image005WTI $97.89 +1.20; Brent $105.60 +98c, Natural Gas $3.74 -7c

Good morning

This is from our January resources quarterly;

“we believe there will be a regime change in Iran at the June 2013 elections: that a more pro- Western President will be elected, Ahmadinejad will be removed and this will give way to sanctions being lifted and Iranian oil production coming back on-stream”.

So, Rouhani wins the election, against the head, so to speak and did it on a ticket of promising better relations abroad and more freedom at home. He is a respected, senior man and apparently has good rapport with Khamenei, the Supreme Leader so he may be able to persuade him that this is time for a change, however reform is not going to happen overnight. He did say that Iranians have had enough of sanctions-induced austerity and isolation so we must think that the will is there.

Oil Price

Our take on the oil price is reinforced by the Rouhani election victory. The last few days have seen a small degree of firmness caused primarily by the geopolitical situation in Syria which has escalated after President Obama agreed to supply weapons to the rebels.

It can’t be because of rampant growth, the IMF cut their US growth forecast from 3% to 2.7% and Chinese growth numbers were falling last week, Jim O’Neill apparently wants to see that number with a 6 on the front………

Bottom line there is plenty of crude around and not just from Iran, look at these forecasts for the US where the EIA suggest that US production ranges from 6 to 8m b/d over the next 30 years but with a high case of 10m b/d.


Saipem- Profit warning No 2 out of?

Another profit warning by Saipem as the company guessed that it would now make a loss of €300m-€350m instead of the profit of €450m they forecast at the time of the last profit warning. 43% owned by Eni, Saipem have blamed the unexpected loss on “a significant deterioration in our commercial position in Algeria” as well as “operating issues…in relation to two onshore contracts in an advanced stage of execution in Mexico and Canada”.

With profit warnings usually coming in threes, no sign of things getting better anytime soon and 43% of the company overhanging the market there is no case for holding this stock, it is not investment grade.



As predicted at the last company meeting, Lamprell has delivered on its promise to restructure its debts and has announced a new $181m facility. The new facility contains two term loans and a revolver all expiring in 2016 but with some options to extend. The firm will now work with only five core lenders, much reduced from before and the rate of borrowing is 6.7% on average. We remain very happy with Lamprell as a recovery play and this is another building block in that recovery.

Lamprell 1 Year chart

Lamprell 1 Year chart

Ithaca Energy

Ithaca continue the process of farming out acreage, this time they have reduced their interest in Handcross to 45% and a much reduced cost to them having farmed-out to Edison with a carry. The company has also farmed out to Shell 50% of their interest in 27th round licence P2048 to Shell for costs and an option to Shell over the remaining 50%, all in all a couple more pretty good transactions for Ithaca.

Leyshon Resources – From DFT – JS/DY

Leyshon reports that is has discontinued testing of the ZJS6 well (the second drilled in the current programme), located on the southern boundary of its Zijinshan Gas Project in China, due to technical problems. While other areas of the field are dry, it seems the pay zones here produced water and it has not been possible to isolate the source. Furthermore, the company is unable to tell whether this issue is specific to this well, or this area of the licence more generally.

This is clearly a disappointing result after the successful flow test on well ZJS5, which flowed at 160,000scf/day more centrally in the licence. There is still further news to come from pressure testing at ZJS5 and the company is planning a further six wells elsewhere based on current 2D seismic. Hopefully these will show that the water issue has been an isolated occurrence by the end of the year.

BP’s statistical review last week showed that China is well established as the world’s largest energy consumer and it also potentially has the largest shale reserves in the world according to the US Department of Energy. However, at this point we would be more comfortable investing in more traditional Chinese gas assets in areas such as the East China Sea until the commercial viability of Chinese shale gas is proven.

And finally…

A good weekend for British sport, Andy Murray won Queens and also donated his winnings to the Royal Marsden Cancer Charity.

And Justin Rose justified years of optimism by winning the US Open at Merion, seeing off Phil Mickelson who you might have thought was going to do it at last.

England cricket just about got through against New Zealand in the rain at Cardiff, with five balls to go and the rain falling before a match was in play technically a Kiwi batsman fell like he had been shot but the rain wasn’t enough and he got up run a quick two the next ball……………….

Keeping an eye on the basketball last night the Spurs beat the Heat again 114-104, this series is hot, now 3-2 to the Spurs………….

And for those of you old enough to remember Black Sabbath, they have just had a number 1 album, 43 years after their last one!!

Kind regards