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Oil price, Petrofac, Cairn/FAR, Amerisur, And finally...

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Oil price

The week ended more or less all square, Friday gave it a small boost with demand again picking up as the non-farm payroll numbers beat the whisper at 209/- and the rig count showed a fall of 4 units overall and 1 in oil to 765. Supply took a not unexpected knock as in Libya the Sharara field was knocked out by a terrorist attack.

Today and tomorrow sees the ‘informal meeting’ of Opec and Non-Opec members in Abu Dhabi at which there will be some inevitably embarrassing debate about adhesion to quotas, not for the Russians as they are playing ball at the moment.

Petrofac (LON:PFC)

Petrofac are sticking to what they do best as on Friday they announced that they had won a $2bn contract with Samsung for the EPC work at the Duqm refinery in Oman. A four year contract will make life a lot easier during this difficult period of investigation in which they seem to have taken more stick than other companies under the spotlight. The shares have rallied a little off the 349p low but at 472.8p this morning are still a long way away from the 952p high.

Cairn/FAR (LON:CNE)

Cairn, as operator has announced the results of the SNE North-1 exploration well this morning and it looks like  incredibly good news all round. They have discovered oil and gas in the primary objective and oil in the deeper secondary objective which is a separate accumulation to the SNE field and thus very important. The company say that this is positive for the hydrocarbon potential north of the structural trend and ‘broadens exploration potential’. A 24m gross hydrocarbon column is indicated over three intervals with 11m of net condensate and gas in the primary objective and 4m of oil in the secondary objective, importantly below the SNE oil water contact.

Finally the crude oil quality at 35° API is slightly lighter than from the SNE field. Overall this well could provide enough new data to significantly upgrade the prospects and this should enable the partners to progress the SNE field development. This well marks the end of this campaign with the drill bit, it has been better than could have been expected and will without doubt lead to an increase in contingent resources in the area.

Amerisur (LON:AMER)

Following the announcement last week about the social unrest in the Putumayo region, whereby AMER suspended their production in the area from the 10th-28th of July, I was very fortunate to be able to spend some time with John Wardle on Friday. The reason for the unrest is primarily down to the rural reforms contained in the peace agreement that has now been reached and has to be put into effect. The Putumayo region is the principal coca growing region in the country and historically has been picked every four months, the peace agreement with which the FARC are in compliance will ensure that this ceases through a number of solutions. This agreement has effectively put an end to the trade,  markets are closing and prices are falling sharply whilst encouragement to grow other crops is eased by subsidies and capital from Government for ‘legal’ crops.

With this trade now hopefully extinguished AMER no longer has the problem of not being welcome in the region and can step up activity and indeed be seen to be helping the local communities. Following production coming back onstream the company are already up to levels of around 6/- b/d of which 5/- b/d is going through the OBA pipeline. It has been known for some time that there can be an increase of the throughput and negotiations with Petroamazonas are continuing and are thought to be nearing a conclusion, the necessary kit is ordered and the tariff complexities close to agreement. At present the company are staying with guidance of an exit production rate of 7/- b/d and I can imagine that with an agreement on the OBA that could increase in due course.

The other area not discussed in this process was the situation at CPO-5 which looks increasingly promising although, unsurprisingly fearfully slow. ONGC as operator do not have the clear lines through to command and I get the impression that things would happen more swiftly if AMER were the operator. A good double act is working between JW and GC who himself has excellent relationships at the top of ONGC and it achieves good results. It is possible that up to 3/- b/d might come from here in due course making the longer term forecasts look thoroughly achievable.

Overall I think that the sorting out of the social issues in the Putumayo will prove to have been a wise move all round and AMER will remain a trusted partner of the Government and steadily increase production through the OBA pipeline. Coupled with the CPO-5 success I see no reason why the company cannot hit its production targets over the short and longer term, accordingly the recent price weakness has been overdone.

And finally…

The 4th and final test between England and the Proteas continues at Old Trafford today, chasing an unlikely 380 in two days the Proteas have their work cut out.

In the MotoGP in Czechoslovakia Marc Marquez proved to be the master technician when, after a wet start, he came in at the end of the 2nd lap for slicks on a rapidly drying track whilst the rest of the field struggled on wets. By the time they all changed to slicks, Marquez had built up an unassailable lead eventually winning by 12 seconds ahead of his Honda team mate Dani Pedrosa with Maverick Vinales 3rd Rossi was 4th and conceded his mistake in not changing tyres earlier, saying after the race – “To understand the moment is not my strong point,” . He just pipped Cal Crutchlow for fourth – the Brit riding with a “nondisplaced fracture” of his T6 vertebra, to the fury of the circuit doctors ..No-one can doubt Crutchlow’s determination which has been rewarded with a 2 year contract from the LCR Honda MotoGP Team. In Moto3 John McPhee fought his way through the field to finish sixth ..which shows that if only he could improve his qualifying times we’d have a World Championship contender !

The London World Athletics Championships have provided us with excitement as Sir Mo Farah won an acutely difficult 10,000 metres against concerted opposition. The furore has been caused by some people booing at two time drug cheat Justin Gatlin who should have been banned for life. Unfortunately WADA chief Sir Craig Reedie thinks it would be difficult to do, IAAF President Coe does nothing and worse Michael Johnson defends him when he could still be extracting benefits from the drug taking…

And with the Premier League starting next weekend the Charity Shield or Community thing was won by the Gooners yesterday against 10 man Chelski.


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