WTI $51.64 +85c, Brent $57.87 +$1.30, Diff $6.23 +45c, NG $2.51 -2c

Oil price

If you add Easter into the equation the oil price went up last week by a modest 5%, but on the weeks trade only the late rally on Friday pushed crude into positive territory. The reasons are a bit samey, the Iran settlement news is losing traction with every day that passes, now not only is an immediate withdrawal of sanctions expected but apparently IAEA inspections not welcome without which there is no deal. Accordingly, markets are now not pencilling in any Iranian crude arriving any time soon.

The second piece of positive news on Friday was a decent rise in the number of rigs lost last week after two rather pathetic figures. The overall rig count was down 40 at 988 and oil lost 42 to 760 which did just enough to give the bulls a few hours in the sun. What they havent worked out yet is that despite the number of rigs halving since October the US production is still 9.4m b/d….

Having said all that the CFTC data is showing that ‘specialist market operators’ are calling the price up, last week saw the biggest rise in long positions since 2011. A rise of 52/- lots to 225/- lots is big and the two week rise is 43%, somebody is certainly taking a view. I would change the word from specialist to speculatory and without wanting to be a Jeremiah, say that we are still far from out of the woods.

Finally we all like an interesting fact and the EIA often provide them for me. It seems that they are predicting that average US household spend on gasoline in 2015 will be $1,817, the lowest level for a decade and a massive $700 down on 2014, dont tell me that the falling oil price isnt having a material impact…

FOGL/Argos

Readers of the blog will know that I have been highly sceptical of Noble’s desire (ouch!) to drill another well in the South Falklands Basin this year, commitment has been less than obvious, a question I asked at the Capital Markets Day on the 3rd of March. So it comes as no surprise that there is a change to the drilling programme as the team down south defer the second well, this will apparently give them more time to assess the results of the Humpback well due to be spudded in May. In addition the team will be able to assess the Scharnhorst and Starfish prospects post the Humpback well data accumulation. A number of things come out of this process not least the possible dwindling of Noble’s interest in the area, something that will probably only be rekindled by a big discovery at Humpback or Rhea of which more later. The most interesting thing for investors in FOGL is that it has, notwithstanding success in the North, become a very serious bet on one well in the South not something I feel that the market or investors have yet grasped, this is proper risk taking… The one bonus for FOGL is that it does leave them in a stronger financial position at the end of the programme than was previously expected and may be one good reason for accepting Noble’s offer of a reduced programme. I had been concerned that FOGL may have felt the need to top up the coffers at some stage, at least that it now unlikely, at least for a little while.

For Argos things havent gone entirely according to plan as it farms-out its position in PL001 in the North Falklands Basin to Noble and Edison. They have been rewarded for their patience by not having to pay for a high risk well on the Rhea prospect but in return will receive a modest net 5% overriding royalty of all hydrocarbons discovered on the block. In addition to $2.75m in cash they will receive $800,000 pa from January 2016 until the first royalty payment is received or when Noble and Edison relinquish the block when it will revert to Argos. I cant imagine that long-suffering shareholders of Argos thought that this would be the final play, a well, funded by someone else, for a 5% overriding royalty but given that the company was not able to participate in this drilling season means that their options were severely limited at this stage.

For Noble, who having abandoned the second southern well, had a problem to solve as it is committed to the final drilling slot regardless. Answer, take out Argos with the promise of a piffling 5% OR and use the rig to fulfill the commitment on PL001 the Rhea prospect. This is still high risk but will have the added advantage of capping Noble’s expenses somewhat and they appear to have few, if any commitments to FOGL in the south any more unless Humpback comes in which is roughly where we started…

Overall, looking at the stakes at play in the Falklands at the moment, I still feel that Rockhopper is the way to have the best, most rounded exposure to the campaign.

Ithaca Energy

Good news at last from Stella as the company completes its flow test operations on the 5th well with more positive results. Flow rate was over 8/- boe/d with 6,191 b/d of oil and 11.3 mmscf/d of gas produced. With all the recent problems concerning the development and its delay by Petrofac this news is all the more welcoming and when it does finally get under way investors will undoubtedly reap the rewards patiently waited for. Happy to keep on the bucket list and looking forward to a catch up with the company at some stage.

Sundry

Plenty of column inches in the weekend press about the Shell bid for BG and some normally quite sensible journos becoming unnecessarily concerned for the Shell dividend. I would say to them two things, firstly that most commentators, myself included, feel that although not without oil price risk the deal represents an opportunity to take cost out of the process and not to add it. Secondly, if the Shell dividend is seriously at risk financial journalists will have more to worry about than how much of the index dividend income that the company pays… As for the comparison between Macondo and Bhopal in one paper, it proves that five years on from the GoM disaster BP still has its supporters…

And I notice that despite it being the smaller member of the consortium in the Cairn Senegal discovery, Far Ltd has a really interesting new presentation on its website this morning. Detailing the options and the likelihood of an FPSO for the offshore development makes a detour well worth the while, I have a lot of time for the Far management team as you know and am hoping for another meeting before too long…

And finally…

That was the weekend of sport that was… The Masters was won in impressive style by the genuinely likeable Jordan Spieth who spared me a really late night by countering any attack against his strong lead throughout the tournament. I am looking forward to some great challenges between him and Rory in the coming months.

Lewis brushed off the attacks of the Ferrari team as well as the whingeing of his own team mate to win the Chinese Grand Prix. Reminiscent of a school playground, the shouts of ‘Miss, Lewis is driving too slowly for me’ at which stage we all shouted as one, then just go and overtake him then which of course he couldnt do…

Today is the start of the first test against the West Indies, always something special although nowadays not quite the challenge of yesteryear, indeed one wonders who one would prefer to bat against, the West Indies or the Oxford attack at the Fenners…sorry I had to….

So to the footy and all the top teams won at the weekend with Chelski squeaking past the not so Super Hoops, the Gooners beating Burnley and of course at the Theatre of Dreams the Noisy Neighbours were silenced. At the bottom it looks dreadful but Leicester winning shakes it up somewhat and the Maccams dont appear to be responding well the Ricardo Avocado, Burnley, QPR and Hull City Tigers are all doing their best to give up the ghost…

And finally, A P McCoy is still riding this week, something that wouldnt have happened had he won on Saturday, well done to Oliver Sherwood though who didnt look at all confident either after the Gold Cup or before the race, shows what we know then…