Kurdistan, Mozambique deals, Shale gas, and Amec

WTI $96.08 +1.42; Brent $104.52 +1.33; Natural Gas $3.83 -2c

Good morning

So, the Iranian election is now less than a week away and the first vote is on Friday. If there is no decisive winner then there will be a run-off on Friday week, the 21st of June at which the Ayatollah Ali Khamenei, the Supreme Leader will indicate his preference. At the moment the favourite, Saeed Jalili is still expected to win although probably not at the first ballot, his nearest rival, the Mayor of Tehran, Mohammad Baqer Ghalibaf a conservative is very powerful as is Ali Akbar Velayati, a Khamenei loyalist. The biggest problem may well be the turnout which is expected to be low, not helpful for the new President.

Oil Price

The non-farm payroll figure exceeded expectations and gave the oil price, along with other commodities and markets a bit of a boost on Friday. We remain of the view that with a significant surplus of oil around the market place and at least 2m b/d+ held up from Iran by sanctions the pressure on the oil price is downwards.

Kurdistan

Iraq’s Prime Minister Nouri al-Maliki visited the Kurdish region at the weekend and held a cabinet meeting in Irbil, the first since 2003. The visit, to improve relations between the KRG and the central Government is highly beneficial but both leaders acknowledge that ‘difficulties in repairing the relationship remain’ but that the meeting was ‘an important step’.

Mozambique

The latest sale of stakes in the Area-1 block has been agreed as ONGC Videsh and Oil India have agreed to buy the 10% stake recently auctioned by Videocon. The share of the block which includes the Rovuma Basin was sold for $2.475bn and will be split 60/40% by the above two companies. The interesting thing about this deal is that at the time of the sale announcement Anadarko, the operator also put 10% of their 36.5% stake up for auction as well and given that the Indian JV were thought to have bid for all 20% one can only assume that we should expect another announcement imminently.

Shale gas

Saturdays Lex column revisited the shale gas story, ignited last Monday by IGas when they put out increased resources numbers for the Bowland shale of up to 172.3 TCF of gas initially in place. I won’t go back over the points that I made last week about Centrica but there is clearly a deal being done somewhere and I suspect that if and when it is announced it may surprise a few people and fill in another piece of the jigsaw. For energy providers and investors alike, the risk of not being invested in the few remaining opportunities in this sector is probably the biggest danger. (Remember CNOOC own 25% of IGas, Riverstone and A J Lucas own 84% of Cuadrilla, Henderson Global Investors own 23% of Alkane)

Amec

Amec has announced a two-year extension from BG Group to continue to provide engineering, procurement, construction, commissioning and project management support for all of BG’s facilities in the central North Sea. The extension is worth around $110m and runs through to December 2015. Whilst this is a good win and Amec continues to pick up plenty of contract work in the North Sea there may be some margin pressure associated with the softening of oil prices recently. The same must apply to work in the Gulf of Mexico where another big Amec client, BP recently shelved the Mad Dog 2 project as the economics were not reflecting a twenty dollar drop in the oil price.

It is worth taking a good look at the chart if you like that sort of thing as the support at around £10 looks pretty crucial and the shares need to break out clearly from the recent trend of falling peaks.

And finally…

Let’s get the bad bits out first, another shambles by the England U21 side and Stuart Pearce blames everything except lousy coaching…

Miami Heat who had lost at home in the first match came back and won 103-84 against the San Antonio Spurs in the second. Now all up to S A for the next three games….

Nadal wins the French Open for the 8th time and now goes straight to Wimbledon, its Queen’s this week and young Dan Evans has already secured a great win in the first round.

Palace Malice wins the Belmont…………..

In the cricket England cruised past the Aussies but it’s still painfully slow at the start, other sides would have made 280 odd with ease, South Africa v Pakistan today is pretty crucial in that group.

And why am I not surprised that Thames Water paid no Corporation tax in the UK last year, according to Sky business news?

Kind regards

Malcolm