WTI $59.88 -62c, Brent $66.59 -22c, Diff $6.71 +40c, NG $3.01 +7c

Oil price

It has been a busy fortnight, almost entirely away from my desk but all the time visiting companies and seeing their operations. Today is really a summing up blog as I try to cover as much as possible that has gone on while I’ve been away, if I have missed something get in touch and I will try to make amends! Also over the next few days I will be writing up company visits where possible.

The oil price is marginally up on last week and given that the greenback has been weak that isnt much of a result for the bulls. All three agencies have reported this week with Opec probably the most bullish as they revised up world oil demand but the others weren’t so optimistic, one even calling a fall. Today will see the rig count which as suggested last week saw a slowing in the rate of fall, soon we will see a rise… The US production number has fallen modestly and is predicted to continue to do so a little but the EIA still maintain that around 9.3m b/d will be produced through to the end of 2016, hardly being crunched by the Opec policy…

Opec production in April was still high, Reuters are as high as 31.04m b/d with Platts at 30.93, semantics really and within that the Saudis are consistently north of 10m b/d. There was a draw in the weekly inventory numbers on Wednesday but as previously reported it would be surprising if there wasnt increased refinery demand at this time of the year. Retail gasoline prices are still rising, around 65c a gallon off the $2.04 low but year on year they are still almost a dollar a gallon cheaper. Watch the natural gas price, now over $3 and showing a rise of half a dollar in only two and a half weeks…

The new Conservative Government in the UK means that there are more ministerial appointments to make from their ranks, for us that means that Ed Davey has been replaced with Amber Rudd who is allegedly ready to make the exploration for shale gas in the UK, ‘a priority’. Note the significant rise in the share prices of IGas and Egdon Resources.

Company-wise its been quite hectic, Shell have received permission to drill in the US Arctic whilst BP have recruited Sir John Sawers, a former spy-master and noted critic of Russia to the board. Not a natural appointment given the Russian exposure one would have thought…

Afren missed the latest debt payment and are in formal default, no surprise and of little consequence as the bondholder have the company tightly by the short and curlies.

Premier announced that 1st quarter production was 60.2/- b/d, above expectations and above current guidance of 55/- b/d. I remain very positive about Prems, recent performance has been good along with most of the sector but they are as well placed as any and the portfolio is well balanced and offers good strategic upside along with defensive qualities if the oil price rally peters out. Premier, along with partners Rockhopper and FOGL announced this week that the Isobel Deep well had been re-spudded after repairs to the BOP, expect results by the end of the month.

Ithaca also had 1Q numbers with production in line with guidance at 12,489 boe/d. The company has a good record on the hedging front and has two years in place, an average of 6,800 b/d at $74 until 2017. With operating costs below $35 being 30% down on 2014 and the benefit of the hedges showing in the sub $10 Brent break-even price through to Stella start up things are looking pretty solid. Ithaca remains on the bucket list for all the above reasons despite the share price having nearly doubled from the lows.

Europa Oil & Gas announced a significant increase in resources after a new CPR on their FEL 3/13 prospect in Ireland in which they have 15% and Kosmos 85%. They are showing 1.49bn  barrels of gross unrisked mean prospective resources which is a net 225m barrels to EOG. The big question is clearly when will Kosmos decide to drill it and at present 2017 seems likely to be the best guess. Kosmos obviously have the fire power with the legendary rig contract meaning that they will be drilling something all the time for the next few years but the bad news is that they are coming up trumps in Africa just now…Either way there is potentially huge upside for EOG but a large helping of patience is required.

I was very disappointed to have been in the US and missed the Cairn Capital markets day, I am really hoping to catch up with the company next time they have some time down here. Readers will know that Cairn is another favourite as I am convinced that Senegal is a properly big find and will add significant value for shareholders. I understand that there was a detailed presentation on Senegal not dis-similar to that I pointed out by Far recently. The proposals to the Government are for an initial 3 year evaluation programme with three firm and three optional exploration and appraisal wells. Starting in Q4 of 2015 they will focus on SNE-1 and drill two appraisal and one shelf exploration well on the acreage as well as shooting 2,000² km of 3D seismic. The existing two discoveries plus identified prospects give an estimated mean risked resource base of more than a billion barrels of oil. I remain positive and the shares which have been as low as 143p and a recent high of 208p look good value at 185p now. Dont forget that there is another way to play the Senegal discovery via Far whom I hope to see on their next trip to London.

Cape had two announcements whilst I was away, one a slightly disappointing trading statement and the acquisition of Redhall Group. On trading most is going ok but Motherwell Bridge appears to be a bit light on orders and in Australia business is a bit slack, something that should recover. Coal is really feeling the pinch which shouldn’t be a great surprise and the fall in demand for coal fired generation results in less maintenance work available. Redhall isnt huge by Cape standards and will be a modest but accretive acquisition. I expect that Cape will get to work on the margins there and get them up to their own levels thus adding value to the deal.

Wood Group also gave a trading statement this week where they said that ‘overall performance in the year to date reflects the relative resilience of our business model’. Like a number of stocks in E&P and oilfield services Wood has rallied strongly in line with the oil price since early January this year. At north of 700p there is quite a lot in the share price and it rather discounts what might be a slightly tricky second quarter, although giving a positive statement in mid May reflects no sign of a downturn so far I assume. If one was being bullish a chartist might get quite excited about the shares which if they break through resistance around here might test the old highs about a pound higher, watch this space carefully…

EnQuest have also updated and show production of 30,768 boe/d which is up 20.2% on last year. Full year guidance stays at 33-36/- boe/d which at the mid-point would be an increase of 24% year on year. Since EnQuest shrugged off the bond worries they have more than participated in the rally by almost tripling in price this year to 55p but are still well adrift of previous highs nearer the 160p level, they should consolidate around here for a while.

Caza has announced results this morning and not surprisingly show revenues down in line with the oil and gas prices. Production is still well up on this time last year and around the same as the last quarter with EBITDA rising 29%. Oil and NGL’s are rising as a percentage of hydrocarbons recovered and the netback is $21.02 per barrel against $57.76 last year. I will be writing more about Caza in the next few days as I spent a day with them this week at their offices catching up with the story but I think the market may be being rather harsh on the company. It has had significant success with the drill bit and the Bone Spring play is arguably one of the most exciting in the US at the moment. In comparison with its peers in the area it is up with the best and the technical team at Caza is genuinely on the case, more later…

Independent Oil & Gas has an interesting business model and for those wanting to look at a high quality, experienced  management team in the North Sea oil and gas market should take a look. The company has commenced a 3D seismic re-mapping project over their southern North Sea gas portfolio. This would hopefully move from 2C resources to 2P reserves thus doubling the 2P number. The company say that they are ‘in discussions re the funding of a well on Cronx’ and a new CPR and also remapping of the Blythe carboniferous gas which CEO Mark Routh has significant experience of will add to what will be an exciting period ahead.

I have been waiting to see where John Hamilton was going turn up at and it is Panoro Energy which is based in London, listed in Oslo and has assets in Nigeria and Gabon. It will be interesting to catch up with John in the not too distant future and see what’s going down.

I hadnt been back at my desk for ten minutes before Range Resources announced that the proposed funding by Core Capital had been ‘terminated’. Whilst this doesnt mean that the game is over (I suspect that LandOcean will step up to the plate) it doesnt bode well for long-standing shareholders as the shares have been suspended now for a long time and i’m sure the authorities are watching very carefully…

Finally it’s high time to put in a call to Peter Levine, Chairman of President Energy after they reported figures this week. This year they will be completing seismic operations in Paraguay and as it is potentially such a large accumulation, looking for a partner. In Argentina they continue the programme and management say that they are ‘well placed’ and see a year of progress in both their principal  areas.  I have had a lot of faith in this one for some time and will update after talking to the company.

And finally…

What is the difference between David Cameron and Kevin Pietersen? David Cameron got his job back with a score of 331…You really couldnt make it up could you? Now, having told Kev to go and score a few runs in county cricket he has done just that and whilst i’m sure he wouldnt expect to get back into the side it seems like suicide by the ECB to take the stance that they have done. But making sows ears out of silk purses comes as second nature to the ECB and this is no exception. By banning a player averaging 50 when one didnt need to has infuriated supporters and given the Aussies a huge boost ahead of the Ashes series this summer. They could have kept their powder dry, not be seen to be vindictive and left all options open, particularly as there is a new coach to arrive, I’m sure Mr Gillespie wont want Andrew Strau$$ telling him who he can and cant pick especially with a bunch of goons as selectors…

Having been totally biased during the election campaign I’m sure that the appearance of John Whittingdale outside Broadcasting house will have done nothing for the digestive system of the apparatchiks who inhabit the place, the words licence fee and history are probably worth keeping in mind…

The football season is drawing to a close and this weekend will see a few more matters decided. In the Premiership its all down to the last relegation place so the key game is probably the Maccams v Leicester but the Tigers go to Spurs, the Magpies go to the Super Hoops who are already down and the Villa go to the Saints. At the top the Gooners go to the Theatre of Dreams but almost a dead rubber…In the Championship play-offs it might be worth taking in Middlesboro v the Bees tonight.

And I spotted that someone in North Korea was executed by a missile for sleeping during a meeting, apparently the sales desk at Cenkos is very worried…

And in the rugby its the last day of the season before the play-offs and still some spots to play for, with Sarries looking like a cruise at relegated London Welsh I have a feeling Leicester might have to beat the Saints, no east task…