The Oil Man: Hunting, Caza Oil, Nighthawk

WTI $41.75 -$1.18, Brent $44.06 -$1.75, Diff $2.31 -57c, NG $2.26 n/c

Another bad day at the office for oil market bulls; the prices are now well back through the longer-term moving averages and looking vulnerable to more weakness. December Brent expires tonight and, at a two month low, doesnt look good - indeed, with the Fed increasingly likely to raise rates in December, crude will remain in a battle with a strong dollar for a while.

The EIA inventory report didn't help; stocks were up 4.2 million barrels, which was well above estimates, and at Cushing up 2.2 million barrels - also higher than forecast. OPEC came out with an interesting comment: "The build in inventories is due to an increase in total supply outpacing growth in world oil demand in the first nine months of the year." Never…..!

Their demand for OPEC crude next year is 30.78 million barrels per day (b/d) against current production of 30.2 million b/d, apparently, and with the Saudis at 10.3 million - unchanged - and Iraq at 4 million b/d, there is little room for Iran in the New Year. The IEA is out this morning and it should be noted that these three reports may carry a little more weight than usual, as they are the last before the OPEC meeting on 4 December.

Hunting

I had an update with Hunting earlier in the week and, whilst things are pretty grim in the marketplace, the team are hunkering down and patiently hoping to see out the stormy weather. Operationally, margins are expected to see some degradation as stocks are wound down but, with exciting kit such as the new perforating gun available, the sales force will be able to offer this at old levels.

Financially, the company are concentrating on watching and reducing debt, whilst aiming to build the EBITDA(earnings before interest, tax, depreciation and amortisation) number through next year sufficiently to ensure no breach of covenants. I don't expect an equity issue, as this would be much more expensive than existing debt and the company are being highly disciplined on capex.

Continued expenditure this year has been sanctioned by the board, as it is pointless to keep customers waiting for products - or worse, subcontracting and outsourcing kit. With Cape Town and Mombasa up and running, business can grow steadily there and in Singapore, building the new facility has been moved to the right slightly to ensure that capex next year stays at around $50-60 million.

Finally, regarding takeover stories, I would be very surprised if either the family or the management team were to have any interest in selling the business anywhere near here and will tough it out for the longer term. Clearly times are tough for the oilfield services companies and trying to pick times for recovery is for the brave or even stupid. However, for Hunting and others in the sector, any evidence of a sustained recovery will without doubt lead to substantial reward for shareholders.

Caza Oil & Gas

Third-quarter figures from Caza today and the report is very much more of the same. As one would expect, revenues are down, with low oil prices and capex reductions taking off production. The Apollo forbearance agreement remains in place and Caza are still in advanced discussions with a third party - but with no guarantee of completing - and if so would result in "significant dilution". Nothing here is new or has changed, but the market remains concerned and it is a shame that such a good portfolio of assets is under threat; holders must hope that a deal can be hammered out.

Sundry

Round at Nighthawk Happy Jack is not so happy; the well bearing his name has just come in as a dry hole. At the same time, the company has downgraded production guidance and - interestingly after my recent comments - have now only one broker name at the foot of the RNS; has the Night of the Long Knives been extended to advisors I wonder?

Enteq Upstream, as I was reminded by a smart investor this week, has not been a brilliant performer. Coming to the market just at the wrong time turned into a nightmare and if Hunting are hunkering down then Enteq are battening down the hatches. Losses as expected - but cost reductions are as high as any I have seen in the industry, so much so that cash is actually going up! Expect nothing for the time being, but don't write this one off quite yet…

And it was good to meet up with Simon Hawkins yesterday, back from his break and trying to put the Afren experience behind him whilst learning from the process at the same time. The experience has, unsurprisingly, left some scars, but I'm glad to say that he is looking forward to rolling up his sleeves again in the oil sector.

And finally…

The RFU are working hard on the shortlist for new England coach, with international experience high on the list of priorities. Having said that, I have heard that a certain South African heads the bookies' sheets; some would prefer Jack Whitehall to Jake White methinks…

It's Euro rugby time and the Quins started last night with a good win - although my spies tell me that the referee made Craig Joubert look like a consummate professional...

This weekend's fixtures include Leicester v Stade Francais, Saints v Scarlets, Ospreys v Chiefs, Leinster v Wasps, Toulon v Bath, Racing v Glasgow and the Sarries v Stade Toulousain.

It's an international break with all that entails; England have a friendly in Spain but, as for the ROI, they have an important trip to Bosnia and Herzegovina in a play-off first leg where they hope to qualify for France 2016.

Sunday sees the start of the ATP World Tour Finals at the O2 arena and Muzza, keen not to overwork ahead of the Davis Cup Final, appears to be in the marginally easier group.

After the now-infamous 3:15 am crash in Monaco, Lewis is off to Brazil for the GP, which regrettably now is a dead rubber, as it were - but at least Red Bull have announced they are staying in the sport next year.

And a great three days down at Cheltenham, where the Open meeting starts today and includes the opening of the new stand, which looks fantastic.

Today also sees another One-Dayer against Pakistan, England batting managed to get through at least two overs without losing a wicket this time...

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.