BP, Petroceltic, Tower Resources, and Tullow

WTI $106.01 -2.79 , Brent $112.79 -3.44 , B/WTI Diff – $6.78 -65c , Natural Gas $3.64 +2c

Good morning

So how things change in the crazy world of international politics. After being slagged off something rotten for his swift acceptance of the Parliamentary vote, DC might actually looking a tad smarter than your average political journo has given him credit for. To me he appears to be holding a stack of fairly high cards and now that Barry has changed his mind and agreed to put military action to a Congressional vote the ball is firmly in the US’s court.

Oil Price

The oil price has taken a tumble following the Capitol Hill antics but was a bit overdone on the downside as much as it was on the way up. Shortages from Libya and Iraq will keep the downside protected for the time being though and on the other side of the equation Saudi is producing 10.5m b/d to handle domestic power requirements and for exports.

The Driving Season officially ends today and despite the recent spike in the oil price, gasoline prices are below the midsummer peak and also 19 cents lower than this day last year and just below two years ago.

BP

It’s getting boring, the litigation situation at BP, as now the blog is going to have to hire an in-blog lawyer just to cover every new allegation by the company. The latest one, filed on Friday was again to curb payments under the existing agreement which is apparently “fatally inequitable” as similar businesses claiming for lost profits could end up receiving “dramatically different treatment”.

As I said on Friday;

“I wonder just how long the BP Board can sit by and watch their famous company be dragged ignominiously through the courts in the USA, spending buckets of money on expensive attorneys and without doubt taking their eye off the ball in terms of day-to-day business. Amongst the Knights, Admirals, Doctors, Dames and Professors round the non-executive table sits Andrew Shilston, now the Senior independent director who is a shining light and must be, as a genuinely top guy and hugely intelligent bloke just be beginning to think that BP and its executive board have finally come off the rails, time for a change?”

Petroceltic

The company has announced that it has spudded two wells, one is the first on its acreage in Kurdistan and the other is offshore Romania. In Kurdistan they are in with Hess and a campaign of preparatory work has led to them contracting two rigs, one for the Shakrok-1 well which has a COS of 24% on a P50 resources potential of 650m barrels of recoverable oil.

In Romania, 3D seismic has confirmed the presence of a significant gas prospect and two wells will be drilled here.

Tower Resources

Tower has announced that there is a fly in the ointment concerning its acquisition of Wilton Petroleum announced in July. The acquisition was to capture the 20% carried interest in a block onshore Madagascar. The operator and holder of the other 80%, Ophir has indicated that it now does not intend to drill the commitment well after all. So back to the drawing board as all parties try and work out what to do.

Tullow Oil – From DFT – DY/JS

The Buzio-1 exploration well offshore Mozambique has failed to encounter hydrocarbons and has been plugged and abandoned. This concludes Tullow’s stated 2013 exploration program in Mozambique after the Cachalote well discovered an uncommercial gas reservoir in July. The company will combine its data from the wells with its seismic in this area to determine its next steps.

This is clearly bad news for Tullow and continues the poor run of exploration success seen this year. Our risked valuation of this well was c3p (c14p unrisked), however we suggest the stock could fall more than this as the market questions its exploration premium again. At current levels the psychological £10/share mark could well be tested.

The market’s appetite for risk has waned and we feel that the next key driver for Tullow is the completion of the TEN farm down. Should this be pushed back we expect further downward pressure on the share price.

And finally…

Cricket worked for both men and women on Saturday as the Ashes were rubberstamped for the women and the 2nd T20 went to England’s men thus drawing the 2 match series. (Only the ECB could have an even numbered series that might end up tied…)

In football its transfer deadline day so tomorrow there should be much to report, meanwhile Bale has gone to Real!

Andy Murray has reached the last 16 in the US Open so this week should be fun