The Oil Man: Oil price, Gulf Keystone, Caza, Sound Energy

WTI $45.09 -14c, Brent $48.37 +14c, Diff $3.28 +28c, NG $2.52 -6c

The oil price took the US Energy Information Administration (EIA) inventory stats pretty much in its stride and indeed both are up by around 50 cents in early trading this morning. The pointer from other inventory numbers this week had been taken and although the build was 4 million barrels against estimates of a small draw prices actually ended around all square. The market as is its wont, chose to look at the EIA domestic production number which was a fall of 40/- b/d down to 9.1m b/d.

Another small straw to clutch comes in the shape of Hurricane Joaquin which shows that the season is not over by any means.

Gulf Keystone

The long awaited updated CPR from GKP has arrived and at first glance it looks pretty impressive. At Shaikan, 1P reserves are up 55% to 306m barrels with 2P numbers up 114% to 639m barrels. This means that the company evolves from measuring from oil in place to recoverable reserves which is a significant step forward.

The increased knowledge of Shaikan re-risks the field's commerciality and with solution gas rather than water drive will give greater predictability of the field performance. As mentioned in my recent note on GKP, the company has increased the reserves per well thus lowering capex as less wells will be needed. At Sheikh Adi FDP work is under way which we are told will lead to a reclassification from 2C resources to 2P reserves which will be further good news.

Gulf Keystone are all of a sudden starting to look like the real deal and this is a decent step in the right direction. Having met new CEO Jón Ferrier I am pretty sure that management is hands on and will mean that the process of rebuilding continues.

The risks associated with the company have not gone away by any means, geopolitical concerns will always be there and of course getting paid whilst looking better than a few months ago is far from being assured. Either way shareholders can rest a little easier this morning and I think that the modest mark up in the shares is more to do with the oil price than this very decent addition to the reserve base of the company.

Caza Oil & Gas

Caza has announced an update of its financing discussions, the agreement with Apollo to waive the financial covenants has been extended until October 31st. The company is in "advanced negotiations with a potential financing partner" which will, if it goes ahead likely be in equity form and therefore "is likely to subject shareholders to significant dilution".

Caza has found itself in a difficult position in recent months and whilst the acreage position it has built up is a strong one the circumstances, particularly in the refinancing market, are decidedly against them. The shares are off some 40% this morning and until we hear more news on the financing and I can speak to the management later the jury will remain out.

Sound Energy

Sound has announced that ground works at the Nervesa gas field are starting today which in due course provide a solid addition to the company's cash flow. It also confirms that it has, as of today, changed its name to Sound Energy, this will more accurately reflect the nature of the company's business and at a launch later today will expand on its ongoing Greater Mediterranean strategy.

And finally…

Last night in the Champions League some English pride was restored, but only just. Man Who went behind after four minutes to Wolfsburg but ended up getting over the line 2-1. The noisy neighbours could have been under water after an hour but ended up also just squeaking home. Tonight in the Boropa Cup there are games for Celtic, Spurs and the HubCap Stealers.

In the RWC its time for Wales to reappear, taking on Fiji at the Millennium Stadium should be a doddle even with the injury hit squad.

And Johanna Konta survives in the Wuhan Open getting through to the quarter finals where later today she will play Venus Williams…

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.