Opinion

Oil price, Victoria Oil & Gas, Trinity, Sundry-Thalassa-EnQuest/Cairn-Touchstone-UKOG- And finally…


Oil price

Those strange bedfellows of the USA, Nigeria and Libya continue to combine and spook the market and their increased production is making investors wobble. The rig count showed another 11 units on last week and the CFTC data showed a huge cut of 55m barrels to 160m barrels by the ‘money managers' in the period. The FT comments that Hedge Funds are taking on Opec which shows a bit of journalistic flair but echoes a sort of sentiment that the former love the smell of blood provided it is not their own. There are a number of more bullish takes on the market at the moment that are being disguised by the bears, the most interesting of which are the belated dash for the door by various investment banks, Macquarie, Barclays and the vampire squid have all cut price forecasts and ratings in recent days chasing the market downwards.

Victoria Oil & Gas

VOG has announced this morning that it has extended its current gas sales agreement with ENEO until December of this year. This will enable ENEO and GDC the chance to ‘optimise all technical and financial elements of a long-term gas sales arrangement aimed at increasing the current contractual power supply of 50 MW to 100MW+'. The current agreement will remain in place at a price of $7.50 mmbtu.

VOG remains in a very strong position indeed, with demand in Douala from both ENEO and third party IPP licensees well in excess of supply I expect a significant rise in revenues to build over a long period of time. With the two wells drilling at Logbaba and in due course the likelihood of production from the Bowleven acreage, the ability to service all areas of the rapidly growing City of Douala makes the company compelling. The fall in the oil price has understandably hit the E&P sector badly but makes no sense in the case of VOG which is a highly profitable utility in essence and should be way higher on any sensible valuation.

Trinity Exploration & Production

Friday saw the Trinity AGM statement which to be frank many thought might not happen after all that has gone on in recent years. In fact the company seems to have come back even stronger and whilst continued patience will be required I am sure that it will be rewarded. With the recent investment has come initial essential maintenance and upgrades to infrastructure in order to sustain base production levels. A combination of workovers, swabbing, reactivation, RCP's and new infill drilling should mean that current production of 2,500 b/d will rise to 3,000 b/d within twelve months.

Trinity are not only rare in being profitable (on AIM) but has arguably the best acreage amongst peers (as evidenced by production levels despite lack of investment) as well as additional significant upside from profitable offshore operations where in time new drilling will target bigger barrel wells with significantly higher IP's than you get from onshore wells. My target price remains way above current levels and the patient will be rewarded, for those who require swifter information I understand that Executive Chairman Bruce Dingwall will be speaking at the Oil Capital Conference tomorrow.

Sundry

Thalassa has announced this morning that it has received an indication of interest for WGP Group and that the potential buyer may take an option to invest in Autonomous Robotics ‘subject to reaching mutually agreeable terms'.

EnQuest/Cairn have announced that first oil has been achieved at Kraken which is good for both parties bring revenue and for EnQuest an opportunity to reduce debt.

First day of dealing for Touchstone Exploration (TXP) after their recent raise of £1.45m at 7.25p and announcing Peter Nicol as a Non-Exec for the second time, he must be good…..!

And although I dont cover UKOG one has to be impressed by what one is hearing from Broadford Bridge-1 in the Weald Basin with most interesting potential oil shows…

I have done a couple of interviews with Interactive Investor lately, the links are below.

Interactive Investor interview: How dangerous is Qatar row for oil investors?

Interactive Investor interview: Five oil share bargains

And finally…

A really great week at Royal Ascot which showed that both the ‘Blue Boys' and the ‘Green Machine' are very much dominating some of the bigger races but also good to see plenty of local victories across the board.

Saturday morning saw the first Test between The Lions and the All Blacks where the home team showed why they are rarely beaten. The Lions try was however one of the best and maybe with some better selections next saturday may be better but dont hold your breath…

England beat South Africa in the T20 series with some good performances from the newcomers, watching Dawid Malan and Tom Curran was most enjoyable yesterday.

In the Dutch MotoGP at Assen the young pretenders were out in force with Danilo Petrucci and Johann Zarco challenging for the lead in a partly wet race. After Zarco made a poor decision to change to wet tyres it was eventually won by ‘The Doctor', 38 year old Valentino Rossi, who held off Petrucci by .063 of a second and Marc Marquez 3rd, closely followed by Brit Cal Crutchlow whose bravery in the wet gave him a well deserved 4th. Another British success was Scotsman John McPhee in Moto3, who fought his way from 19th on the grid to a brilliant 3rd place on the rostrum. McPhee rides for British Talent Team which aims to cultivate young talent to the World stage and has upped its efforts this year to find the next Barry Sheene …It's been a long wait !

In Azerbaijan the F1 race was broken up by the safety car a number of times and after a red flag the race eventually finished with Daniel Ricciardo coming from last to first to win after Lewis' neck support loosened. But the big news was the behaviour of Sebastian Vettel who must have thought he was playing bumper cars with a 200 mph vehicle, dangerous driving indeed and only a 10 second drive through penalty….?



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