WTI $78.65 +74c, Brent $83.39 +53c, Diff $4.74 -21c, NG $4.41 +1c
Having bounced off those inconvenient key support levels the oil price has actually behaved quite well especially after the Chinese economic data was pretty poor over the weekend. The one piece of Chinese data I did like was the crude oil import stats which vindicated my view that the country would not be able to resist buying cheap crude for their strategic stockpile, imports were up 18% in October far more than they need for day to day usage.
The oil price has risen quite sharply this morning, as I write Brent is $84.72, well over a dollar up on Friday’s close. I put this down to a combination of factors, firstly Libya is not going according to plan with both the El Feel and El Sharara fields down as well as Hariga Port being blocked at the moment. Secondly the ceasefire in Ukraine looks pretty shaky at the moment with troop movements over the weekend heightening tension and creating concern about the accord. With the rouble still falling there may be an old fashioned link between economic hardship and military activity…
Finally the nuclear talks with Iran continue which are riddled with enigma and uncertainty with conspiracy theories abundant, either way if a deal is done the market hardly wants another million b/d overhanging the market.
Cairn Energy- Senegal, the next Ghana?
So my guess about SNE-1 on Friday turned out to be uncannily accurate as the well result was announced by operator Cairn this morning. This is ‘a discovery of high quality crude oil’ according to the company and remember that the deeper target has not yet been reached. This means that over the next two to three weeks the size of the discovery might increase significantly. Already the P90 number is 150m bbls, P50 of 330m and P10 of 670m and I hear that the source rocks are very high quality and the geotechnical term is ‘world class’. A 95m oil bearing column with a gas cap leaving net oil pay of 36m (my guess on Friday was 35m+!) of 32º API crude is indeed very positive. Having already labelled the discovery commercial, Cairn are clearly delighted to have opened up a new basin on the Atlantic Margin.
I have had a chance to speak to the Cairn guys this morning and it is clear that they are very positive but that there might indeed be plenty of upside. For example, FAN-1 did drill into the top neck of the fan but there is no clue as to how far the fan might extend, if it is a long way then who knows how big the discovery might be? After all, it intersected a gross 500m oil-bearing section which indicates a prolific oil generating province.
There are plenty of people in the oil industry who like these Atlantic Margin plays and this discovery will have pleased them a lot. For Cairn, it validates their decision to get into pieces of acreage in different plays in different settings, much of which is under-explored. I have heard that Conoco are very excited about this and have had a huge team of top people on the case, this leads me to believe that this discovery is likely to be significantly bigger than has been described this morning and by this I dont just mean in the deeper target. What happens next is most interesting on many fronts, Conoco will surely want more of this than their 35% and Cairn should be careful about under-playing the size of the discovery, whilst for Far this is the find that dreams are made of, I suspect that celebrations went on late into the night in Melbourne.
Cairn were up on Friday as the early birds gathered the worms and today the stock is up another 11% which is good but not good enough. Cairn have 40% of what I think is a huge, world class discovery and adding £100m on to their market cap doesn’t do it justice, however, in these markets and with the company’s Indian distractions I can understand what is going on. When the deeper target is completed whatever the result, and the data is processed I think that holders of both Far and Cairn will realise just how big this discovery might be, you never know, Senegal may well be the next Ghana…
This Thursday is going to be a big day for the Kurdistan stocks as DNO, GKP, and Genel announce all sorts of news, the first two with updates from management and Genel having a Capital Markets Day. The Times and The Sunday Times have both suggested that the long awaited Gas Sales Agreement between Genel and Turkey will be announced and i’m sure that it is quite likely. For what its worth I have been of the view that not only is this agreement imminent but that longer term selling gas into Turkey will make transform the valuation of Genel. My high end number is probably three times the current share price when this finally happens so I have weathered the recent storms knowing that the long term is assured.
The KRG have given a good boost to those companies operating in country as they announced the success of the pipeline capacity increases, 185/- b/d in August, 300/- b/d now, 400/- b/d by the end of the year and 500/- in 1Q 2015 is very good news and if it is combined with a reasonable system of paying for the oil then it gets better. My views on GKP have remained positive but until recently the political problems in country have taken precedence, these will not go away but risks will be lessened especially if military activity in the area brings more stability.
More departures at Afren as on Friday Ennio Sganzerla left as a non-executive ‘to pursue other interests’. I suspect that there are a lot of other interests worth pursuing more than being of the Board of Afren at the moment and I also suspect that there will be more departures…
The Premiership was quite interesting at the weekend but I think that those interested in betting should now do so without the favourite as they say at all good racecourses. Although the HubCap Stealers had a couple of decent shouts for a pen the longer the match went on the more likely Chelski were to score. With the Noisy Neighbours only getting a draw with QPR it is up to Southampton and West Ham to challenge for the European spots at the moment. Misery in North London as Spurs lost to Stoke and the Gooners gave away another lead to lose to Swansea whilst Man U just got past the Eagles, just…Lots of FA Cup stuff but mentions I guess for Warrington, Worcester and Aldershot plus Blythe Spartans…
The rugby was interesting, for England ‘B’ the game was over either when the ref didn’t use the TMO or when Farrell missed touch with a vital pen in the second half, that and giving away far too many pens as well. With Wales traditionally losing to the Wallabies it was up to the other home nations to do well and Ireland had a great victory over South Africa and Scotland, or should I say Glasgow, had a high scoring victory over Argentina. (Not many points in that one according to TipTV rugby experts…)
Andy Murray’s recent run of form ran into a brick wall in the shape of Kei Nishikori at the O2 and he still has to play Roger Federer…
So, with just the one Grand Prix to go Rosberg beats Lewis to set up the battle in the desert with double points all round. If Lewis has a DNF by any chance what will the outcome and what will be the orders? It may be Jensen’s last race too as it looks as if McLaren are about to sack him, as Martin Brundle and many others have said, most of the other drivers on the grid aren’t capable of lacing his boots, as shown by a great drive for 4th yesterday…
Yesterday in the NFL,
The Cowboys win comfortably at Wembley against the Jags who now move to 1-9. Dez Bryant gained all of his 158 yards in the second quarter with two touchdowns.
The 49ers move to 5-4 after an overtime win against the Saints in New Orleans. The Jets shock the Steelers in New York for only their second win this season.
The Raiders move to 0-9 after another heavy loss. This time to Manning and the Broncos. 24 unanswered second half points helped the Seahawks overcome the Giants in Seattle after trailing at half time. Marshawn Lynch ran for 150 yards and 4 touchdowns.
Aaron Rodgers threw 6 first half touchdown passes as the Packers lead the Bears 42-0 at half time. Packers win 55-14.
Elsewhere, there were wins for the Lions, Chiefs and Cardinals, who now move to 8-1.