WTI $92.33-$1.34, Brent $107.15 -20c, Differential $14.82 +$1.14, NG$4.22 -8c

Oil price

Like the last few days Brent started the day just over $107, rallied and failed to break through $108 before closing below where it started. Influences on Brent were minimal, Libya has got up to production of 650/- b/d with exports of 515/- b/d according to Oil Minister Abdelbari Arusi and for choice the price looks to be trending better as a few shorts have been taken out of the market.

Different for  WTI though as the inventory stats took the wind out of its sails coming in worse than expected. The crude draw was 2.7m barrels versus consensus of 1.7m but more interesting was the rise in product stocks, up 6.24m barrels much higher than forecasts of 2.5m barrels. With the maintenance season coming up its quite likely that there will be a lower call on crude which is worth keeping an eye on.

Gulf Keystone

An operational update from GKP this morning and in most areas things are looking in quite good shape. Firstly it is good to  see that crude oil is being trucked to Dortyol and will be sold shortly, another cargo is on the way by truck which will be sold as will all crude from Shaikan until the pipeline spur is built and a blending facility completed. The KRG Ministry of Natural Resources announced yesterday that the first shipment of crude through the pipeline is on its way and sale is expected this month, GKP will probably be using this pipeline in 12-18 months.

PF-1 is being fed by Shaikan 1 and 3 with 4 being laid now. The facility is producing 9-10/- b/d from the two wells which is lower than I envisaged and subject to sales contracts adding Shaikan -4 will help. PF-2 is ‘nearly’ completed and wells 2,5 and 10 are being laid to feed into it with the eventual aim of producing 40,000 b/d. The deep well, Shaikan -7 which I saw spud last summer is slightly behind target after some remedial work was done on the 319 rig and will now reach TD in the 2nd quarter of this year.

Elsewhere, GKP is cracking on with the paperwork for the main listing and that may come through in the 2nd quarter of this year. Also, whilst the company is funded through the completion and rollout of PF-2, it will need to assess further debt funding of further drilling and development and all those options are being assessed at present.

Gulf Keystone appears very much in my lists for 2014 winners especially as the country is being opened up, particularly with the arrival of the majors on the scene. Although it seems as if the progress is a bit slow it must be borne in mind that this is a massive project and that Rome wasn’t built in a day, remember what Petroceltic said recently about their progress in their current well. The share price of GKP in no way represents the potential value of the company’s assets but markets are very rarely prepared to take a long view and the story has taken longer than expected. I still believe that as soon as the majors start to make decent progress in the area, GKP will look very tempting having done all the hard yards and along with other independents in the country de-risked these major prospects to the point of being inevitable bid targets.

Heritage Oil

Heritage has also updated the market this morning with particular reference to Nigeria where progress is being made. Production at  OML 30 has  exceeded 50/- b/d including from the Uzere West field which has been shut in for 2 years for maintenance. In Tanzania the company has relinquished the Rukwa North licence whilst retaining the  South where it will drill this year and next. In PNG it will drill the Tuyuwopi prospect this year and two wells on PPL 337, it will do seismic on PPL 437 and drill that licence next year.

Revenue last year was $465m and Heritage has $190m of cash so with the increase in production it is well placed for the immediate future.

And finally…

Funnily enough the noisy neighbours were remarkably quiet last night, despite putting half a dozen past the hapless Hammers most of the fans didn’t see the end as they had gone home bored with the process, even one of the goalscorers didn’t know how many they had won by.

The RFU announce the England squad for the forthcoming 6 nations championship this afternoon, as usual and in their own rather unintelligible way they don’t include players playing abroad which just shows that IQ in rugby hierarchy hasn’t gone up much in recent years, its 2014 fellas!

And good luck to England’s women cricketers who start their defence of the Ashes tonight, I’m sure that they wont make such a Horlicks of their defence as the blokes did…