Faroe, MOG, and 3Legs Resources

WTI $105.51 -1.08 ; Brent $108.71 -2.17 ; B/WTI Diff – $3.20 – 1.30 ; Natural Gas $3.73 -1c

Good morning

A short blog today as I am on the road with Alkane and have nipped back to the office to find computer problems with Factset……….grrrrrrrrrrrrrrr!

Obv- FOMC results tonight, 7pm UK time for taper talk to terminate.

Oil Price

My better news yesterday about Libya is followed on today by word that Force Majeure has been lifted at Zawiya and Mellitah, they expect production to be rising above 750,000 b/d by the weekend.

Following this news, Brent has eased further, now at $108.38.

And those API STATS…? Analysts’ consensus were for a fall of 1.5m bbls, actual was 252,000 so another dud set of forecasts.

Faroe Petroleum – From DFT –DY

The company has spudded the Snilehorn well (FPM: 7.5%) in Norway which is located 4km away from the producing Hyme field. The well is targeting 55mmboe of gross resources so the unrisked share price impact is limited to 3p/share, however the value uplift comes from a successful well being cheaply tied into Hyme.

This well effectively restarts Faroe’s drilling campaign which is focussed on Norway in 2013 and 2014. Exploration results have been poor over the last two years and we would hope to see some early wins to regain confidence in the portfolio. The company has its interim results on the 26th September where we feel exploration write offs may be notable.

Mediterranean Oil and Gas – From DFT – JS

MOG has announced that the Guendalina-3 (GUE-3ss) short string remains shut in due to technical issues. The operator, ENI, has informed the company that the production string was briefly reopened on Friday and produced at 60,000 scm/d after nitrogen injection, but was then closed again due to the probable formation of hydrates.

The production issues are most likely due to the plugging of the well completion and ENI is now evaluating additional remedial operations to restore production, including an acid wash. The GUE-3ss short string accounted for approximately 49% of the production at Guendalina prior to the shut-in. Post shut-in, the field is producing at 34,000 scm/d (net to MOG).

While these problems are unfortunate for MOG the company is emphasising that the recent tests demonstrate that the reservoir remains in good condition and has an absence of formation water. We expect slight downward pressure on the stock but remain positive on the MOG story and look forward to the Hagar Qim 1 well offshore Malta in Q4, which could trigger a significant re-rating.

3 Legs Resources

3Legs Resources has allowed its southern Poland concessions to lapse and are in active discussions with potential partners in relation to their Baltic Basin and southern German concessions, they remain in the western Baltic Basin. There is little information on recent wells being drilled but a lot of ‘significantly improving of our understanding’ which isn’t always helpful.

A cash burn of £4m in the period means that despite the strategy to concentrate on the Baltic Basin, with associated reduction in commitments elsewhere, is still of some concern and the attachments to Conoco are a mixed blessing, at the moment I suspect that upcoming decisions on timings and costs are not in 3Legs gift. Nice chart though……………

And finally…

The prize for Britain’s Davis Cup win against Croatia………………………being drawn away to the USA in the next round!!

Good wins for both sides of Manchester in the Champions league last night, tonight Chelsea, Arsenal and Celtic play.

PM DC says to Manu “no need to apologise, I know it was just a bit of fun”………….Tuilagi replied by asking DC round to his place for dinner.