Energy companies, Statoil, Eni, Petrofac, Genel Energy and Gulf Keystone

WTI $97.88 -80c ; Brent $109.19 -24c ; B/WTI Diff – $11.31 +39c ; Natural Gas $3.50 -7c

Good morning

FOMC ruling later this evening, this is the safest bet you could take, I am still on for no change until March/April, next big event is Yellen’s confirmation in front of the Senate Banking Committee on 14th November.

Oil Price

There is a real pull in the market at the moment as I discussed yesterday, defined last night with another set of poor inventory statistics offset by further news of falling Libyan production which hit WTI and relatively favour Brent respectively. The API stats showed a build in crude stocks of 5.88m barrels against analysts’ consensus of 3.2m, they probably think of that as a result, the analysts that is……………

It’s time for another meeting between the Iranian delegation and the 6 world powers to discuss the nuclear issues, talks are going very well I understand. To help matters the Iranians managed to leak into a number of papers yesterday that they were prepared to talk about better terms for investing oil companies if and when sanctions are lifted. It seems as if the old system of ‘buybacks’ may be superseded by more helpful production sharing agreements as it looks very much like the Iranians have spotted the difficulties Iraq had with effectively ‘service’ contracts which pushed a number of majors north to Kurdistan.

Energy companies

So, the energy companies turned up to be ‘grilled’ by the energy select committee yesterday in a ritual that rarely affords the opportunity to find much out. Yesterday was no real exception, the only thing they didn’t say was my mantra which you will know is ‘you can have green energy or you can have cheap energy but you can’t have both’.

So first of all you strip out all the luxurious bribes to have wind power and all the other costly eco projects and add them to the tax bill where they belong, then you ensure the wholesale price is transparent and after that you get the companies to work out how to do their PR and you may be half way there. Comments later by Mr Milliband during which he repeated his view that companies were ‘ overcharging people and taking advantage of a broken market’ were almost as wide of the mark as that of former PM John Major, millipede should know better as he was at the energy department and Major brought in VAT on to domestic fuel which he conveniently forgets at this time…………..

Statoil

Not a bad set of numbers from Statoil, lower gas production and some price erosion were as expected and guidance for this year remains intact. Management reasonably confident and long term seems better than most can boast.

Eni

Interesting figures from Eni and a remarkably confident statement from CEO Paolo Scaroni who put up with the fall in revenue which was offset by exploration success and asset sales. Shades of BP here as Scaroni emphasised the mix and in particular credited the company for monetising the acreage in Mozambique and making good progress in the existing developments.

Petrofac

A solid recovery from Petrofac this last few months, built on a large number of high quality contracts that the market bears thought either wouldn’t come or at least not this year.

Today’s offering is a typically bread and butter EPC contract for Sonatrach in Algeria to extend the life of the Alrar gas field. Leading the 32 month contract with Bonatti, worth $650m, PFC should take slightly more than 50% of the value another good contribution to the order book. Having been positive about the company since the results in March, when we felt that the market had ‘got the wrong end of the stick’ in particular with regard to the deep-water vessel, (singular), and also aforementioned worries about slippage to the right, we are not going to change our stance just now.

Genel Energy

An IMS from Genel today but although highly positive, didn’t add much to what we already know. Production guidance stays the same at 45-55,000 b/d with revenue guided to $300-400m also as before, capex is to be at the top end of the $500-550m range.

New news is that the Chia Surkh well has encountered a 170m gross hydrocarbon column and cumulative testing across three zones has totalled 7,210 b/d of 50⁰ API oil and 46mmcfd of gas.

Less good news is the Taq Taq sidetrack and delay until early next year but elsewhere there is much good news, the pipeline completion already mentioned and the drilling programme outside Kurdistan starting with Cap Juby in Morocco in 1Q 2014.

The shares have struggled to break through the 1000p level for various reasons, mysterious sellers appear like magic but out 1200p target is very much achievable and in due course a lot higher, our target does not include 917p of further upside yet to be booked.

Gulf Keystone

GKP has announced an offering of $50m senior unsecured convertible bonds issued on the same terms, except price, as the issue of October 2012 with which they will be consolidated and form a single series with. The price will be announced after book building which I expect any time now.

This comes as no surprise, I had not expected equity fund raising and as the development of Shaikan and other significant projects continues, GKP will use debt to finance them.

Production is now increasing again at PF-1 after the temporary suspension in September, Shaikan -1 and -3 give the company about 12,500 b/d and Shaikan -4 will take the figure up to 20,000 by the end of the year, a bit late but not significant in the whole scheme of things. Regarding PF-2, I was already saying 1Q 2014 after my visit in the summer, I am sure I will be vindicated and that production will flow next year. The pipeline spur is awaiting the contractor, the same one as is commissioning the main line to Turkey but it won’t be long, also there is to be a blending plant there as I mentioned previously.

The GKP share price has tracked back to below the level it was before the law suit was won and although there have been some delays, this company is still a store of money, the value going up every time more exploration success is made. Next up will be a CPR and the shares moving to the big board, after that as we move into 2014 real value creation can continue with leaps and bounds.

And finally…

Stormy weather………..At the height of the storm the UK Met office issued a warning; “With high winds in the South, expect objects to come off the line, such as clothing or Joe Hart”………………….

My neighbour is such a snob. I woke up yesterday morning and saw him showing off his new 30 ft Christmas tree that he had on the roof of his car……..

Last night’s action in the Clueless Cup saw both Arsenal and Chelski field strong teams, but Wenger, who has never beaten the chosen one wasn’t going to start and the Gooners lost 0-2. Man Who saw off the Canaries 4-0 and West Ham overcame their claret and blue oppo as well. Fulham lost to Leicester city as they prepare for Man U at the weekend and Stoke had a 4-4 thriller beating the brummies’ on pens…

And England start the Ashes tour with a game against the Western Australia Chairman’s X1, without Cook who has a back strain so Prior captains the side.