboe of gross resources, of which 80% are liquids. It has also identified 10-40mmboe in one prospect to the north of the discovery.

We feel that this flow test is on the low side given the high gas content which may be difficult to process. As the company stated, more work will be required to appraise the field and to potentially increase the resource base to the north.

Cairn/Providence

Cairn has announced that it has agreed with Chrysaor and Sosina to farm-in to Frontier Exploration licences 2/04 and 4/08 as well as option 11/2 in quad 35 in the Porcupine Basin off the west coast of Ireland. Cairn will earn a 38% equity stake in the licences by paying 63.33% of future exploration and appraisal costs subject to a cap. Providence,(figures tomorrow) who are already carried to a certain extent in Spanish Point is not getting involved in this deal and will remain at 32% equity participation. Subject to rig activity it is envisaged that the partners will drill the appraisal well in Q2 2014. Cairn will become the operator with 38%, Chrysaor 26%, Providence 32% and Sosina 4%.

Wood Group

A ‘substantial’ contract for Wood Group in its JV with CCC in Iraq as the partnership has been awarded a contract by Shell Iraq Petroleum. The JV is to commission the first phase of the Majnoon field near Basra in Southern Iraq. Shell are the operator of the giant, 38 billion barrel oil field with partners Petronas and the Iraqi Ministry of Oil. The contact starts in June 2013 and lasts for one year and the contract description covers all areas of start-up, commissioning and testing of the infrastructure.

And finally…

I see that Mark Kleinman, City Editor at Sky News has another scoop, this time in the oil sector! A piece of news I heard a few days ago and was told to keep under my hat was in his column last week, the story goes that Martin Lovegrove, an ex-colleague and good friend of mine has joined Chevron as a ‘special advisor’….

In sport there is much to cover, briefly though Orb won the Kentucky Derby ending a massive wait for victory by trainer ‘Shug’ McGaughy.

Wolverhampton Wanderers have sacked their manager Dean Saunders after their second consecutive relegation this season. To be fair it’s the board and owners who should be sacked here as the departure of Mick McCarthy was the turning point at Wolves and the poor old supporters have been well and truly legged over.

Another manager to go today is Kenny Jackett at Millwall.

Ronnie O’Sullivan cruises the world snooker title, never in any doubt in the final….

Two great play-off semis yesterday as Yeovil and Brentford squeak though to the final and Sunderland nicked a point off Stoke last night. Wigan vs Swansea tonight, it doesn’t get much more important to Wigan and if they win Newcastle are in the drop position.

Kind regards

Malcolm