Shell, Kentz, Roundup – Fastnet, Cairn/MOG, Nighthawk, and Trapoil

WTI $93.83 +38c; Brent $103.00 +1.31; Natural Gas $4.00 +1c

Good morning

A quiet morning today with little news, waiting for non-farm payrolls on Friday and better Chinese data as well.

Iraq has confirmed that it is going ahead with its Basra to Jordan pipeline on the Red SEA. The three year project which will eventually export up to 2.5m b/d will give Iraq even more ability to increase production and is another area that Opec are not worried about….

Oil Price

The oil market is also lethargic at the moment but has lifted gently from the sub-$100 last week but traders tell me physical buying is pretty limited at the moment. It was the API inventory stats last night and another chance for the massed ranks of the US analytical world to shine but they didn’t although they scraped in on the right sign. The price rise last night was driven by the crude inventory falling by 7.8m barrels against consensus of 400,000 so they were only 20 times out!

We are still concerned about the elections in Iran next week so remain cautious on the downside, short term.

Shell

It’s worth mentioning on a quiet day a speech being made by Peter Voser at the CBI which I am getting snippets from. He appears to be confident that in oilpriceriggingGate “we have nothing to hide” and that Shell are at the “forefront of transparency”. On oil prices he says that they are not going up in the next few years but will over decades and will become more volatile.

Kentz

Kentz has announced a contract award in Alaska for the Point Thomson gas cycling and condensate production plant, the size of the contract has not been revealed. Clues however abound as the contract is the Groups ‘largest US contract to date’ but a ‘comparatively small award for the group’. While the US has not hitherto been fertile ground Kentz this is indeed a good, if modest contract and proves how good they are doing construction projects in harsh environments such as Alaska.

Just rounding up a bit of news from the last few days,

Fastnet – From Daily Flow Test – DY

The company has provided a corporate update this morning. At its Celtic Sea assets it reiterates that final processing of performed and acquired seismic data is slated to complete by December, with preliminary results expected in September. A data room has been open for parties interested in farming-in since March and discussions are expected to complete this summer.

At the Moroccan assets it expects to drill an appraisal/pre-development well in Q1 2014 following the recent farm into eight exploration blocks covering c14,500km2. This will cost approximately US$7m and will increase the gross interest in the area to 50%. A farm out process has also begun at the Forum Assaka licence in the Agadir Basin, in which Fastnet holds an 18.75% interest.

Exploration over the next 12 months is expected to remain fully funded if the farm-out discussions are successful, which is a significant benefit. Management also have a good record of returning value to shareholders via divestments and company sales.

Overall a positive update and we would expect share prices to strengthen slightly today.

Cairn/MOG – From DFT –DY

MOG have reached an agreement with Cairn to join in the exploration of offshore Malta Area 3 – Blocks 1, 2 and 3. As of December, Cairn has a three-year Exploration Study Agreement (ESA) with the Government of Malta for this area, which covers approximately 6,000 km2. MOG will assume a 40% interest in the ESA and will make a payment of US$0.365m to reimburse Cairn for back costs. In addition it has paid US$50k for the right to back in and will pay US$150k for consulting fees and provisions for sharing in success.

This deal is in addition to MOG’s Area 4 Maltese acreage, where operator Genel is expected to commence drilling later this year. Given the growing interest in the regional geology we would regard today’s announcement as a logical addition to the portfolio with exciting upside. We met with the company last week and, while there is some dispute over maritime boundaries between Malta and Libya, management is keen to emphasise that they are only focusing on acreage which is not contentious.

Following our meeting, MOG feels very much like a company in transition. It has prospective acreage, a strengthened balance sheet and very experienced management. It could well be a junior company worth watching over the next 12 months.

Nighthawk

The Nighthawk revival continues as development of the Arikaree Creek oilfield continues with testing of the Taos-1 well and the rig moving to drill two appraisal wells nearby. A convertible loan to the value of £3.8m has been issued to fund this drilling and also development costs, the note has been mainly taken by the major shareholder.

I see that Trapoil has appointed Scott Richardson Brown as its new Finance Director, this is very good news for Scott who has endured more than enough in recent years and deserves much success.

And finally…

The Welsh Lions are under way in their game against Western Farce in Perth, with the opposition withdrawing most of their decent players and the Aussie coach not wanting any contact with his team until the tests this should be a cruise for the boys….

In the cricket yesterday, warming up for the Champions Trophy which starts tomorrow the Aussies managed to play even worse than England, getting bowled out for just 65 against India.

England have a dead rubber game today against New Zealand having already lost the series so one doesn’t quite know what to expect, a strong performance should send the right signal ready for the Aussies on Saturday.

And yet again I have to report more awful news, a very good friend and city veteran Mark Worpole died last night after a long fight against a terrible illness.

Kind regards

Malcolm