The Oil Man: Faroe, Velocys, Sound Energy

WTI $31.72 -56c, Brent $34.46 -58c, Diff $2.74 -2c, NG $1.97 -7c

The oil price drifted yesterday; there are concerns about the US economy after recent farcical statements from the Fed and, of course, today is Non-farm payroll day; much to watch.

Also, Saudi Aramco announced that it was cutting prices to European, Asian and Mediterranean customers, which doesn't sound like a move away from market share-grabbing policy…

Faroe

An operational update from Faroe this morning - the company remains one of the most disciplined in the sector, holding onto its cash, cutting costs and keeping to a modest drilling programme in tax efficient Norway.

Last year can be described as a disappointing one with the drill bit, but production beat the guidance at 10,530 barrels of oil equivalent per day. This year guidance is down; this is due to Njord and Hyme being suspended in the summer. More details on redevelopment and costs are due shortly.

Capital expenditure last year was a net $15 million (£10 million), whereas this year will be $12 million thanks to the tax efficiency in Norway. As for operational expenditure, last year was $23 per barrel of oil equivalent (/boe), but will rise to $27/boe this year due to that production fall mid year.

Butch, Pil, Bue and Boomerang are all working their way through the process; Butch is likely to be up for final investment decision in the fourth quarter.

All in all, Faroe remains very much one of the favoured plays in this difficult sector, its relative financial strength with cash and mostly undrawn reserves-based lending means that, should the opportunity arise, it could be a consolidator with all the advantages that might bring.

Velocys

The ENVIA Energy gas-to-liquids joint venture moves on; contractor Ventech has signed its first major contract and Velocys has provided $12 million of funding, of which $9 million is a loan at 10%.

This is further good news from Velocys and I am looking forward to meeting the new CEO to get an idea of his plans.

Sound Energy

Two pieces of news from Sound in the last 48 hours: the Badile process rolls on and another suite of information is being prepared, but movement is forwards at least.

Much better news is that first gas has been achieved at Nervesa, commercial production is really important and, when ramped up, will deliver 1.8 million standard cubic feet per day and goes into the gas supply agreement with Shell.

And finally…

In the Prem this weekend, there are two standout fixtures: undoubtedly the best is the Noisy Neighbours entertaining the Foxes, whilst Man Who go to Chelski.

Spurs host the Hornets, the Hammers go to the Saints, the HubCap Stealers have the Maccams at Anfield and the Gooners go to the Cherries.

At the bottom, it's Villa v. the Canaries and the Magpies take on the Baggies.

Of course it is also Super Bowl weekend, where the Denver Broncos take on the Carolina Panthers starting at 11:30pm on Sunday…

Finally, of course, tomorrow sees the start of the Six Nations championship and, after the Rugby World Cup, it's very welcome.

It's the battles of the old enemies, with France taking on Italy and Ireland playing Wales, but I shall be at Murrayfield, where the Calcutta Cup is likely to be as close as it has been for many years, after Scotland showed England a thing or two in the World Cup.

There is the small matter of the Scottish Oil Clubs dinner to get over first, however, tonight in Auld Reekie may get very messy…

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.