WTI $49.61 -$1.15, Brent $59.73 -75c, Diff $10.12 +40c, NG $2.84 n/c

Oil price

The Non-farm payroll number came in at 295/- way ahead of the consensus of 240/- and the unemployment number came down as well making a June rate rise more likely than September now, markets came off as a result and the greenback strength doesnt help the oil price.

Of course being a Friday it meant that it was rig count day and after last week’s modest number it came in at minus 75 to 1,192 overall, in oil it was -64 at 922 with Texas and the Permian taking the biggest hit. Having come down sharply after the nfp, the crude price recovered somewhat although Brent was down almost 5% on the week. News from China that February oil imports were higher than expected due to further inventory build has steadied the market somewhat and maybe also given a reason for that strong performance last month.

BP

As a result of the LetterOne RWE deal, BP faces an old adversity in the guise of a certain Mikhail Fridman who becomes their partner in the West Nile Delta project, they say you should keep your friends close and your enemies closer, quite where you put him is anyone’s guess…The deal also reunites BP with Lord Browne who’s record at the company speaks for itself. They also announce a gas discovery in the Eastern Nile into the bargain. BP has also conceded defeat and ended its bid to oust the administrator for the Macondo payout fund, Patrick Juneau remains overseeing payments to businesses and individuals which lawyers have unsurprisingly now asked to be speeded up.

Falkland Island drilling campaign-Premier/Rockhopper/FOGL

With the drilling campaign in the Falklands getting under way on Friday all the UK companies involved had investor/analyst meetings in the last few days. Premier covered the process in their results meeting where exploration chiefs were excited and optimistic and why not, this might be the biggest chance of success with the drill-bit this year.

Rockhopper and FOGL had a Capital Markets Day where they presented their thoughts, RKH had the opportunity to give a bit more information about the Sea Lion development, which is going ahead regardless of success in this campaign whereas FOGL purported to be the ‘leading Falklands explorer’ without any sign of tongue in cheek…

The programme has started with a well on Zebedee where they will test 7 stacked fan bodies with a 9-52% GCOS but the two companies have a rather different idea of what they might find, RKH say Net prospective Pmean resources are estimated at 68 million barrels (mmbbls) in a range of 13 – 178 mmbbls whereas FOGL have a mid case unrisked gross prospective resources of 281 mmboe. After this well the plan is to drill Isobel and Chatham in the North before FOGL and Noble head South to drill the Humpback prospect which the company has in as having a 510 mmboe unrisked target, if this comes in it will indeed be good news all round. (Noble is alleged to have said that if Humpback works it will be like ‘shooting fish in a barrel’)… After that well the rig will go back North and drill Jayne East and Chatham before heading back South or East again. If Humpback has not been a success the Noble/FOGL team must decide whether to head back down towards the Darwin area or go further North and East to Scotia, neither of which has quite the size appeal of Humpback. Cynically one might doubt the tenacity of Noble should they not have success in the first well but let’s wait and see…

There is no doubt that the Northern area, being so close to Sea Lion is significantly lower in risk with the Zebedee F2 fan giving the optimum return should it come in, Isobel will be a 20% GCOS and Jayne East and Chatham providing interest for reservoir quality and at Chatham detail on the gas cap.

Funding wise the companies could not be more different, RKH have said that the four wells will cost them around $25m, well within their significant cash reserves but for FOGL the number might be at least three times that dependent on success and future plans. Tim Bushell said that all their cash will be spent this year so the message for FOGL shareholders is that without much headroom be prepared for a possible equity issue, maybe even before the summer is out. It is also worth bearing in mind that success brings with it the need for more funding over a longer time frame, I would be very tempted to go to the well if I got any signals that there was appetite for a raise…

In conclusion it is likely to be an exciting few months for all the companies involved in the drilling campaign and with a mixture of high impact exploration wells and some more appraisal type activity the opportunities are very real. For Premier and Rockhopper the chance is to add to the Sea Lion development and consolidate considerable success in the northern basin at a very reasonable cost, for FOGL the allure is the size of Humpback as well as exposure to the north. The market has concentrated almost exclusively on FOGL, pushing the shares up on the back of what might turn out to be very optimistic resource numbers; I suspect that Humpback may have to deliver to justify the recent strength in the price which has doubled in the last quarter, great expectations indeed.

Sundry

Victoria Oil & Gas has announced this morning that GDC has completed all pipeline and metering installation to the Bassa and Logbaba power plants ahead of schedule which is a properly good achievement. With the gensets being delivered and installed now, the commissioning target date of the end of March is still very much a reality. There has been insufficient credit given to VOG for this achievement and with a rapidly increasing demand for gas in country there is no reason why it cant go on to the next stage, bring on the exploration.

Andes Energia has announced that it has completed the fraccing of the Vaca Muerta discovery from last year and whilst it is a modest flow rate is good news for the basin.

And finally…

Home with the Scottish, you’re going home with the Scottish is the chant from down under as England lose to Bangladesh and go out of the Cricket World Cup. The worst thing about this is that it was so predictable, it didn’t need me to spot abysmal selection, coaching and attitude, let alone playing. Nuff said…

Team GB had a good weekend in Glasgow and were very impressive as they beat the USA to reach the quarter-finals of the Davis Cup. Next stop a home fixture against France in June on a surface and venue that we will choose.

The FA Cup still only has one name in the hat for the semi finals after Villa beat the Baggies for the second time in a week, draws between Bradford and Reading and Blackburn at Anfield left all those teams in along with Man Who and the Gooners who play tonight.