WTI $43.65 -$1.13, Brent $44.97 -86c, Diff $1.32 +27c, NG $2.09 +4c

Oil price

For choice the news was bearish yesterday, Chinese data was poor and the US economy is only stuttering into life, jobs data there on Friday and the usual guess is around 200/-. Production continues to rise in the Middle East with Iran testing its recent highs apparently and the Saudis up at around 10.5m b/d. As we approach the summer expect domestic consumption to reduce export capacity somewhat in the KSA and I dont expect Iran to add export capacity so swiftly from these levels. Those rises are offset modestly by a fall in US production, now below 9m b/d and gradually waning.

Stocks are still abundant though and the stories about ships on the high seas looking for a home continue to do the rounds. Last night the API stats showed a build of 1.3m barrels and the estimate for the EIA numbers tonight is the same. At the moment the risks do appear to be on the downside if you go with the fundamentals.


Shell has released numbers this morning that include BG for the first time and are roughly comparable to recent performances by the majors. Clean net income of $1.6bn is down 58% as expected due to lower oil, gas and LNG prices and also weaker refining markets. Apart from lower costs, Shell gained primarily in the quarter from its downstream and integrated gas businesses which delivered strong results despite the low commodity prices.

Like the others, Shell has significantly lower operating expenses and the acquisition of BG has meant that the company has ‘accelerated the delivery of synergies and at a lower cost’.

In fact the numbers appear to be better than I was expecting, capex guidance for 2016 is now $30bn, down 36% on the companies combined number in 2014. In essence they have absorbed BG’s capex and opex during 2016 with no net increase compared to Shell stand alone in 2015. Annual operating expenses are trending to $40bn compared to the 2014 number of $53bn.

Whilst the jury is still out on the BG deal and the timing might have been better, I am impressed by the consolidation of BG, the speed at which it has been done and the sheer size of the cost savings. This and of course the integrated nature of the gas businesses do indeed differentiate Shell and it is the reason it remains right up there as one of the clear winners in the majors.


Plexus has announced a  contract worth £0.6m with Det norsk for surface wellhead equipment, although modest in size this is the ninth contract with this customer who remain very happy with the company.

Catching up from last week, Tullow had a trading update at its AGM on thursday. Production is below guidance at present as expected, problems at Jubilee are being fixed. The TEN project is still on target for first production in 3Q 2016 which has made a huge difference to capex and will make a difference to revenue streams. Two pipelines from Uganda and Kenya have been approved which de-risks these projects but may up their capital costs.  There has been speculation since then as to whether Tullow would maintain its operations in both countries especially if Total are interested in buying them out of Uganda. I remain happy with Tullow in the bucket list despite these temporary uncertainties.

Also on thursday Wood Group announced a five year contract with two, two year extensions with BP in EPC management services, worth winning at about $500m.

Finally, Caza announced yesterday that the share consolidation had been approved and the shares will de-list on the 10th May.

And finally…

With Athletico knocking out Bayern last night all eyes are on the Bernabéu where the Noisy Neighbours play Real Madrid in the second leg of the Champions League semi-final It is 0-0 after the first match in the tie, all is to play for and Ronaldo is back from injury.

And for one last time… I hadnt realised until last night when I saw the list of donors to Holly’s marathon fund raise, quite how many blog readers gave and so generously. One way or another she is determined to thank you all individually but from me, thank you so much and you are all incredibly kind and generous. Her blog on the day is below if you want to share the pain!