The Oil Man: Premier Oil, Tullow, Gulf Keystone

WTI $42.93 -$1.28, Brent $45.81 -$1.63, Diff $2.88 -35c, NG $2.26 -6c

Another weak day for the oil price yesterday as the market digests or waits for the monthly reports from the reporting agencies. The EIA, who were first out of the blocks, appeared to be a bit more positive with numbers, indicating further cuts to Non-OPEC production leaving the call on OPEC at 30.78 million barrels per day (b/d).

Depending on the OPEC number today and the IEA tomorrow, there might be light at the end of the tunnel - but in the meantime it's the stock build, as evidenced by the API stats on Tuesday, that concentrates the mind and may be accentuated by the delayed EIA inventory numbers tonight.

Premier Oil

Today's trading statement from Prems continues the theme of beating guidance, delivering projects on time and budget, whilst cutting costs in opex and G&A by a significant amount. Add to that "significant liquidity in cash and undrawn facilities of $1.2 billion" and at least $700 million of covenant headroom and you would have thought that, despite the pressures of the current low oil price scenario, management was doing a better-than-average job of running the company.

Although the developments at Solan and Catcher are on track and on budget, Sea Lion has completed pre-FEED and the company has had a run of successes with the drill bit in the Falklands, there are still a number of cynics out there not prepared to give the company the benefit of the doubt. Whilst I am sure that there are people who know much more than me about these projects and that they do carry project risk, it seems that Premier is being harshly treated by the market and although I am far from calling the turn, the company is looking well poised to take advantage of any such recovery.

Sundry/Catch-up

Being out and about yesterday meant that one or two items didnt get the mention that maybe they should have. One such piece of news is that Anadarko has walked away from a potential bid for Apache after the company rejected out of hand an offer, allegedly worth a short $30 billion. Looking at one or two pieces of work from analysts who do cover these stocks it seems that passing up on the offer - whilst showing commendable long term confidence in one's company - may have more to do with self-preservation than the interests of the shareholders…

IOG has released another update with regard to the situation at Skipper. It seems that the process is ongoing and that - should management estimates of 34.1 million barrels (mmbbls) be correct - then that gives a break-even Brent price of $34 for the project. It seems that, despite the considerable number of hurdles placed in its way, Skipper looks like it will go ahead and justify the management's confidence in the project. My last meeting with the company was cancelled as there is much to do, but I hope to update shortly when I do see them.

Tullow updated the market but, after recent statements and the Maersk farm-in activity in Kenya, couldn't add much. News from the TEN project is still positive, with first oil expected second quarter next year and Jubilee is on track as per the recent Kosmos trading update. Capex has been reduced in line with current market conditions and debt appears manageable. Some commentators are still concerned that scope for upside has been taken away, but it seems a fairly practical approach at the moment.

Azinor Catalyst announced that it is farming-in to Xcite's P1979 licence in the North Sea, giving XEL access to more technical assessments and an acceleration of the process. I suspect that when shareholders saw the headline regarding Xcite and a farm-out they might have rather hoped for some Bentley action…

And I spotted that Gulf Keystone has called for a special meeting so that it can get rid of some of its antiquated by-law provisions. In a recent discussion with CEO Jón Ferrier, I talked with him about how the provisions must have been like having his hands tied behind his back - with regard to board members and so on - and these changes will be long overdue.

And finally…

The situation at the RFU goes from bad to worse; a finer example of p. poor management you could hardly expect to find outside FIFA or international athletics… Apart from the whole Sam Burgess disaster, we now hear that the England players went into the tournament unhappy and losing sleep as they had lost more than £100,000 by investing in LGO on the basis of a tip from their kit-man Dave Tennison. Now it is clear that neither Dave, nor the England camp, read the blog because if they had they would have known at least which stocks make you sleep at night and which don't…

The One-day tournament with Pakistan started yesterday and when I saw that we were 14-3 I knew the writing was on the wall. At least Morgan and Taylor salvaged some respectability…

And sad to see the passing of legendary jockey Pat Eddery yesterday; people of a certain age will remember so many successes, 14 English Classics and four Arcs into the bargain.

This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

Malcolm is a Founding Partner of HydroCarbon Capital, which provides independent advisory services to the Oil and Gas sector. He is a Director of the Maven Income and Growth VCT 4 PLC, a venture capital trust listed on the Premium segment of the main market of the London Stock Exchange.