WTI $45.96 -48c, Brent $50.86 -$1.14, Diff -$4.90 -66c, NG $2.94 -4c

Oil price

Where to start that’s the big question… There is no doubt that Harvey will cause havoc in oil markets well after it has faded away, gone but not forgotten you might say. The October Brent crude contract expires tonight and no surprise that it weakens before it goes off the board to discourage those naughty traders who want to roll over their positions. With WTI falling less the differential has at last come back a touch, at nearly $6 recently it was pricing in too much on both sides of the equation although WTI will be unsettled for some time.

So, back to Harvey and its effects on the marketplace where the continued rise in product prices and weakness in crude makes one believe that the effect of losing a quarter of all the US refining capacity (4.5m b/d) and the knock-on of crude oil demand outweighs the loss of 1.5m b/d shut in production. With Total and Valero shutting their Port Arthur refineries gasoline prices rose, indeed the effect on retail prices is already being felt with a 6-12c per gallon rise coming through, pushing average prices towards $2.50 a gallon.

Accordingly the EIA inventory stats were pretty meaningless and likely to be for a few weeks. Last night stocks were down by 5.4m barrels, way more than the 1.9m forecast and then the refineries were at 96.6% capacity which is about to change. This comes as refineries were headed for the end of season change of mix, away from gasoline and more towards heating fuel ahead of the winter months, we shall see.

President Energy

The FT has run an article today on the Argentine banking market which is rapidly expanding now that ‘normality is returning’ in this substantial emerging market. Lending activity is taking off and banks are helping to fund underleveraged local businesses in a big way. Argentine debt markets have started to build up after the removal of credit controls and the huge but oversubscribed recent long term Government issue.

What this also means is that there is a positive read across for companies like President who have been investing in the local market for many years. The energy sector remains very important in Argentina and market leading oil and gas companies are investing in conventional and unconventional assets across the board. The recent emergence of Phoenix Global Resources is another sign of the positive attitude towards the sector and PPC is well prepared to take similar advantage. Seriously undervalued, I expect to see action from the company on its workover programme and of course can’t rule out corporate activity or asset acquisitions either.


A brief note on PFC who issued a pretty good set of results yesterday although I suspect that the market concentrated more on the dividend cut than the numbers themselves. Although the year will be 2H weighted I thought that the underlying numbers were quite impressive in the circumstances and the dividend decision ‘rebased to protect the balance sheet’ was a pretty sensible decision. Target cover of 2-3x gives the opportunity to smooth market ups and downs which are inevitable in this area. I liked the $2.7bn worth of new orders giving a backlog of $12.5bn and tendering activity remains high if sometimes erratic. The company has some problems hanging over its head but is committed to a focused strategy in its core areas of expertise and is looking to add to territories where opportunities arise. With a good operational and financial performance in the first half Petrofac is concentrating on what it know best which at this stage is pretty much what it should be doing.

Empyrean Energy

It is very much a drip feed approach from EME’s Dempsey well but at least the news remains good. Since the last update mud logs have indicated ‘additional zones of significant gas shows’ despite upping the drilling mud weight for the purposes of a safe well. Again it should be cautioned about getting too excited but the shares are creeping up and will go a lot higher if these deeper zones confirm early promise.

Pantheon Resources

It was always going to be inevitable that PANR would be caught up in the horrors of Harvey and yesterday they updated the market on the situation. All operations have been suspended which means delays on the VOBM#2 frac job and the VOBM#4 sidetrack well. Nothing the company can do except sit and wait, there may be work to be done on local infrastructure such as roads but so far all is safe.

And finally…

Fairly quiet at the moment, the transfer deadline day is upon us and the cheque books are out lining the agents pockets. Alex Oxblood-Chambermaid has turned down £180/- a week at the Gooners and he is joining the HubCap Stealers of only £120/-, what a gent…

The US Open tennis may be won by someone we havent heard of as pre tournament dropouts and carnage yesterday leaves the field decimated. Britain’s Kyle Edmund   won yesterday and makes the 3rd round.