Eni, Woodside, Genel Energy, and Madagascar Oil

WTI $106.69 +68c , Brent $114.20 +1.41 , B/WTI Diff – $7.51 +73c , Natural Gas $3.66 +2c

Good morning

A bit like after the Lord Mayors Show this week, with companies all having to have had their results in before the end of August they carefully managed to all come along like London buses last week.

Li Keqiang reiterated that he was happy with the state of the Chinese economy and non-manufacturing PMI beat market forecasts. At the weekend a number of papers wrote that broker forecasts for Chinese GDP were slowly creeping up despite the official lagging figures for 2012 being revised down to 7.7% (7.8%)

Oil Price

With the US closed for Labor Day the oil market was unsurprising very quiet, as I mentioned yesterday there was a bit of buying on the fall, probably bear closing but it didn’t follow through. This morning has seen a slight rise pushing it back towards the recent high.

Eni

Eni has announced a further “high-impact” gas discovery offshore Mozambique as the Agulha-1 well found 160 metres of wet gas pay in ‘good quality’ Paleocene and Cretaceous reservoirs. The find adds between 5-7 TCF of gas to Area 4 and according to CEO Paolo Scaroni ” could be a play opener for the South of the block”.

Woodside

The company announced last night that the partners in the Browse Joint Venture have selected the use of floating LNG technology as the development concept to commercialise the three Browse gas fields. This will be a Shell technology show and comes about, as predicted by the blog, after the WA Minister appeared to shoot himself and the state in the foot by scrubbing the onshore LNG development, good for the rest of Australia though…

Genel Energy

Genel has announced that the Miran oil and gas field has been declared commercial by the Ministry of Natural Resources in Kurdistan. Oil and gas will be produced but the oil will be produced first, ahead of the Gas Sales Agreement currently being negotiated with Turkey. These discussions are at an extremely advanced stage and I expect this to be concluded before very long. The final agreement will be another major step in getting the shares onto a premium listing in London, at which time the world and his wife will want/have to buy the shares.

Miran oil is in our model, contributing 155p to our target price (1200p) but the gas isn’t, Dougie has 163p in his note for the gas and the total risked NAV takes our upside to a potential 2115p.

So, having seen the shares drift back from the high of just over 1000p I strongly believe that there is still significant upside for Genel and of course not just from Kurdistan, the African acreage is looming large and provides further excitement in the longer term.

Madagascar Oil – From Daily Flow Test DY/JS

Madagascar’s interims report total crude production from the Tsimiroro Steam Flood Pilot of >10,000 barrels. This has been undergoing continuous steam injection since April and a third generator is expected to be commissioned soon. Average well production rates are still relatively low, however average total recovered volumes for the eight wells that have been subject to two “huff and puff” cycles have more than doubled between the first and second cycle and there are signs of improved individual well performance as the quantity and quality of steam injected is increased. The company reported a loss of cUS$5m and had cash of cUS$45m after a US$78m fund raise in the period.

We regard this as a positive update from the company which demonstrates that on-going development at the Steam Flood Pilot is gaining traction now start-up issues with the steam generators are largely overcome. The company will now apply the continues steam injection to the designated injection wells to continue its data gathering and a Tsimiroro Field Development Study has been initiated with a remit to determine a Declaration of Commerciality early in 2014 and to submit a Development Plan within the next 12 months. The company is also expecting to begin formal farm-in partner processes at its three exploration licences in Q4.

Madagascar falls into the category of an overlooked junior oil producer with a decent balance sheet and a promising production outlook. We think it will be one to watch over the coming months.

And finally…

OK, OK, OK so I didn’t mention the weekends footy but it did make for some great feedback yesterday as Scousers came out of the woodwork to remind me of the score! So to put the record straight the HubCap Stealers not only beat Man Who but are also at the top of the table!

Arsenal the big winners yesterday with the inspired signing of Mesut Ozil from Real Madrid for £42.2m.

And as Federer is beaten in the US Open by Tommy Robredo of Spain he sets up a meeting with fellow Spaniard Rafa, it is the first year since 2002 that Federer has failed to reach a Grand Slam final…………………………….I’m not going to say it though……