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The Pay Zone: Oil Price, Genel Energy, Essar Energy, Cairn Energy, Transglobe Energy, BP, sundry and finally.....

WTI $98.89 +69c, Brent $108.57 +1.18, Diff $9.68 +49c, NG $4.43 +4c

Oil price

The Ukraine dominates the news as one might imagine as people start to talk about sanctions and the like after yesterdays referendum. Renowned blogger Marcus Ashworth at Espirito Santo, today makes the interesting point that the  process might now slow down for a while as all sides may want to step back and avoid entrenched positions. I think this is right, few have much to gain and even Mrs Merkel has adopted a stronger than expected anti-Russian stance. Money movers in Russia have had a funny old time lately as first they have to take money out of the country and then they have to take it somewhere that potential sanctions wont seize it, its a tough life…

The famous Libyan tanker that was loaded up by the rebels and set sail at the weekend was boarded by US Seals from the guided missile Destroyer USS Roosevelt last night and is now headed back home escorted by USS Stout, another Destroyer. Libyan and Cypriot Governments requested help as the tanker from North Korea allegedly, had been ‘unlawfully’ sailed.

Its good to know that the IEA has not lost its power to amaze with its comedy forecasting, over the years I have consistently been proved right in my belief that whatever it costs to run the organisation (and it is a huge amount) is a colossal waste as it rarely gets anything right. On Friday I was talking on CNBC about its latest guesses with regard to supply and demand figures, as they have now increased production numbers from Opec – specifically Iraq - and also increased their global consumption expectations into the bargain.


Talking about investing in Russia, or not as the case may be, I wonder if there are any uncomfortable conversations going on in the boardroom as to the pro-Russian, pro-Putin stance that the company has taken in the recent past? I have warned many times about how little control BP has over its investment in Rosneft and if for any reason this process of annexation gets any worse, the investment that BP has in Russia may prove to be costly in more ways than one.

Cairn Energy (LON:CNE)

Its difficult to know what to make about todays announcement of the result of the JM-1 well offshore Morocco as it is hardly verbose. I suspect that given tomorrow is results day for Cairn we will hear more then but it is hard not to think that this well is a tad disappointing. The Upper Jurassic is the key here and ‘requires further evaluation’ which is normally speak for ‘it wasn’t as good as we had hoped for’. Watch this space

Genel Energy (LON:GENL)

Genel is also in that well offshore Morocco and so without other news this morning may also have been a bit weaker, thank heavens for DNO as Tawke gets bigger every day. DNO has announced this morning that they have initiated production from two newly completed horizontal wells in the Tawke field with a combined flow rate of 37/- b/d. The operator also says that on March 5th they produced 129/- b/d, a record which puts them on track for the 200/- b/d by the end of this year. This news is I suggest, slightly better than I had expected, I don’t think that there is any doubt about the field or its reservoir characteristics, only technical and pipeline capacity issues, all which will be in place in due course. With the Taq Taq deep results due at the end of this month and Genel drilling exploration wells in Malta and Morocco again soon I am very happy with my continued positive recommendation.

Essar Energy  (LON:ESSR) – Cowboys or Indians?

The bid that came out in the dark on Friday was as unpalatable as it was expected and is surely a disgrace in terms of regulatory abuse, even Philip Aiken (Chairman of the Independent Committee) said that it had been timed to ‘avoid the new rules’ and ‘materially undervalues the company’. This is incompetence and exploitation on a truly heroic scale and leaves shareholders in a difficult position, made worse by the fact that they and their governance teams must have approved a minority investment in the company and never sold out when the signs were blatantly on the wall.  When this story is written up for future business school case studies, students will scratch their heads and wonder how this was ever allowed to happen, and so they might it has been a travesty in the truest sense of the word.

Caracal Energy (LON:CRCL) /TransGlobe Energy (TSE:TGL)

Although technically a reverse takeover, this deal announced today looks like a takeover of TransGlobe by Caracal, interestingly the new CEO of the combined company (cunningly to be called Caracal) is Caracal boss Gary Guidry who until last Tuesday was also on the board of TransGlobe…He also owns shares, convertible debentures and has options in TransGlobe so is well placed to know the lie of the land, as it were. The combined operation will have production and reserves in Egypt and Chad as well the Yemen and is fully funded with over $300m in the bank and no debt. The new company will be listed in Toronto and London subject to usual approvals and has a large and distinguished board from both companies.


Rumours flew around at the weekend that BG and Pancontinental had made a big oil and gas discovery on licence L10A offshore Kenya. It looks like word got out as it seems that there is indeed a substantial hydrocarbon column but ‘the vertical extent of it is not yet determined’.

Some concerns are mounting about Lamprell ahead of its results next week as the shares have traded down sharply on high volume. As you know Lamprell has been a favourite of mine and I think that the management have done a superb job of getting the business back on its feet following profit warnings nearly two years ago. My one concern is that the company has been very reluctant to have a company visit which would  enable some ‘kicking of the tyres’ and to get to know management which includes a new CFO. The fall in the share price looks even worse on the chart as it is in serious danger of breaking down through the resistance level of 131p. Lets hope that next week the figures are good, the order book is strong and there are no more excuses about seeing the operations as has been the case for a year now, after all the market the company is operating in couldn’t be in much better shape…

Fastnet Oil and Gas has announced that the FA-1 well in Foum Assaka offshore Morocco has spudded and will take around three months to get to TD. Following a very successful farm-out in December this is a potentially  transformational well for the company and the shares are very much worth keeping an eye on.

And finally…

A truly awful display by Man Who yesterday and the result could have been much worse, it was a shambles. Whilst I have always said that Moyes would be given plenty of time I am beginning to think that it is much worse at the Theatre of Nightmares than anybody thinks… Spurs lost again, this time to arch-rivals the Gooners, the noisy neighbours won easy at Hull Tigers and Villa beat Chelski who had two players and the Chosen One sent off.

The Grand Prix was indeed most exciting and Mr Vettel was nowhere to be seen although his new Aussie partner managed to do alright…McLaren’s 3 and 4 might be interesting and it looks like this season may just be quite fun…

Lots on the cricket front as the pre-qualifying for the T20 World Cup gets underway, watched Nepal yesterday who were superb! Jonathan Trott has started his comeback and received some harsh words from former Captain Michael Vaughan today for leaving the winter tour, probably not for us to judge…

Ahead of the Barclays AGM, St Antony is getting a huge amount of stick for paying obscene bonuses to his staff after caving in to investment bankers, why this comes as a surprise is anybody’s guess, he’s just a guy who cant say no…

In the tributes to Tony Benn at the weekend not many that I read said that he was a pretty good Energy Secretary if I remember correctly…

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