(MENAFN- ProactiveInvestors)WTI $44.43 -$1.27 Brent $47.34 -$1.26 Diff $2.91 +1c NG $2.56 n/c Oil price The oil price headed back downwards yesterday and with equity markets reacting badly to a number of economic stats that has carried over into Asia and Europe this morning. There must be some sort of 'Glencore' effect in the commodity markets and of course a number of the international traders have substantial oil and gas assets in their own rights which may cause some peripheral concern. Adding to the slight worries about the oil glut the Russian Deputy oil Minister said yesterday that he expected production this year to be slightly up at around 10.56m b/d no signs of a policy change there at the moment. The only slight plus was the Genscape inventory number which put the stocks at Cushing down by 1m barrels which would help if only modestly tonight is API time and we will need to see another draw from them. Gulf Keystone Petroleum (LON:GKP) I was recently fortunate to spend some time with Jón Ferrier who has recently become CEO of GKP indeed given my 100 days in office fixation I immediately discovered that our chat was indeed on day 101 in office. I had done a bit of homework on Mr Ferrier and had very positive feedback from industry executives who praised him as a hands-on operationally hard-working type probably what is needed at GKP right now. Indeed having spent some time working with Petro Canada in Syria Ferrier has experience in tough conditions and old friends in the country although when he sees me reading the Daily Telegraph interview he is less than amused by the inset picture of what looks like President Assad waving him off. The last few years have been tough for all the companies working in Kurdistan which have been well documented but I would say that operationally and under such conditions all have performed well if not highly creditably. Recent reports from the company have shown record production some days of nearly 50/- b/d have been reported so the wells are delivering the goods as are the production facilities. Shaikan is performing well with good connectivity and pretty much only restrained by infrastructure the pipeline will have plenty of capacity and there are no water problems at present. Whether it is by truck to Dortyol or pipeline to Fyshkabour and then Ceyhan on the Mediterranean coast where the netbacks are better GKP is maintaining a regular outflow despite recent problems. Those problems have been primarily due to an absence of payments from the MNR something that has now by the look of it been at least partially resolved. Recent payments and promises of the consistency of monthly amounts have led the CEO to believe that at last the KRG have realised that the oil industry is 'the golden goose' and that it was not just GKP that were close to administration. This lack of payments has left the company running on a lean mix and investing virtually nothing that wasnt needed to keep operational excellence. With only modest payments so far the company are not yet in a position to invest but all the companies in the region are upbeat that slowly but surely the money will come through. So how does that leave the sales process I ask quietly hoping that the company wasnt going to be sold out at what might be close to the bottom of the cycle Shareholders I suggest are between a rock and a hard place as selling out down here would be barely palatable yet something is needed to finance future developments. Ferrier has some 'serious names' in the data room but probably getting my angst about selling out tells me that the company would prefer ' an industrial investor as a partner' I suggest that a helpful strategic benefactor might be best and he does not demur albeit suggesting that may be clutching at straws. The balance between ensuring that equity shareholders are not diluted out of sight and encouraging inward investment is a tricky one but I feel that he will do what is best for the company. Interestingly on the operational front it seems that not as many wells will be needed to drilled as originally thought 9 out of the planned 20 wells have been drilled and it wont take another 11 to reach targets. Those targets which looked a long way off even quite recently are still very much achievable next stage is 65-70/- b/d with 100/- b/d the longer term target. GKP already has the site ready for the bigger processing plant and with such strong operating fundamentals and some money coming in this is more than a historic dream. The Government he says are 'passionate about support for the companies' saying that their success is our success about them. The CPR that has been talked about is imminent and will provide the company with a further chance to speak to investors at length about the future. Ferrier is adamant that the relationship with investors large and small is going to change so expect much more communication than in the past and all the way to the top he acknowledges that this has been a problem in the historically. Although it seems that GKP is turning the corner and I felt much more uplifted after the meeting than when I went in all is not going to be plain sailing under the new management. The finances are hardly text book and with only $15m a month coming in there may have to be some serious negotiating to be done before financial security can be achieved but Ferrier who has a close relationship with Dr Ashti and will spend at least one week a month in Erbil has his finger on the pulse. A phrase often used is 'world class asset' but this is surely one of them with a massive STOIP the worries are still about under selling it with which I concur. The asset he says 'has a 40 year production life this is just a blip' and we havent talked about satellite developments or adjacent blocks yet not to mention Akri Bijeel where MOL are also doing a CPR at present. There will be more to write about GKP in coming days as the CPR finally comes out but from what I have learnt so far my confidence hasn't been dented although readers will know my historic calling on the company has been over enthusiastic to put it mildly lets hope I am as they say cautiously optimistic this time…. Circle Oil (LON:COP) I wrote up Circle fairly recently after my meeting with Mitch Flegg and today's interims dont add that much. A bit more straight talking from Chairman Steve Jenkins as he points out that the company had been hit hard by 'significant costs of drilling in Tunisia and Oman and at sole risk' ouch but the clean up continues. 'Aggressive management strategy on cost cutting' helped by well costs being reduced by over $1m each and significant efficiencies being made are all contributing to the turn around from a lifestyle company to a no-nonsense one. Confirmation that they are or have exited from Tunisia and Oman to concentrate on the three main geographies is as expected and there are the faintest signs that they may add if good enough opportunities present themselves. As I said before one of those may be the Gulfsands assets in Morocco and if Circle could cut a deal with ONHYM on the level of commitment wells then it might be a no-brainer. Providence Resources-Jam tomorrow (LON:PVR) I havent written on providence for some time the whole Barryroe saga was getting me down and it still is the last deal fell through and those of us who worked out who it was were able to see at close hand that the moolah wasnt on its way to Dublin. Apparently it still is in negotiation and any delay is only on 'capital availability' join the club boys. On the conference call the mood was upbeat but then when was it ever not Provvies is in 'invest' mode apparently and valued at only 9 cents in the barrel in the books with an unparalleled portfolio and the latest licensing round showing incredible interest from oil companies large and small from all over the globe. PR are still talking to Melody finance and maybe others about extending terms and the maturity of their debt facilities which need to be tucked up before long. There is little doubt that Providence is on the list of highly leveraged exploration stocks standing at a massive discount to its potential NAV but the market is in no mood to give companies the benefit of the doubt at the moment and proof of the pudding is in the eating starting with Barryroe the company needs actions not words to get the share price moving. Sefton Resources (LON:SER) Sefton has announced that the requisition for an AGM to replace three directors has been withdrawn effectively the three having all one way or another stepped down in recent days. The board will accordingly change in October as will the Nomad where the company has a replacement identified. The company also announce that Clem Chambers who had been put up as the Interim CEO has been in discussions with the Executive Chairman Jossy Rachmantio presumably about future strategy of the company. With the lawsuit against Jim Ellerton being the current priority it looks like good news as they can concentrate on the litigation now and longer term strategy after that. Sundry Trinity E&P (LON:TRIN) has announced interims but as usual being historic add little to the sum knowledge of the current situation. They also announce that lenders have again rolled over the current loans this time until 9th October. With the formal sales process under way its a difficult call but as Range have showed in recent days its not all bad in Trinidad and whilst I expect the worst it is far from over at Trinity. And finally… Last night in the Premier League the Baggies snatched defeat from the jaws of victory going down 2-3 at home to the Toffees having been 2-0 up at one time. This takes Everton to 5th in the table ahead of the weekend's Merseyside derby… Back to the Champions League tonight and Chelski travel to FC Porto and the Gooners entertain Olympiakos at the Emirates which is a must win game for them.
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