Petrofac, Genel Energy, Mediterranean Oil & Gas, and Enegi Oil

WTI $107.20 +29c, Brent $109.82 +1.30, B/WTI Diff – $2.62 +1.03 , Natural Gas $3.73 +6c

Good morning

Another short blog I’m afraid as I am still on the road with Kentz, yesterday was great, Chris Brown on good form and delivering the Kentz story very well. Again if you would like the note please just send a quick reply.

The Washington Post suggests Larry Summers is the front runner for the Fed Chairman job………………

Oil Price

The main drivers to the oil price at the moment are US inventories and Chinese demand, last night we had indications of both. The API inventory stats, usually a reasonable precursor to the EIA numbers showed a fall in inventories of crude oil of 1.44m bbls, lower than the consensus of 2.4m but still a draw. Interestingly, both gasoline and distillates fell as well, analysts here not quite so close as they expected a build but what’s a sign between friends…After the data WTI and Brent rose as above but in Singapore and London this morning whilst WTI held its own Brent fell by nearly two dollars.

This will be in response to the Chinese flash data for July announced this morning (how can you produce July data on the 24th of the month?) which showed a lower PMI number indicating manufacturing contraction.

Petrofac

Petrofac has announced that Maroun Semaan has decided to retire from the board at the end of this year, having been a founder of the company along with Ayman Asfari in 1991. There is no doubt that Maroun has been a key driving force behind the outstanding success that Petrofac has become acknowledged by Ayman Asfari in his statement today. The news should not come as a shock to the market place and although he has been a driving force behind the company they have been carefully structuring succession plans and his retirement should have no effect in the market. The only point that the market might be concerned about is his shareholding of 8.18% in the company but in his statement Maroun says that he intends ‘to remain a long term shareholder’ which might mean a part placing but nothing the market can’t handle.

In our recent report on Petrofac (ask me for a copy) we initiated with a BUY and a target price of 1850p, we continue to remain very confident about the prospects for the company.

Genel Energy – From DFT – DY

Mid-Year Review

Major Operational Successes Already in 2013

Genel has benefitted from considerable drilling success at Chia Surkh, Tawke Deep, Ber Bahr, Bina Bawi and, most recently, Tawke. These wells have boosted both the resource base and production potential in Kurdistan.

Q3 will see the completion of the conversion of the gas pipeline running from Khurmala to Dohuk, to oil, which will add 300,000bbl/d of production into Turkey. Taq Taq will supply 200,000boe/d of gross production into this pipeline. Taq Taq and Tawke will reach peak production totalling 270,000bbl/d in 2014, versus 2013 domestic production guidance of 45-55,000boe/d (VSA forecast: 50,000boe/d).

Technicals Still to Come Into Play

Genel’s transfer from a Standard listing to a Premium one has not yet occurred. We assume that it will happen this year, once export agreements are signed with Turkey. As we discussed in our initiation note of 16 April, FTSE Indices would be required to buy in excess of 70 days of stock at current liquidity, inevitably pushing the price up.

Expectations for H1 2013 Results

These will be reported on 31 July, and we would hope to get an update on negotiations with Turkey relating to export agreements. Securing these contracts is vital for how the company evolves in 2014. A review of the impact of 2013’s drilling successes would also be beneficial in determining potential upgrades to the valuation of the discovered assets.

Target Price and Recommendation

Our DCF valuation of Genel’s producing and near-term development assets plus cash yields a core valuation of c1200p. The RENAV and valuations for the gas projects have the potential to add a further 917p. We continue coverage with a BUY recommendation and maintain our target price of 1200p.

Mediterranean Oil & Gas

I have written up MOG a bit lately and as my views on Italy are well known, today’s announcement of the acquisition of more acreage in Malta alongside Cairn can only be good news, albeit modest.

I like what Bill Higgs is doing at the company and the more diversification they do from Italy the more I like it, its just a shame that Italy don’t realise that they are strangling the goose that lays the golden eggs.

Enegi Oil – From DFT who saw the company yesterday

Enegi and its JV partner ABTechnology (ABT) have agreed with Antrim Resources to prepare an amended Field Development Plan for the Fyne oil field using ABT’s unmanned buoy technology. As part of this, Wood Group has been contracted by ABT to commence pre-FEED and FEED studies which it is expected to complete this autumn.

In a separate announcement, Enegi this morning confirmed that it has entered into a definitive Farm-In Agreement with Black Spruce Exploration (BSE) in relation to its Newfoundland assets. BSE with pay 100% of the costs associated with a multi-well drilling program, with the first phase consisting of four new wells through which BSE can earn a 50% interest in each respective Exploration Licence. BSE can then drill seven additional wells to earn a further 10% working interest in the assets. Work has already commenced for a new well on PL2002-01(A) to be drilled this year.

Finally, the company this morning reports that it has raised c£2m through the issue of 24.9m new ordinary shares at an average price of 8.11p/share.

Positive news all round this morning. The Newfoundland farm-out will allow the company to focus on the rest of the portfolio while preserving its cash position, which has been further supported by this raise. We see the company’s involvement with buoy technology as exciting and think it could offer smaller producers a cost effective means of production as opposed to expensive FPSO contracting. This could, however, take a number of years to mature.

We met with the company yesterday and were impressed by how much the story has evolved over the last couple of years. This could well be an interesting stock to watch over the remainder of 2013.

Enegi Oil 1 and 2 Year charts as they are so interesting….

And finally…

The owner of the Hubcap Stealers, John Henry has asked ‘what are they smoking over at the Emirates’ after they bid over £40m in an offer designed to trigger his escape clause. Whether this will open the market up to the Spaniards is anyone’s guess but they smoke over there to!

Spurs manager AVB has also said that Gareth Bale is going nowhere which is dangerous but may be right, sounds a bit like when Ronaldo stayed one more year at Old Trafford before going to Madrid……

Papiss Cisse who notoriously wouldn’t wear his teams shirt because the sponsor (Wonga) clashed with his Muslim beliefs has been photographed in a casino in Newcastle………………….

Aussie legend Jeff Thomson has admitted that he was embarrassed by the teams batting display at Lords saying that it was” the worst batting we’ve seen in our life, then they turned around and did it again in the second innings”