The Oil Man: Amerisur, Tullow, IGas, Hurricane

WTI $49.72 +54c, Brent $50.47 +49c, Diff -$0.75 -5c, NG $2.76 +3c

The OPEC "machine" went back into action yesterday in a number of ways. Firstly, "sources" revealed that the reduction in peak output would be 4%; to my maths this is about the very minimum that they could get away with.

Then it became known that OPEC were prepared to agree to an Iraqi exemption in order to facilitate an agreement, which is more interesting…

Inventory stats have helped a little this week, after the poor American Petroleum Institute numbers the Energy Information Administration produced a draw. Even though a modest 553/- barrels was better than the build forecast by the teenage scribblers, yesterday Genscape helped by noting a 650/- barrel draw at Cushing.

Amerisur Resources

At long last, yesterday Amerisur announced that the OBA pipeline link was open and, starting with 1,500 barrels per day (b/d), would build up to 5/- b/d (and presumably, by the year end, 7,200 b/d).

It seems like we have been talking about the benefits of this export route through Ecuador for a long time; now the results will be tangible. The most obvious gain is in the operational expenditure costs, which, owing to the lack of trucking, with minor exceptions, saves around $11-12 a barrel.

Another gain is that, in due course, the company will be able to offer the same economics to other local producers, probably starting with their partners' crude. In due course this should lead to greater profitability and create a value for the pipeline in its own right as an annuity.

In a way even more important is the way that it has developed the ongoing strategy for the company; with the prize of oil being near the OBA, management has embarked on the "cluster" policy to drill the prospective areas in the south which have hitherto been less attractive.

A recent visit to Colombia has confirmed that not only is the in-country management of a very high quality but that it has strength in depth, more than capable of taking advantage of this scenario unfolding.

Amerisur has no debt, a raise earlier this year has ensured funds for drilling are available and now a seriously positive cash flow from operations - all in all, the outlook for AMER is highly encouraging.

Hurricane Energy

A brief mention of Hurricane this morning as most was covered in yesterday's blog.

With the news that the horizontal sidetrack well had been completed with a natural flow rate of 6,520 b/d and 14,500 b/d using an electric submersible pump (ESP) and a very impressive productivity index (PI) of 147, the well can be considered to be a significant success. The rig moves to do some clean up work on 205-21a-6 before spudding a Lincoln in early November.

Tullow Oil

Tullow has confirmed the rather nervous confidence that I showed in it at the beginning of the year when putting it into the bucket list by further sorting out its finances.

The six-monthly re-determination of reserves based lending facilities, including embedding the accordion, provides plenty of headroom going forward.

Although the Jubilee floating production, storage and offloading (FPSO) unit has been unhelpful, we have been advised that it is a likely insurance offset, that the news from TEN has been nothing but good and that the fourth quarter will see genuine free cash flow and the start of paying down debt.

The shares have justified the confidence and are now back to the year's high; I expect things to continue to go well.

IGas Energy

Difficult times for IGas as it juggles the cash situation and a horde of bondholders, not all of whom appear to be friendly or to have the best interests of the company at heart.

With various payments due, the spotlight is on 31October, but things could change at a moment's notice. The 10-day grace period is almost certain to be needed but one thing is almost guaranteed: the company has much change on the way, not all of which will be at its own discretion.

Sundry/Catch-up

The results season for the majors is under way, yesterday Statoil missed the whisper by making a loss, but the shares went better as cash generation rose reducing gearing. Exxon, Chevron and Total today and BP and Shell next week.

The difference between the performance of Hunting and Amec Foster Wheeler yesterday could not have been more marked. Hunting took advantage of the strong share price by raising £70-odd million and the shares are still only around 5% off the recent peak.

This means that, with continued canny financial management and adept use of inventories, they are probably sorted until at least the end of next year, by which time the worst should be behind them.

Amec took rather a different route by postponing the capital markets day by over four months, hinting at a rights issue and suggesting that earnings may need to fall and that asset sale prices are disappointing.

And there was me thinking that the worst was over. Clearly the new CEO has a lot to learn about handling investors and markets; after two days his shares are down 30% and, when the rights issue comes, it may be at a 50% discount to the recent high of 620p. The words "hole" and "stop digging" come to mind, Jon Lewis - never knowingly oversold, it seems….

Independent Oil & Gas have completed their acquisition of what is now to be known as the Vulcan Satellites and the deal is clearly very smart from an economics point of view, but still a long way from development. In the immediate short term there are questions to be answered about the Skipper oil.

So, it is finally all over for Xcite Energy, for whom the bell tolled yesterday: this morning Liberum, the company's nominated adviser, resigned, which means that in 30 days the shares will be cancelled.

It is a shame, as it could have been avoided; an over-rosy view of the asset and arranging debt that, it appeared, was not covered by any substantial cash flow was always an accident waiting to happen.

And finally…

The cricket from Bangladesh this morning has been most peculiar: batting first, the Bangas raced to 177-1 before being all out for 220! England then followed suit by losing three quick wickets before the rain came.

This weekend sees a bunch of fixtures without a stand-out amongst them.

The Gooners go to the Maccams, the Noisy Neighbours go to the Baggies and the Foxes go to White Hart Lane.

The HubCap Stealers go to bogey side the Eagles, the Red Devils host Burnley and the Hornets welcome the Hull City Tigers. The Hammers go to the Toffees, and the Saints host Chelski.

The "World Series" is one-all after the Cubs came back, beating the Indians comfortably in game two; off to Wrigley Field now for the next two crucial games.

And the Grand Prix circuit moves to Mexico, where Nico apparently feels confident - at least he knows that it won't be his engine that packs up...

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.