Oil price, IOG, Sefton, Sundry roundup of week. And finally…

WTI $42.56 +$3.96, Brent $47.56 +$4.42, Diff $5.00 +46c, NG $2.64 -6c

Oil price

Wow, that was one hell of a week whichever way you look at it. The oil price has picked up from the bottom in no mean fashion, yesterdays rise was the biggest one day rally in six years and WTI will likely be up on the week for the first time in 11. There are a number of reasons for the rally with fundamentals not really being involved that much. True, the inventory stats helped a fair bit as did the US crude production falling to 9.34m b/d day and the US GDP revision was a bit higher than expected at 3.7%.

It was worries about China that started some stories about Opec ‘reexamining’ their stance and more countries called for an emergency meeting, maybe with non-Opec participation. When WTI dipped into the 30’s even the Saudis were apparently taking the notion seriously and today it’s Venezuela calling for a meeting with Russia invited along. Those of you who watched my interview on IGTV on Wednesday or through the link in the blog yesterday will understand what I was trying to get over, no great change in fundamentals but some change in how to deal with the problem right now. I have had many requests to see it again so the link is below, it is also on the website at www.malcysblog.com

https://www.ig.com/au/live-video?bctid=4445069265001&bclid=3728437912001

Unsurprisingly all of the above led to a proper bout of short covering, with net long positions at a low and shorts having trebled in a month it was like putting petrol on a fire and the rally was significant. Early this morning crude made further gains of nearly another dollar but as I write prices are a touch below last nights close, next bull point is Tropical Storm Erika hurtling through the Caribbean…

Independent Oil & Gas

Barely a week goes by without IOG touching base with regards to their finances, today they are updating on money, licences and the Alpha sale and purchase agreement. Right now it seems that the company is pursuing a contractor-led funding approach in order to drill the appraisal well on Skipper late this year. To do this the company has had to discuss matters with the OGA which has resulted in that licence being extended until 31/12/2015, in addition the Blythe licence has been extended until 31/12/2016 provided a draft FDP is submitted by the end of this year. To do all this the sale and purchase agreement with Alpha has had to be extended until 7/10/15 and of course the Darwin loan repayment due next week also needed extending, this is now due on 4/10/15. IOG has many balls in the air as you can see, it looks like everyone concerned with the process is doing all they can to ensure that if it can be done, it will be which is what they deserve.

Sefton Resources

Sefton has announced that the date for the bankruptcy court hearing is likely to be in October. This case is to contest the motion by James Ellerton and to seek fees, costs and punitive damages against Mr Ellerton for bringing the case ‘in bad faith’. Until this case is sorted it is impossible to judge whether the plans that Sefton has for the future are justifiable although they are I understand still hoping to radically change the business. That is quite a good thing as history such as the association with Ellerton, not to mention having a convicted armed bank robber as a former chairman is probably horrible enough…

Sundry

It has, as I said at the top, been one hell of a week even on the company front. With a horde of results, each with their own meetings sometimes one felt that one was chasing round various meeting rooms in the city with the same bunch of analysts. It was primarily the oil service sector that was reporting and the second quarter was clearly going to be difficult but I suspect that few of the assembled analysts would have predicted that by the end of the week all shares would have performed so well especially as there was a dividend cut smuggled in there by Hunting. I have reported on most and will do so again in coming weeks as I catch up with managements but there are a few points to mention. On Hunting it was interesting that despite a miserable quarter and that divvi cut (sharing the pain) the market decided to reverse the initial price fall and chalk it up around 13% on the day. I suspect that a combination of takeover rumours and positive talk about a recovery each contributed to the rise, either way the shares are 110p off the bottom. Hunting’s appeal is that if and when that recovery does come it will have invested in top of the range plant and product across the globe and should be able to take advantage rapidly. The downside is that the order book, including in the strong subsea areas might diminish more before that recovery comes through…I remain convinced that Hunting has the right model to succeed in the long run.

The takeover stories in the sector were already doing the rounds before this week but when Schlumberger announced its takeover of Cameron it was assumed that more would follow, who would argue when it is historically accurate that some sort of a recovery happens around two quarters after the nadir, whenever that is….

It is worth mentioning one or two other things that emerged this week, at Petrofac news was more upbeat than the market had expected, it seems that NOC’s particularly in the Middle East are not taking their feet off the pedals like IOC’s are and the order book is solid. Cape also delivered the goods as if they were ever going to disappoint, revenue and cash flow was up and of course, the dividend was maintained giving punters a healthy yield to bank away. Even Amec remained upbeat although Samir being Samir was always going to champion the Foster Wheeler acquisition upon which I believe the jury is still out…Finally it is worth mentioning Lamprell who tailed in last of the reporters and holding the meeting yesterday lunchtime with much to prove. You will remember that as a big fan of Lamprell, or more specifically Jim Moffat, I had been somewhat concerned that firstly big Jim had announced his retirement last week and secondly that the statement contained some worrying comments about a change of strategy. Fortunately the meeting yesterday tempered almost all the worries that I and some others had, it certainly seems that last weeks words had been, shall we say, been read in a different light to that in which they had been written. So instead of strategy being changed it was ‘tweaked’ and it turns out that worries about two ‘executives’ being on the case are wrongly placed. The ‘executive’ Chairman will build strategic alliances, work on synergies and increase the pipeline in order to improve Lamprell’s recognition as a first rate engineer and fabricator, whilst the Chief ‘Executive’ Officer will continue to run the business, we shall see but the longer Jim Moffat stays on the case the better it will be.

Two other things, one of which is about Kurdistan where yesterday, miraculously timed to coincide with the GKP results the MNR released a statement saying that it would start making regular payments to the energy companies and that it had allocated $75m-100m for the first half of September. Whilst this is but a drop in the ocean that is owed to the companies, it is a meaningful gesture and an acknowledgement that things could go on as they had been, the idea of slaying the goose that lays the golden egg is obviously written in the desert…lets hope that GKP now dont go and flog themselves on the cheap and that Tony Hayward ups his exit price as well, Genel is worth so much more than the current price. My interview with Mr Ferrier is in two weeks time so more after that…

Finally I had been expecting something from Nostrum/Tethys by now, the due diligence and the two day rest period has expired in which Nostrum had been expected to bid for the company. With the AGR financing having been despatched and the Nostrum bid seemingly the only remaining game in town, is the sound of silence deafening? As they say, watch this space…

And finally…

Stuart Lancaster named his squad for the RWC yesterday with no surprises, the tricky positions being centre where Burgess gets the nod, and at hooker where I bet he wishes he had someone with the ability to throw the ball into the line-out where he planned it… Also I suspect he wishes Dylan Hartley had just a tiny bit more common sense…

Good to see Usain Bolt cruising the 200m with the double doper trailing in his slipstream, only the camera man managed to bring him down…

It’s the US Open tennis next week and Muzza has been drawn against foul mouthed Aussie Nick Kyrgious, I wonder what he will have to say about Mrs Murray jnr?

Back to the Premiership this weekend with no outstanding matches it seems. Chelski host the Eagles and the HubCap Stealers have the happy Hammers at Anfield whilst the Red Devils go to the Swans. Villa v the Maccams may be hard to watch but the Canaries might fancy their chances at the Saints, just knocked out of the Boropa Cup. The Noisy Neighbours take on the Hornets, the Cherries host the Foxes and at the potteries the Baggies will be seen. Just the Spurs versus the Toffees where Stones is apparently not going anywhere…

A moment of nostalgia today for me, 36 years ago on August Bank holiday 1979 I joined Wood Mackenzie in Queen Street, Edinburgh which turned out to be the start of a fantastic time in the world of oil and gas, I know, I dont look old enough…!

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