Centrica, BP, and Ithaca Energy

WTI $104.67 -1.72 ; Brent $110.06 +28c ; B/WTI Diff – $5.39 +1.91 ; Natural Gas $3.69 -3c

Good morning

A quiet start to the week, Mrs Merkel wins election in Germany pretty much as expected, now it’s the horse-trading around the coalition where Angela is very much in the box seat. Good news for the UK as the SDP were put to the sword and we think Angela has a soft spot for Dave.

Labour party conference this week so many policies being wheeled out but more people are reading the book about Gordon and his antics………..

Oil Price

Brent drifted back in early trading and has settled at $109.38 but the pressures are downward, a call for a ceasefire has been made in Syria and President Rohani of Iran is addressing the United Nations General Assembly in New York this week.

Even Libya is holding levels of production from the end of last week which will settle markets down.

Centrica

As mentioned here and in the Daily Telegraph recently, Centrica has announced that it has decided not to proceed with its new-build gas storage project at Baird in the North Sea and to put the Caythorpe project in East Yorkshire on hold indefinitely. Cost to Centrica £240 of write-offs which is bonkers but not their fault!!

When I mentioned this in the blog before, suggesting that the UK Government had bottled out of what was a totally reasonable policy of encouraging gas storage, I had a number of replies saying that the policy was ‘not economically viable’ and should not be publicly funded. As George Bush would say, if only the French had a word for Chacun à son goût…………………..

BP

A story is emerging that the Rhum field in the North Sea may restart production soon as the UK may be close to agreeing a sanctions-busting deal with the EU and the USA. Partner in the field is the National Iranian Oil Company so there may be many legal problems ahead of the partners, what you might call an Anglo-Persian joint venture…

Ithaca Energy

You will know that we are very keen on Ithaca and below is our comment from today’s Daily Flow Test in which we assess the announcements today. We do however believe that despite the recent rise in the price that the shares are still seriously undervalued and we expect significant outperformance.

Ithaca has carried out a series of farm-outs which will see it fully carried for UK exploration well commitments from the Valiant acquisition and receive over US$8m in cash. These include:

-A 9% and 5% WI farm-out of the licences containing the Handcross prospect to Oyster Petroleum and Sussex Energy, respectively. Ithaca remains as operator and now has a full-carried 31% interest.

-A 10% WI farm-out of the licence containing the Isabella prospect to a subsidiary of Edison SpA. Ithaca now has a fully carried 10% non-operated interest.

The company has now offset all of the US$85m forecast UK exploration well commitments transferred after the Valiant acquisition and has also received over US$8m in cash. This is encouraging news which ensures the focus remains on the Stella development, where initial development work has been encouraging and the ramp-up into the middle of next year looks on track. Ithaca has the potential to significantly outperform over the coming months and is now offering exploration upside with fewer concerns over portfolio management.

We continue to feel that Ithaca is a seriously undervalued stock and given the high level of cash generation we could see substation returns to shareholders or the possibility of further acquisitions. We expect the share price to strengthen today.

And finally…

Sir Bradley Wiggins wins the Tour De Britain which came through Guildford on Saturday, what a joy….

Exit Paolo Di Canio after 13 games, maybe about 6 games more than we all thought………A pasting for Man Who yesterday but at least three London clubs in the top 4. Also a shocker for the HubCap Stealers at home to Southampton..

Watch this sailing, its great! Bringing in Ben Ainslie has dynamised the Shermans as they go from 1-8 in the series to 5-8 but with the Kiwis only needing one win it may just be too late!

Saracens CEO offered Bath supporters their money back if Henson scored in the game, money was totally safe mate……….

Ashes squad to be announced any minute, full commentary tomorrow……….

And a typhoon hits Hong Kong to welcome Mr Monk who is visiting this week…………………