Chevron/YPF, Schlumberger/Hunting, BP, Genel, Providence, Soco, and Plexus

WTI $108.36 +32c, Brent $108.79 -52c; B/WTI Diff $43c -17c , Natural Gas $3.81 +18c

Good morning

In Japan, Shinzo Abe wins a landslide victory which gives him a majority in the Upper House and a mandate to continue with Abenomics for the next three years.

G20 has said that it will press for growth over austerity as it changes tack somewhat on economic advice dished out whether we want it or not.

Oil Price

So, WTI has finally overtaken Brent with another rise this morning pushing it 20 cents higher. A combination of factors, much discussed here, has been responsible but higher refinery demand, better pipeline facilities and a return to more normal stock levels at Cushing has done the trick. As a side effect it may just bring to an end the very high refining margins being made in the mid-west.

Chevron/YPF

After much negotiation, including a tripling of the gas price, Chevron and YPF have signed a contract to explore for oil and gas in Argentina.

Schlumberger/Hunting

Worth noting that Schlumberger reported 2Q profits of $2.1bn on Friday, up 48% from last year driven by ‘significantly higher’ international activity in the Middle East, China and Australia. The mix of business is changing with clients increasing capex internationally and offshore at the expense of North America. I will wait until after the Halliburton numbers today before finally drawing some conclusions but my first instinct would be to think carefully about upping ones exposure to Hunting which gives potential upside from its operations in the Gulf of Mexico as well as the longer term opportunities in China.

BP

BP has lost its case in the District Court in New Orleans, failing to freeze compensation payments it believed had been overpaid and the subject of misconducts in the office of the claims administrator. Judge Barbier not only rejected the company’s claim but criticised its tactics saying that CEO Bob Dudley had gone ‘beyond the line’ with ‘unfair, inappropriate, personal attacks’ on Mr Juneau. He also criticised BP for its publicity attempts and encouraging of media coverage that ‘often conflated the allegations of misconduct with the entirely separate question of the interpretation of the settlement’ which BP had not expected when they signed up to the deal.

Back to the drawing board for BP and its legal advisors who must be looking at plan z by now, thank goodness for an $8bn buyback to stop the natives from getting restless.

Genel Energy

DNO has this morning announced that it has initiated production from its first horizontal well in the Tawke field in Kurdistan at a rate of 25,000 b/d, a record rate. The Tawke-20 well was previously flowing at 8,000 b/d from the first of four of ten fractured corridors in the cretaceous reservoir. The well is now on production but subject to wellbore and surface facilities limitations but this is excellent news and bodes well for further hikes in production from Kurdistan.

Genel also gets some publicity today in The Times where Tim Webb assess the risk of its drilling programme in Somaliland, as he says, finding oil will be the least of their problems in a disputed country, never mind licence title!

Genel has been a good performer for us since we initiated coverage back in April, we still believe however that with a target price of 1200p and upside of a further 917p on RENAV and valuations for the gas projects there is still a long way to go and the stock remains a BUY

Providence Resources

Exxon as operator has announced that the Dunquin North exploration well in the Porcupine basin offshore Ireland has on preliminary interpretation indicated that the reservoir is water bearing with the evidence of a possible oil column. Although this is bad news for Dunquin north it doesn’t necessarily mean that the south prospect is dry as there is evidence of a working petroleum system in the Porcupine basin.

Disappointing as this is for Providence, I still believe that with extensive interests in other lower cretaceous prospects as well as an exciting appraisal programme, they still have plenty of room for upside, after all Barryroe must be worth more than the current share price on its own. I have a meeting with CEO Tony O’Reilly on Thursday and will report back after that.

Soco International – From DFT – Joe Stokeld

Operations update this morning. The TGT-10X exploration well in the TGT Field off the southern coast of Vietnam has encountered c117m of net pay at 4,226m depth. The formation pressure is higher than expected and a liner is now being run over the appropriate reservoir horizons before potentially extending the well to 4,430m after logging.

In the Republic of Congo, the offshore LDKEM-1 well spudded on 20 July and will test the Sndji Formation in the Lower Congo Basin. It is expected to take c30-35 days to reach target depth.

In Angola, final preparations are being made at the onshore Dinge 20-6 and Dinge 20-7 well locations prior to the commencement of the two well exploration programme. Dinge 20-6 is expected to spud before the end of July and will test the Vovo Sands in the pre-salt section in the area of the Dinge discovery.

A positive update this morning which shows that progress is being made in each of the key geographies. It is frustrating however that there are no target resources given for the individual wells. The stock dropped 5% on large volume on Friday and this morning’s news should hopefully reverse this.

Plexus Holdings

Plexus has announced that it has won a £2.5m order from Statoil for the supply of POS-GRIP high pressure, high temperature wellhead system for two exploration wells on the Norwegian continental shelf. This is a very good contact for Plexus with a blue chip client such as Statoil and the contract includes two options for the client to extend the contract by two years.

I believe that the company has lost its premium rating recently for no good reason, a share price back up nearer to 300p would be much more justifiable.

And finally…

As the world waits for news of the royal baby the Guardian website has a tab labelled Republican? Which if pressed takes all the baby news off the site, clever or what!!

The cricket finished with another big win for England as Joe Root scored 180 odd and took a couple of wickets into the bargain, shame about the dropped catch…

Chris Froome won the 100th Tour De France which is a great achievement and in particular a great team achievement as he crossed the line in Paris with his colleagues.

Phil Mickelson won The Open as he saw off challenges from Stenson, Scott and disappointingly for the home crowd Westwood and Poulter but it was a very popular win all the same for the left hander.