WTI $96.62 +74c; Brent $104.57 +1.58, Natural Gas $3.82 +4c

Good morning

Last day on the road with Primeline, if you didn’t see them look them up on the TSX ( TSXV:PEH) and then ring me up and ask ‘what’s the catch’? There isn’t one, it’s just wrongly valued.

The election in Iran started at 03.30 hours GMT as 50m eligible voters had a chance to cast their votes. Fears of a low turnout are probably worse than a re-run of the 2009 carnage as then rumours of a fix led to civil unrest. According to reports there are still four possible winners but Jalili seems to be the favourite.

Following ‘confirmation’ that chemical weapons had been used by the Government troops in Syria, President Obama has authorised sending weapons to the rebels for the first time which will slightly enhance the geopolitical insecurity.

Markets have generally picked up after a ‘well informed’ report in the Wall Street Journal suggested that next weeks Fed meeting will not discuss tapering, at least not yet. The kite that was flown over markets to try and see what the reaction to tapering would be has certainly worked, we don’t like the sound of it one bit!

Oil Price

Another small rally but the trading range remains very narrow, Opec said that it would reduce shipments, bearing in mind the increase in US production but my guess is that more realistically they are producing the same but using more domestically. The weak greenback is probably the only thing holding the price up right now.

Shale Gas etc……………

Just a brief follow up to yesterday’s activities in the Centrica/Cuadrilla situation now that the dust has settled, a bit. Firstly, this should have come as no surprise although I still think that we were the only outfit who publicly and in hard copy said that it was a must-do deal for Centrica and option money in case unconventional energy succeeds. Word seems to have it that a number of majors were interested in the stake, certainly Total appear to have been at the table, probably Exxon and Statoil and maybe Chevron too. The interesting one is Shell who have publicly said for a while that they were not interested and that it was not in their budget at this time, however there are people who are saying that they were somewhere in the shakeup.

We mentioned IGas yesterday and the market has still to appreciate anything like what this deal means for them, think 250p as a starting point for valuation here.

Another stock we have been watching is AJ Lucas who broke all records yesterday by having an equity raising before the print was even dry on the Cuadrilla deal. They have announced that they plan to raise A$ 148.8m through a placement and entitlement offer at $1.20 per share (currently $1.60) at which their largest shareholder, Kerogen Investments will subscribe for up to $85.3m of shares. When the ducks are quacking its right to feed them and in this case they had only just started quacking!

AJ Lucas Group 1 Year chart

AJ Lucas Group 1 Year chart

Dart Energy

Not to miss out on the excitement, Dart was up sharply in Australia too but from a lower base, Dart has suffered from concerns about its prospects at home which are back-burnered at present and at some of its international operations. However Dart’s jewel in the crown is its UK asset base where it has a CBM play in Scotland and, you’ve guessed it, a more than interesting shale position in the Bowland Western and Eastern. The market cap of Dart is only A$47m so it is realistic to think that subject to tidying up the portfolio and identifying a UK unconventional rump, the stamping of the value of UK shale yesterday might even rub off on Dart.

Dart Energy (ASX) 1 Year chart

Dart Energy (ASX) 1 Year chart

Faroe From DFT – DY

We have updated our valuation for the company to take into account the latest information for the 2013 drilling programme and recent licence acquisition in the Barents Sea.

Our core valuation for Faroe’s producing assets, Norwegian tax receivable and cash remains at 106p/share. 2013 exploration at Butch (two wells), Novus, Peel, Snilehorn and Solberg has the potential to add a further 85p/share (risked). Other exploration assets contribute 64p/share (risked). The chance of success for the wells in 2013 is estimated by the company as 1 in 3.

The drilling at Butch is the most significant and the company has stated that the Butch Area has the potential to contain 250mmbbl of gross resources.

We continue coverage with a Buy recommendation and upgrade our target price to 255p from 213p.

And finally…

The US Open was indeed affected by rain and many players are going back out today having not finished their rounds from yesterday. That includes current leader Luke Donald but I’d rather be Phil Mickelson, leading in the clubhouse having played the difficult last five holes already.

The Welsh Lions have a tricky game against the NSW Waratahs tomorrow and Gatland has picked a strong side that might almost be a nearly test side for the game.

Notice that Gavin Henson has signed for Bath, he must be trying to see if he can play for all English, French and Welsh clubs in his TV career……….All leave has been cancelled in Bath’s nail bars and waxing emporiums………………….

England lost the cricket despite Bo Peep taking 28 runs off the last over, good work but the slow rate early on continues to hamper the side.

Miami Heat won away from home, beating the Spurs 103-93 to take the series to 2-2 and a genuinely exciting finish, losing yesterday would have meant big trouble.

A good line-up of quarter finalists at Queens Club with Murray regaining his fitness.

Kind regards