Natural Gas, Brazil, Chevron, BP, Petrofac, and Chariot

WTI $106.20 -1.87 ; Brent $109.68 -1.91 ; B/WTI Diff – $3.48 +28c ; Natural Gas $3.72 -1c

Good morning

A bit quieter today after meeting mania this week!

How to sort out Greenpeace………..After their vessel Arctic Sunrise arrived to protest at the Prirazlomnoye field in the Pechora Sea, the Russian Coast Guard arrived, boarded the vessel and arrested all the activists at gunpoint, you’re in Russia now………………..

Oil Price

Some repetition of yesterday’s oil price report, as when I reported – late – yesterday the Rohani speech was filtering into the market. Also, we have been able to confirm from very senior and verifiable sources that there is no doubt that the President is very much on the road to re-integration with the international community in general and the USA in particular. So when he says that Iran will never develop a nuclear weapon and that he has authority to seek a deal with the US we should take it seriously.

Libya- as we have been reporting all week Libya is slowly and with some shakiness, getting back to realistic production, albeit at the end of a gun barrel. I calculate that the country could be producing around 700,000 b/d at the moment but that is very tentative. Either way, as part of the reason for the recent shortage in the Brent market in particular any sign of increasing exports from Libya can only help to free up that market.

US Natural Gas

Yesterday afternoon also saw the US natural gas inventory stats, not something we could do as we haven’t got any policy to store gas in the summer for use in the winter, it’s too expensive apparently.

The injection number at 46 BCF was a bit lower than consensus forecasts of 57 BCF and gas continued on the run it has enjoyed lately, this is partly due to the extreme heat wave on the East coast where temperatures of 35⁰c have increased late summer demand for air conditioning. Great chart too!

Brazil – From DFT – DY

Eleven companies have paid to take part in the recent licensing round, with the names being dominated by the State backed entities. It was interesting to note that BP, BG and ExxonMobil chose not to participate given that the acreage is subject to the new PSC terms which are not as attractive as the original ones.

The Libra field which is under offer is estimated to have 12bnbbl of oil recoverable resources in ultra-deep water. One key downside of the new PSC terms is that the concession will have a 35 year life and is non-renewable, a very short lifespan given the size of the prospect. This is likely to have put off the move conventional players such as BG.

In our view it reiterates the attractiveness of the old PSC terms, which we will not see again, those who are holders i.e. BG now have something the rest of the industry wants and would attract a premium should BG wish to divest that part of the business.

Chevron

Maybe why Chevron didn’t participate in the above is due to their ongoing confidence in their own production profile, the company say that they are on course to produce 3.3m b/d by 2017 which will be 25% up on their 2012 number. Nice chart here, four times the short term low has been higher than the last one and you would expect it to break higher than the $127.62 high before long.

BP – I fought the law and the law won……………

BP are in the news again as they confirm long term supplies of gas to Europe from the Shah Deniz project in Azerbaijan, apparently the European Commission are not happy as the gas has been sold to Italy and its neighbours rather than the eastern states.

The FT carries a ‘non-news’ story saying ‘BP’s deepwater costs spiral’, I say non-news as you could write this story every day as they ‘spiral’ every day. In every part of the litigious carry-on post Macondo, BP are getting more and more mired in hugely expensive and time consuming actions, only yesterday BP sued a Louisiana regulator for requiring the company to retrieve anchors lost during the clean-up, honestly you couldn’t make it up.

Despite the buy-back (yesterday 4m+ shares) BP shares have dreadfully underperformed this exciting market, imagine what the performance would be like if they weren’t buying back billions of pounds worth of stock, look at the BP chart, compare with the Chevron one above and weep. Time for action from the non-execs but not sure they’re listening!

Petrofac

Late yesterday Petrofac (ECOM)announced a potentially very large contract from KLPE for their IPCI project Tengiz and Karabatan in Kazakhstan, along with partners Linde and GS, Petrofac could, if a small first phase succeeds take a share in a $3.5bn second phase. Probably wrong to assume, but the market did yesterday afternoon, that maybe this is a $1bn+ contract and at good margins as well.

I reiterate my positive stance on PFC as the contract announcements I said that they needed are now coming through and I expect more good news into the autumn.

Chariot Oil & Gas

Having not seen Chariot for a while, certainly not since the change of management, I am reluctant to make overly strong calls on their results or their recent portfolio management. For example although I know that they like the Atlantic margin I am not sure about the wisdom of them taking blocks offshore Brazil, also the Namibia acreage, albeit not like recent unsuccessful areas gives some cause for concern. However they have cash enough to fund through next year and other companies may de-risk a fair bit of the portfolio in the next few months. Looking forward to seeing the company to de-risk my views!

And finally…

Result of the week, Swansea winning 0-3 in Valencia although they did play for 80 minutes against 10 men. Spurs won well as expected and Wigan got a draw in Bruges.

Some good clashes in the Prem this weekend, none bigger that Man U going to Middle Eastlands to visit the noisy neighbours. Sparky will enjoy going to the Etihad and Chelsea host Fulham in the London derby.

Andy Murray will miss the rest of the season as he has decided to undergo surgery on the back injury that has plagued him for some time. It’s a good move but sad for those with tickets for the London ATP finals at the 02 arena.

With the Singapore Grand Prix this weekend it looks like McLaren have made a move to hire Fernando Alonso from Ferrari. It is planned he would drive with Jensen Button and they would not re-hire Perez.

And closer to home Sir Bradley Wiggins retains the lead in the Tour de Britain with three stages to go. Tomorrow stage 7 finishes in historic Guildford, home of the blog before finishing in London on Sunday.

And the US are hanging on grimly in the Americas Cup, winning yesterday but they are still 8-2 down and the Kiwis need only one more victory………….