Malcy's Oil Report - PPC

WTI $46.90 -25c, Brent $49.08 -67c, Diff $2.18 -42c, NG $2.65 -1c 

Oil price

So, the market got it right and the Fed decided that rates would stay unchanged, having said what they did it looks like next year now before they think again. And it is what they said that caused the oil market to move so sharply after the announcement. Initially crude rose sharply as the idea of a weaker dollar excited traders but when the release was read to them it transpired that the reason that there was no change was because of worries about world economic growth. The Fed also stated that low oil prices ‘are a negative, especially for emerging markets’ and were not worried so much about the greenback.

On the downside Kuwait poured more cold water on any recovery by saying that whilst they were ‘confident that the oil market would balance itself, but that this would take time’ thus not showing any support for change, at least until the December 4th meeting. The fact that prices will probably end modestly up on the week is more of analysts reading into the three reports that have come out recently. As reported here, if you believe in the EIA or Opec you have to remain bearish, if you think that the IEA are right things do look quite a lot better for next year. Technically we had a go at $48 WTI but need to breach it properly before the next leg of a potential bull market is established.

President Energy

I noticed the news from Argentina and took the opportunity to have a chat with Peter Levine about the situation over there. The Puesto Guardian concession has been converted to a new, unconventional concession and for another 35 years, thus expiring in 2050 compared to 2026 which was what it was before. This is a most important deal to get through apparently, for shareholder value long term security of tenure is incredibly important. This is particularly the case under the new law in Argentina for unconventional exploration which also covers conventional. The extended duration of the licence will also be very important when it comes to potential farm-outs particularly on things such as deep gas projects. President has done this now because, as Peter Levine says, ‘timing is everything’ and this will create a platform for funding the business through to 2025, long term thinking indeed.

There is no doubt that President, like other explorers has endured the most challenging market conditions but as I have referred to with regard to Andes Energia only recently Argentina has particular advantages, not least the oil price. President gets $70 a barrel plus $3 for any increase in production this year and with a gas price of over $8 in a gas hungry market is to be envied. With onshore gas projects shallow and with costs that are falling all the time making these projects look very attractive, it is worth keeping a  close eye on President, this may have only been a licence announcement but there is more to it than meets the eye…

Afren

Things have gone very quiet with regards to Afren but I am led to believe that the Afren Legal Action Group is still working hard to try and get something out of it for shareholders, quite why there hasn’t been an enquiry into this by the SEC or the FCA I am astounded by.

The administrators are, I understand, due to report back shortly on their progress and I hear that Blackstone have been out flogging assets where they can. Whispers of interest from Seplat and Unicorn amongst others have persisted but the gossip that deals had been done long ago can't be ruled out. Another surprise is that the army of litigation funders who normally chase such ambulances haven't been seen either, all is extremely mystifying. I am assuming that it is not only the shareholders who are owed money, suppliers and contractors must be pressing for payments as well. Given that Alix Partners allegedly said at one stage that there was ‘no chance of stakeholders getting any money back’ I suspect that the use of the word ‘stakeholders’ rather than shareholders is ominous…

I have heard that there has been one successful transaction done, a group has got together and hopes to buy the assets in the Cote D’Ivoire and get up and running with that, expect something imminently.

Primeline Energy Holdings

Primeline has been even more out of favour than most other energy stocks lately obviously due to its location in China. However this seems to me more than just being a rather broad brush treatment when you look at the market in any detail. The company is selling gas at a reasonable price and getting paid for it, and long term government policy led support for gas means pricing and other dynamics make it one of the best end markets in the world. The company has $50m in cash and is about to spud an exploration well which it is very optimistic about. McDaniel says that its COS is as high as 78% which is extremely positive. If it should come in, any gas could very quickly be tied in as there is spare capacity in the pipeline. Another stock that I suspect has been overdone on the downside, with one well to drill and probably two more behind it the shares are looking incredibly attractive.

TipTV interview…

On Tuesday I did a run through on TipTV covering a few stocks that are showing interest at the moment, these included Rockhopper, Andes Energia, Cairn, FOGL, Genel, GKP and Pantheon. The link is below if you missed it and of course will be on the website under interviews.

http://www.tiptv.co.uk/finance/the-bottoming-crude...

And finally…

As weekends of sport go it doesn't get much bigger than what is approaching, starting tonight.

The Rugby World Cup has been on the radar screen for a long time so now it is about to start we have six weeks of finest action ahead of us. Tonight the hosts England kick off by playing Fiji which will be a very hard game, expect the first 45 to be particularly brutal. Also this weekend we see the Springboks v Japan, Tonga v Georgia, Ireland v Canada, Wales v Uruguay, Samoa v USA and the All Blacks v the Pumas.

Football seems boring by comparison but the meeting of Chelski and the Gooners is the big game in the Prem, elsewhere its derby time in the Midlands as the Baggies go to the Villa. The Maccams make the long trip to the Cherries which may not be fruitful and the Magpies have to beat the Hornets or the Wally with the brolly will be looking for another new job. Away at the Noisy Neighbours must be the worst fixture for clubs but the Hammers go there having already won at the Emirates and at fortress Anfield. Elsewhere its Stoke v the Foxes, the Swans v the Toffees, Spurs take on the high flying Eagles, the Canaries are at the HubCap Stealers and Man Who go to the Saints.

It's the Singapore Grand Prix and with Renault stopping engine supplies either Ferrari or Mercedes will have more to build next year, Rosberg simply has to win on Sunday…

In cricket it is the Cup Final at Lords with Surrey taking on Gloucestershire in the One Day, 50 over game.

The Davis Cup semi-finals are upon us and who would have believed that Great Britain would still be in it. Having just despatched the Aussie cricket team having lost the Ashes, it’s the tennis players we are up against now and this afternoon Muzza and Dan Evans kick off in the singles.

The Solheim Cup is the women's Ryder Cup and although the USA are favourites this time I’m told it might be quite evenly matched.

One more thing, love him or hate him, you certainly can't ignore him, I’m talking about Doyley who is head of market making at WH Ireland. Simon and a few beer loving mates are cycling from Paris to Avignon on behalf of a wonderful charity which can be found at www.thealexandrasalestrust.co.uk and I urge people to have a look and get behind the team. I certainly wouldn't want to be on the Eurostar with them on the way back…