The company detailed its strategy after the net zero target announced a year ago. While 2021-22 is a focus around the balance sheet, 2023-25 will deliver growth. The dividend is cut to €0.60 per share and the total distribution could go back to €0.90 by 2023. The group sees an EBITDA of €8.2bn in 2025. The latter seems rich, with strong growth expected from customer and low-carbon business while the refining margin is expected to be $5.8/bbl.
Companies: Repsol SA
GeoPark (GPRK US)C; Target price of US$20.00: Divesting non-core asset in Brazil - GeoPark is selling its 10% non-operated working interest in the Manati gas field in Brazil to Gas Bridge for US$27 mm. We do not see much upside to the Brazilian asset (in terms of growing reserves or through exploration opportunities) and this divestment may allow GeoPark to reallocate resources to its core operations. We would rather see management remaining focused on deploying capital on higher return assets such as Colombia and Ecuador. Even after this week’s share price appreciation, our Core NAV continues to be 60% above the current share price. Our unrisked NAV for the 2021 drilling programme is ~US$9.00 per share, which represents ~90% of the current share price. Panoro Energy (PEN NO)c; Target price of NOK23.00: 2021 will be a transformational year - 2020 has been a difficult year for the oil and gas industry and 2021 is a turning point for Panoro. In Gabon, development activities at Ruche are expected to return to normal with gross production set to grow to 20 mbbl/d. The company will also appraise Hibiscus to test the 155 mmbbl upside case (=2x existing 2P reserves). The development of Hibiscus is expected to be sanctioned. Importantly, while the existing FPSO has a nominal oil processing capacity of 45-45 mbbl/d, processing expansion is possible which allows for a potential oil production plateau of 70 mbbl/d. We estimate the value of Panoro’s reserves in Dussafu at NOK10.40 per share. Derisking the contingent resources in Gabon could add ~NOK3 per share. We estimate that the upside at Hibiscus has a further unrisked NAV of ~NOK10 per share for a total unrisked NAV of NOK23 per share for the discovered and “to be appraised” volumes in Gabon. Overall, including Nigeria, South Africa and Tunisia, we estimate the unrisked value of the 2021 activities at NOK30 per share; which represents 2.3x the share price. Our target price of NOK23 per share has been set close to our ReNAV. Pharos Energy (PHAR LN)c; Target price of £0.35: Low cost. Quickly scalable. High impact, quality exploration – Pharos is a £[67] mm market cap, ~12 mboe/d oil producer that acquired the Egyptian assets of Merlon in 2019. Under the stewardship of a blue-chip management team that turned Cairn Energy from a micro-cap into a successful E&P that returned US$4.5 bn to shareholders, Pharos has undergone a multi-faceted transformation, enhancing governance and rebalancing its asset portfolio. Given the recent macro challenges, this process appears to have gone unnoticed by many investors. Pharos now holds ~50 mmboe 2P reserves in Egypt and Vietnam. Vietnam provides stable cash flows even at low oil prices. Egypt production can be increased rapidly (up to x2.5 to 13 mbbl/d) with additional investment. Pharos also holds world class exploration assets in Israel, Egypt and Vietnam. With a healthy balance sheet (cash: ~US$38 mm, net debt:~US$36 mm), Pharos’ shares trade at EV/DACF multiples of 5,000 bbl/d, increasing production from the Shaikan field by~15%. FY20 gross production is expected to be at the upper end of the 35,000 – 36,000 bbl/d production guidance, with the field currently producing at ~39,000 bbl/d. SUB-SAHARAN AFRICA LEKOIL (LEK LN): Requisition from large shareholder to change the board of the company - LEKOIL has received a letter from Metallon, holding 15.4% of the company, requisitioning an extraordinary general meeting to vote on the replacement of the Chairman and the appointment of Michael Ajukwu, Thomas Richardson and George Maxwell as directors of the company. Orca Exploration (ORC.A/B CN): 3Q20 results - 3Q20 WI production in Tanzania was 60.9 mmcf/d. At the end of September, Orca held US$79.2 mmm in working capital including US$98.5 mm in cash and long-term debt of US$54.2 mm. Tullow Oil (TLW LN): Capital Market Day – 2020 production to date averages 75 mbbl/d with FY20 production guidance of 73-77 mbbl/d. Assuming an oil price of US$45/bbl in 2021 and US$55/bbl flat nominal from 2022 onwards, Tullow expects to generate US$7 bn of operating cashflow over the next 10 years with capex of US$2.7 bn. The first phase of investment will start in 2Q21 with the commencement of a multi-well drilling programme in Ghana. In Suriname, the prospective Goliathberg-Voltzberg North-1 well will spud in 1Q21. Victoria Oil & Gas (VOG LN): Positive licence update in Cameroon – The duration of the onshore Matanda licence has been extended by one year to December 2021. The gross unrisked prospective resources are now estimated at 1,196 bcf, up from 903 bcf previously. 19 gas prospects haven identified in shallower Tertiary-aged reservoirs, plus 7 prospects in deeper, Cretaceous-aged prospects. The Company believes the largest of these prospects has mean unrisked Prospective Resources of >65 bcf, with geological Chance of Success estimated at >40%.
Companies: VOG BPC ENQ GPRK JOG MAHAA PEN PHAR RBD REP SEN TLW
Panoro Energy (PEN NO)C; Target price of NOK23.00: Delivering production growth in Tunisia – Gross production in Tunisia has averaged 4,850 bbl/d in October, up from ~4,000 bbl/d in 1Q20 following the restart of operational activities in 3Q20. The Guebiba-10 sidetrack has encountered net pay in both the Berino and shallower Douleb reservoirs. Initially bringing the Berino onstream will add a few 100s bbl/d from mid November. There are three other work-overs due in the next few months on the field and while gross production of 5,000 bbl/d now represents a new very solid base, there is also potential to quickly take gross production in Tunisia to 6,000 bbl/d. The potentially more important story of Guebiba-10 is the Douleb reservoir. While the net pay in the Douleb is smaller than at the Berino, the reservoir is of better quality and this formation, once opened (after the Berino is depleted), could generate 1.0-1.5 mbbl/d production from Guebiba-10 only. Panoro has already identified new Douleb well locations with an ongoing remapping of the field. The results of the remapping and the associated work programme should be available in 1H 2021 and could offer material opportunities for further production growth. Tethys Oil (TETY SS)C; Target price of SEK75.00: Taking control of Block 56 – Tethys is acquiring a further 45% interest in the exploration and production license covering Block 56 onshore Oman. The consideration consists of US$5 mm in cash and up to US$2 mm by way of a carry of future expenditure. The agreement further includes additional consideration in the case of a declaration of commerciality. The transaction will increase Tethys’ interest in Block 56 from 20% to 65%. Tethys is also assuming operatorship. Given that Tethys had undertaken drilling and testing activities earlier this year, we view this additional commitment as very encouraging. Block 56 has a lot of similarities to Blocks 3 & 4 and Tethys could add value by applying its knowledge of the geology of Blocks 3 & 4 to Block 56. Medco acquired Ophir Energy for >£400 mm in cash last year and, in the context of lower oil prices, we can understand Medco’s need to reduce its capital exposure to its diversified portfolio of assets. With Tethys now in control of operations, there could be more activity taking place on Block 56 in 2021 including seismic and perhaps further drilling. The share price has dropped to its lowest point in 2020, which represents a ~35% discount to our Core NAV. The core dividend represents >5% yield. Our unrisked NAV for the Thameen prospect, assuming 15 mmbbl resources, is SEK17 per year (~50% of the current share price). The current share price represents EV/DACF multiples of only 2.2x for 2020 and 1.9x for 2021. IN OTHER NEWS ________________________________________ AMERICAS BP (BP LN): Exiting Brazilian assets – BP is transferring the operatorship of a deep-water exploration block in the Foz do Amazonas basin off Brazil. Diversified Gas & Oil (DGOC LN): 3Q20 results and dividend increase– 3Q20 production in the USA was 107 mboe/d. Production from the legacy assets has been maintained at 69 mboe/d. Net debt at the end of September was US$730 mm. The company has declared a dividend for 3Q21 of US$0.04 per share up 7% versus 2Q20 dividend (US$0.0375 per share). Hess Corporation (HES US): Resources increase in Guyana – Gross resources encountered in Guyana have been increased from 8 bn boe to 9 bn boe. Maha Energy (MAHA-A SS): Strategy update – Maha plans to grow production to 15 mboe/d in Brazil, Oman and the USA over a five year horizon. President Energy (PPC LN): 1H20 results and update in Argentina – The LB-1001 well has now been tested with net pay 32% ahead of expectations. The company is expected to add ~1,030 boe/d of new gas production by the end of November including ~590 boe/d from the LB-1001 well. Production in 1H20 was 2,747 boe/d. Net debt at the end of June stood at US$11.3 mm. The exploration well EVN-x1 near the Estancia Vieja field encountered net pay of a total of 10 metres (including 7 metres of oil). These results provide support for the pre-drill projections of production of ~350 boe/d of gas and 188 bbl/d of oil. Westmount Energy (WTE LN): Drilling programme update in Guyana – Westmount holds small indirect interests in the ExxonMobil operated Kaieteur and Canje blocks, offshore Guyana. The Exxon Mobil drilling programme on both blocks has commenced, with the Tanager 1 well on the Kaieteur block currently drilling and a further two wells expected on the Canje Block over the next six to nine months. It is anticipated that the first well on the Canje Block, Bulletwood-1, will be spudded in November/December 2020. The Bulletwood-1 prospect is reported to be a 'Liza look-alike' confined channel complex and will target prospective resources of ~500 mmbbl of oil. The second well on the Canje Block will target either Sapote-1 in the east of the block or Jabillo-1, in the northwest of the block, which is reported as a billion-barrel class basin floor turbidite fan. The Tanager-1 well on the Kaieteur block (currently being drilled) targets unrisked gross prospective oil resource of 136 mmbbl to 452 mmbbl, with an aggregate chance of success 72%. EUROPE ADX Energy (ADX AU): 3Q20 update in Austria – 3Q20 production is Austria was 308 boe/d. ADX had A$2.1 mm in cash at the end of September. Aker BP (AKERBP NO): 3Q20 results – 3Q20 production in Norway was 201.6 mboe/d. The company maintains its FY20 production estimate and has narrowed the guidance range to 210-215 mboe/d from 205-220 mboe/d. Net debt at the end of September was US$3.64 bn. BP (BP LN): 3Q20 results – 3Q20 adjusted net profit was US$0.1 bn with overall production of 3,318 mboe/d (including Rosneft). 4Q20 production is expected to be slightly lower due to maintenance activities. ENI (ENI IM): 3Q20 results – 3Q20 production was 1,701 mboe/d. The company reported an adjusted net loss over the period of EUR 153 mm. The FY20 production guidance of 1.72-1.74 mmboe/d has been reiterated. Equinor (EQNR NO): 3Q20 results – 3Q20 adjusted net income was US$0.27 bn with 1,994 mboe/d production. Organic capital expenditures are estimated at ~US$8.5 bn for 2020 and ~US$10 bn for 2021, and ~US$12 bn annual average for 2022-2023. For the period 2019–2026, production is expected to grow by ~3% per year. IGas Energy (IGAS LN): Hydrogen MOU – IGas has signed a heads of terms with BayoTech, a manufacturer of modular hydrogen generation systems, to produce hydrogen IGas' existing gas resources. IGas has initially identified two of its existing sites, in the South East, where the gas resource can be reformed into hydrogen which will then be sold to local or national customers. Lundin Energy (LUNE SS): 3Q20 results – 3Q20 production in Norway was 157.5 mboe/d with free cash flow of US$164 mm. The FY20 production guidance increased from 157 mboe/d to 161-163 mboe/d with 4Q20 production targeting ~175 mboe/d. The company held US$3.7 bn net debt at the end of September. Neptune Energy: Small discovery in Norway – Well 6406/12-G-1 H (Fenja area) did not encounter reservoir rocks in either the primary or secondary exploration target. However, the well did encounter a total oil column of 38 m above the secondary exploration target in the lower part of the Intra-Melke Formation. The preliminary calculation of the 6406/12-3 A (Bue) oil discovery has now been reduced to between ~1.2 and 10 mmboe, while the estimate for the new oil discovery is between 3 and 10 mmboe. OMV (OMV AG): 3Q20 results – 3Q20 Adjusted net income was EUR80 mm with 444 mboe/d production. OMV expects total production to be between 450 mboe/d and 470 mboe/d in 2020 with total organic capex of EUR1.7 bn. Repsol (REP SM): 3Q20 resuts – 3Q20 adjusted net earnings were EUR7 mm with 616 mboe/d production. Royal Dutch Shell {RDSA/B LN): 3Q20 results – 3Q20 adjusted earnings were US$955 mm with 3,081 mboe/d production. 4Q20 production available for sales is forecasted to be 3,130-3,370 boe/d. Shell is increasing the 3Q20 dividend by 4%. Total (FP FP): 3Q20 results – 3Q20 adjusted net earnings were US$0.85 bn with 2,715 mboe/d production. Total is maintaining its quarterly dividend of EUR0/66 per share. FY20 production is expected to be ~2.9 mmboe/d with net investments of less than US$13 bn including US$2 bn in renewables and electricity. FORMER SOVIET UNION Epsilon Development: Discovery in Uzbekistan – Media reported indicated that Epsilon has discovered ~600 bcf of natural gas and 3 mmbbl of condensate at the Alouddin-4 well on the Kultak-Kamashinsky block. Overall, the company has discovered a total of ~1.4 tcf and 7 mmbbl of condensate since January. Nostrum Oil & Gas (NOG LN): 3Q20 update in Kazakhstan - Average sales volumes over the first 9 months of 2020 were 22,269 boe/d. FY20 production forecast has been increased to 21,000 boe/d, corresponding to sales volumes of 20,000 boe/d (19,000 boe/d previously). At the end of September, Nostrum held cash in excess of US$88 mm and net debt is expected not to exceed approximately US$1,074 mm. The upcoming reserves estimate may lead to a material downgrade in the company's Proven and Probable reserves. Petroneft (PTR LN): 1H20 results – 1H20 WI production in Russia was 783 bbl/d. The company held net debt of US$3.8 mm at the end of June. Zoltav Resources (ZOL LN): 1H20 results – 1H20 production in Russia was 24.3 mmcf/d for gas and 215 bbl/d for condensate. Zoltav has US$0.45 mm in cash at the end of June. MIDDLE EAST AND NORTH AFRICA Chariot Oil & Gas (CHAR LN): Potential debt funding for Moroccan offshore project – Chariot received a non-binding Expression of Interest Letter from Africa Finance Corporation for the provision of development debt finance for the Anchois Gas Discovery and the development of future discoveries from the wider prospect portfolio of the Licence. Chariot has also received a non-binding Expression of Interest for the provision of Reserves Base Lending for the development of the Anchois Gas Discovery with a Multinational Investment Bank. Both expressions of interest take into account an estimated capex of US$300-500 mm. Dana Gas: Selling Egyptian assets – Dana Gas is selling its Egypt onshore gas and condensate assets to IPR Energy for US$236 mm. The assets include 100% WI in the El Manzala, West El Manzala, West El Qantara and North El Salhiya onshore concessions and associated development leases. During 1H20, these concessions produced 30,950 boe/d, and contributed US$38 mm to the Company’s EBITDA. The consideration comprises (i) a base cash consideration of US$153 mm and (ii) contingent payments of up to US$83 mm subject to average Brent prices and production performance between 2020-2023 as well as the realization of potential third party business opportunities. DNO ASA (DNO NO): 3Q20 results – 3Q20 WI production was 97,900 boe/d, of which Kurdistan contributed 80,200 bbl/d and the North Sea 17,700 boe/d. DNO expects to exit the year with Kurdistan and North Sea production at 3Q20 levels. DNO held US$652 mm net debt at the end of September. Genel Energy (GENL LN): Update at in Kurdistan – 3Q20 gross production at the Tawke licence increased 12% versus 2Q20 to 113,700 bbl/d (50/50 split between the Tawke and the Peshkabir fields) following a campaign of quick turnaround, low cost well interventions and the startup of the Kurdistan region of Iraq’s first enhanced oil recovery project. Genel has received US$9.4 mm for crude sales in September. Gulf Keystone Petroleum (GKP LN): Payment in Kurdistan - Gulf Keystone has received a net payment of US$7.7 mm from the Kurdistan Regional Government for Shaikan crude oil sales during September 2020. ShaMaran Petroleum (SNM CN): Payment in Kurdistan – ShaMaran received a net payment of US$5.4 mm from the Kurdistan Regional Government for Atrush oil sales invoice entitlements for the month of September 2020. SUB-SAHARAN AFRICA Africa Oil (AOI SS/CN), Africa Energy (AEC SS/ AFE CN), Total (FP FP) and Impact Oil & Gas: Second gas and condensate discovery in South Africa – The Luiperd-1X deepwater exploration well on Block 11B/12B encountered 73 metres of net gas condensate pay over a mid-Cretaceous high-quality reservoir interval and did not encounter the water contact. The well will now be tested. The net pay encountered in the Luiperd target objective is much larger than the main reservoir at the Brulpadda discovery. The joint venture is now proceeding with development studies and will engage with authorities on the commercialization of gas instead of drilling another exploration well in this program. LEKOIL (LEK LN): 1H20 results - Otakikpo (Nigeria) production averaged 5,676 bbl/d over the period (2,271 bbl/d net to LEKOIL). Net debt at the end of June stood at US$15.6 mm. Seplat Petroleum (SEPL LN): 3Q20 results – Production in Nigeria over the first 9 months of 2020 was 50,653 boe/d including 100 mmcf/d for natural gas. There was a 77% uptime for the Trans Forcados Pipeline during the period and the produced liquid volumes from OMLs 4, 38 and 41 were subject to 8.6% reconciliation losses. Seplat was advised of production quota cuts of between 20%-30% across its assets in July and August. The cuts are expected to hold through January 2021. As a result, the FY20 production guidance is narrowed to 48-52 mboe/d (including 31-34 mbbl/d for liquid). The completion of the Amukpe-Escravos pipeline has been delayed again and the company now expects commencement of export of the initial permitted volume of 40 mbbl/d through the Escravos terminal in 2H21. First gas at the NOH project continues to be expected to occur in 4Q21. Seplat has declared an interim dividend of US$0.05 per share. Over the first 9 months of 2020, Seplat received a total of US$147 mm from NPDC towards the settlement of outstanding dollar-denominated cash calls and US$100 mm in Naira to offset Naira cash calls. Net debt at the end of September was US$480 mm. Victoria Oil & Gas (VOG LN): Update in Cameroon – 3Q20 gross sales rate were 4.7 mmcf/d of natural gas. During October 2020 weekday gas sales have occasionally exceeded 5 mmcf/d with a peak at 6.1 mmcf/d. One more thermal and power customer will be tied in shortly. Net debt at the end of June stood at US$12.5 mm. EVENTS TO WATCH NEXT WEEK ________________________________________ 03/11/2020: Tethys Oil (TETY SS) – 3Q20 results 03/11/2020: Genel Energy (GENL LN) – 3Q20 update 03/11/2020: Gran Tierra Energy (GTE LN/CN) – 3Q20 results 04/11/2020: GeoPark (GPRK LN) – 3Q20 results 05/11/2020: Frontera Energy (FEC CN) – 3Q20 results
Companies: AKERBP BP/ LUNE MAHAA RDSA TETY TETY AOI DGOC DNO ENI EQNR GENL HES NOG OMV PEN PTR REP SEPL SNM FP VOG
The CFO was up €1bn and the net debt was down by €649m, helped by €316m of proceeds from divestments. The group (only partly) mitigated the depressed refining margins with lower throughput but the outlook remains worrying. Sensibly, the group wants to seize the opportunity offered by the growing biofuels markets and has announced an €188m investment to build an advanced biofuels plant at the Cartagena refinery.
SDX Energy (SDX LN)C; Target price £0.45 per share: Growing the prize, accelerating drilling - Sales in Morocco are now almost back to pre COVID 19 levels (90%). This is important for cash flow. SDX has now mapped additional prospects on the South Disouq license, resulting in gross prospective resources increasing by 139 bcf to 233 bcf. Drilling in Egypt is being accelerated to start in 2Q21 with two initial wells targeting 165 bcf, including the new Hanut prospect with 139 bcf gross prospective resources and a 33% Chance of Success. The volumes targeted by the first part of the programme are 5x larger than what we were previously anticipating (34 bcf). At the end of September, SDX held US$9.2 mm in cash with the majority of the 2020 capex programme having already been incurred. With no debt and expected FY21 cashflow of ~US$30 mm (largely unaffected by oil price movements), this leaves the company with ample liquidity to fund the upcoming drilling programme. Overall, we estimate the prospects the company will target with the drill bit over the next twelve months at £0.38 per share, which represents 2.4x the current share price. The main items are the LMS-2 well test in Morocco (£0.14 per share) and the Hanut well in Egypt (£0.16 per share). This does not include the potential for additional look-alike prospects to LMS-2 to be drilled in 2021. While the company continues to deliver positive updates and the materiality of the upcoming drilling is growing, the shares continue to trade at EV/DACF multiples of only 1.3x in 2020 and 0.5x in 2021. IN OTHER NEWS ________________________________________ AMERICAS Diversified Gas & Oil (DGOC LN): Partnership agreement with Oaktree Capital – Diversified and Oaktree are partnering to jointly pursue US PDP acquisitions with individual transaction valuations over US$250 mm. Oaktree and Diversified will fund equal portions of any acquisitions, however Oaktree will provide Diversified a 5.0% upfront promote of its funded working interest (2.5% incremental) at the time of an acquisition. In addition, upon achieving a 10.0% unlevered IRR on its investment, Oaktree will convey to Diversified 15.0% of its working interest (7.125% incremental). Maha Energy (MAHA-A SS): Production update in Brazil – Sales production for the month of September totalled ~ 3,255 boe/d, During the month of September the dual GTE-4 oil producing well was shut down for 14 days, due to workover operations. Fishing operations to date have been unsuccessful and a more rigorous workover operation is now scheduled during the fourth quarter to restore production from the AG zone. Production from the GTE-4 well (Sergi zone) resumed on the 28th of September. Tartaruga had issues during the month with unreliable power from the local grid – back up generation has been is installed and production is stabilizing. Parex Resources (PXT CN): Buy back and operation update in Colombia – Parex plans to buy back up to a further 10% of its share capital by YE20. 3Q20 production was 44.2 mboe/d and 4Q20 production is expected to be 44-48 mboe/d with US$40-50 mm capex. The company plans to drill the Cayena horizontal exploration well on the Fortuna block and one appraisal well at the Boranda Block. At Block LLA-94, the Grulla well will be re-entered. The company held US$350 mm in cash at the end of September. Phoenix Global Resources (PGR LN): 1H20 results – 1H20 production in Argentina was 4,369 boe/d. At 30 June 2020 the group had cash of US$1.4 mm and total borrowing US$317.7 mm. Proposed changes in Trinidad’s fiscal regime - The government of Trinidad is proposing to lift the threshold for the imposition of the very punitive Supplemental Petroleum Tax (SPT) from US$50/bbl to U$75/bbl. EUROPE Getech (GTC LN): 1H20 results – 1H20 revenue totalled £2.1 mm. The orderbook was £2.9 mm at the end of June. The company held £2.8 in cash at the end of June. Getech is currently negotiating with two potential Energy Transition acquisition targets. Key sectors of focus are mining, geothermal energy and the hydrogen economy. Hurricane Energy (HUR LN): Update in the UK – 3Q20 production averaged 13,600 bbl/d with current production of 14,500 bbl/d. Independent Oil & Gas (IOG LN): No offer to buy Deltic Energy (DELT LN) – Independent will not make an offer to acquire Deltic with two approaches rejected by Deltic. Lundin Energy (LUNE SS): Acquisition of exploration licences in Norway – Lundin is acquiring from Idemitsu interests in a portfolio of licences in the Barents Sea, including a 10% WI in the Wisting oil discovery and a further 15% WI in the Alta oil discovery with an overall 70 mmboe net contingent resources. The proceeds consist of US$125 mm in cash. OMV (OMV AG): 3Q20 update – 3Q20 production was 444 mboe/d. Premier Oil (PMO LN): Merger with Chrysaor – Premier Oil is merging with Chrysaor. The Transaction is expected to result in Premier’s stakeholders owning up to 23% (including 5.45% by Premier’s shareholders) of the combined group. A cash payment of US$1.23 bn will be made to financial creditors of Premier. The transaction provides ~US$0.61 on the dollar cash recovery for existing creditors plus US$0.14 in shares for an overall recovery of 75%. The combined entity had >250 mboe/d at the end of June and 2P reserves of 717 mmboe as YE19. The acquisition of the BP assets by Premier will not go ahead. Repsol (REP SM): 3Q update – 3Q20 production was 615 mboe/d. UK Oil & Gas (UKOG LN): Raising £2.2 mm of new equity – UK Oil & Gas has raised £2.2 mm of new equity priced at 0.16 p per share to fund its share of initial drilling and seismic costs in Turkey. FORMER SOVIET UNION JKX Oil & Gas (JKX LN): Operating update in Russia and Ukraine – 3Q20 WI production was 10,245 boe/d including 4,727 boe/d in Ukraine and 5,519 boe/d. The company held US$18.8 mm net cash at the end of September. SUB-SAHARAN AFRICA Tullow Oil (TLW LN): RBL Redetermination – Tullow’s RBL credit facility has been redetermined with US$1.8 bn of debt capacity. As a result, the Group retains ~US$500 mm liquidity headroom of undrawn facilities. The next redetermination will commence at the end of November and is expected to be completed in January 2020.
Companies: UKOG TLW SDX REP PXT PMO PGR OMV MAHAA LUNE JKX HUR GTC DGOC
PetroTal (PTAL LN)C; Target price £0.45: Production at Bretana restarts – In anticipation of the re-opening of the ONP, Bretana oil production recommenced on July 15, 2020 and achieved over 12,000 bbl/d when all seven wells were online. Oil deliveries have also already commenced to the Iquitos refinery and approximately 40,000 bbl are expected be delivered during July 2020. Oil is being barged to the Saramuro Pump Station and will be delivered into the ONP immediately after it reopens , now expected in early August 2020. To manage the company’s inventory and barge storage capacity, Bretana production has been reduced to approximately 8,000 bbl/d pending the restart of the pipeline. While the share price has already increased 30% over the last three weeks, we continue to see PetroTal as a value and growth stock. The company’s value based on its 2P reserves only (2P NAV of £0.28 per share) represents 2x the current share price and our Core NAV is 3x current levels. Assuming production of ~12 mbbl/d in 2021 (i.e. the level achieved when the field was restarted) PetroTal’s share price implies EV/DACF multiples of 1.7x in 2021 and 0.2x in 2022. On a production/capex low case, we estimate that PetroTal generates aggregate Free Cash Flow over 2021-2022 equal to the company’s market cap. IN OTHER NEWS ________________________________________ AMERICAS ExxonMobil (XOM US): Further volumes discovered in Guayana | Karoon Energy: Softening terms for acquisition of Brazilian asset | President Energy (PPC LN): Operational update in Argentina | Total (FP FP): Significant discovery in Suriname ASIA PACIFIC Jadestone Energy (JSE LN): 2Q20 update | Repsol (REP SM): Compensation in Vietnam | ENI (ENI IM): Large volume confirmed in Vietnam EUROPE ADX Energy (ADX AU): Operational update in Austria and Romania | ENI (ENI IM): 2Q20 results, lower capex | EnQuest (ENQ LN): UK Acquisition | Equinor (EQNR NO): Dry hole in Norway | Hurricane Energy (HUR LN): Operational update in the UK | Lundin Energy (LUNE SS): 2Q20 results | OMV (OMV AG): 2Q20 results/dividend reduction/Volumes discovered at Hades (Norway) reduced | Royal Dutch Shell (RDSA/B LN): 2Q20 results | Total (FP FP): 2Q20 results, Dividend distributions maintained | Zenith Energy (ZEN LN): Acquisition of Italian assets terminated FORMER SOVIET UNION Enwell Energy (ENW LN): Negative licence update | Nostrum Oil & Gas (NOG LN): 1H20 trading update in Kazakhstan MIDDLE EAST AND NORTH AFRICA BP (BP LN), ENI (ENI IM), Total (FP FP): Discovery in Egypt | DNO (DNO NO): 2Q20 results | ShaMaran Petroleum (SNM CN), Gulf Keystone Petroleum (GKP LN) and Genel Energy (GENL LN): Payment in Kurdistan | Sound Energy (SOU LN)C: Raising up to £4.5 mm of new equity SUB-SAHARAN AFRICA Angola lowering tax | Cairn Energy (CNE LN): Divesting Senegal and returning cash to shareholders | Total (FP FP): Divesting mature assets in Gabon | Savannah Energy (SAVE LN): FY20 results and update in Nigeria | Seplat Petroleum (SEPL LN): 1H20 results | Tullow Oil (TLW LN): 1H20 update | Victoria Oil & Gas (VOG LN): 2Q20 update in Cameroon EVENTS TO WATCH NEXT WEEK ________________________________________ 04/08/2020: BP (BP LN) – 2Q20 results 04/08/2020: GeoPark (GPRK US) – 2Q20 results 04/08/2020: Gran Tierra Energy (GTE LN/CN) – 2Q20 results 05/08/2020: Parex Resources (PXT CN) – 2Q20 results 07/08/2020: Frontera Energy (FEC CN) – 2Q20 results
Companies: XOM KAR BP/ CNE DNO ENI ENQ EQNR GENL HUR JSE LUNE NOG OMV TAL REP RDSA SAVE SEPL SOU FP TLW VOG
AMERICAS Chevron (CVX US) buying Noble Energy (NBL US) – Chevron is buying Noble for US$5 bn in shares. Chevron is also assuming Noble’s US$8 bn debt. The premium paid by Chevron on Noble’s share price is only 7% compares to the last trading day before the acquisition was announced. Touchstone Exploration (TXP LN/CN): Material reserves estimates in Trinidad – Touchstone’s WI 2P reserves at Cascadura are estimated at 45 mmboe (including 234 bcf) with 3P reserves of 73 mmboe (including 381 bcf). Net peak production from Cascadura is forecasted at 15.1 mboe/d in the 2P case (22.6 mboe/d in the 3P case). 2P NPV10 in the 1P, 2P and 3P cases are respectively US$288 mm, US$519 mm and US$803 mm with net development costs of US$11.6-15.8 mm. EUROPE Equinor (EQNR NO): 2Q20 results – Adjusted net earnings were US$0.65 bn with 2,011 mbooe/d production over the period. The company has declared a quarterly dividend of US$0.09 per share in line with guidance. Repsol (REP SM): 1H20 results – 1H20 production was 675 mboe/d with adjusted net income over the period of EUR0.2 bn and net debt at the end of June of EUR4.0 bn (down EUR0.5 bn compared to the end of March). UK Oil & Gas (UKOG LN): Entry into Turkey – UK Oil & Gas is looking to acquire 50% non-operated working interest in the 305 km² Resan Licence in Eastern Turkey from Aladdin Middle East. Two geological targets have been identified within the Licence's Cretaceous Mardin limestones. The undeveloped Basur oil discovery and the Resan missed oil pay opportunity contain an aggregate unrisked gross mean oil in place of ~253 mmbbl with an upside case at 495 mmbbl. An undrilled exploration target in the shallower Garzan limestones adds further unrisked upside Oil in Place potential of 68-112 mmbbl. To earn its 50% interest in the Licence, UK Oil & Gas will fund 100% of the first of 5 commitment wells in the Licence's 5-year exploration term, together with a small 2D seismic survey with an expected cost of US$1.0-$1.5 mm. UKOG's net expenditure for the one well plus seismic programme is capped at US$5 mm maximum expenditure. SUB-SAHARAN AFRICA Global Petroleum (GBP LN/AU): Resources estimates in Namibia – A total of 881 mmbbl of unrisked gross Prospective Resources (Best Estimate) has been estimated in PEL0094 in two prospects, of which 687 mmbbl barrels are net to Global. The associated geological chance of success is 17-19%. Maurel & Prom (MAU FP): 2Q20 update in Africa – 2Q WI production was 24,919 boe/d including 4,003 bbl/d in Angola, 16,675 bbl/d in Gabon and 24.4 mmcf/d in Tanzania. EVENTS TO WATCH NEXT WEEK ________________________________________ 29/07/2020: Seplat Petroleum (SEPL LN) – 2Q20 results 29/07/2020: Lundin Energy (LUNE SS) – 2Q20 results 29/07/2020: Tullow Oil (TLW LN) – 1H20 update 30/07/2020: Royal Dutch Shell (RDSA/B LN) – 2Q20 results 30/07/2020: DNO ASA (DNO NO) – 2Q20 results 30/07/2020: ENI (ENI IM) – 2Q20 results
Companies: MAU UKOG REP EQNR NBL TXP CVX
Spanish demand for fuels was down 61% yoy in April, but now down by 10-15% in July. The environment is improving, yet still under pressure. The next focus is on Repsol’s new strategic plan. Due in September, it will highlight the environmental targets of the group. More importantly, the new dividend payout will also be announced, dampened by weak refining margins and low natural gas prices.
PetroTal (PTAL LN/TAL CN)C; Target price £0.45: 1Q20 results/Bretaña expected to restart in July – 1Q20 financials are in line with expectations and 1Q20 production had been reported previously. At the end of 1Q20, current trade and other payables had been reduced to ~US$45 mm compared to ~US$55 mm at YE19. Most importantly. PetroTal continues to expect the Bretaña field to be re-opened this month. The contingent liability with Petroperu is estimated at US$25 mm at the current oil price and the company has entered into a financial swap for 0.46 mmbbl of oil with an ICE Brent reference price of US $40.58/bbl to cover the upcoming sale by Petroperu at the Bayovar port. This is a recovery story that we continue to like. It offers a combination of value, production and cash flow growth and reserves upside. We anticipate that the imminent reopening of the field with be an important catalyst to the share price. i3 Energy (I3E LN): Reveals takeover target in Canada | Maha Energy (MAHA-A SS): Production update | Aker BB (AKERBP NO): 2Q20 update in Norway | Energy (RRE LN): Recommended offer by Viaro Energy | Spirit Energy: Dry hole in Norway | Enwell Energy (ENW LN): Ukraine update | JKX Oil & Gas (JKX LN): 2Q20 update in Ukraine and Russia | Pharos Energy (PHAR LN): Operating update in Egypt and Vietnam | Sound Energy (SOU LN)C: Terms of Moroccan licence renegotiated | Tethys Oil (TETY SS): June production in Oman | Victoria Oil & Gas (VOG LN): Gas sales contract with ENEO in Cameroon terminated EVENTS TO WATCH NEXT WEEK ________________________________________ 14/07/2020: Aker BP (AKERBP NO) – 2Q20 results 15/07/2020: Premier Oil (PMO LN) – 1H20 update 13-17/07/2020: GeoPark (GPRK US) – 2Q20 update
Companies: I3E MAHAA JKX PHAR EQNR AKERBP ENI HUR TAL REP RRE SOU TPL VOG OMV
Panoro Energy (PEN NO)C; target price: NOK20.00: Balance sheet withstanding US$25/bbl | PetroTal (PTAL LN/TAL CN)C: Temporary Shut In of Bretana Oil Field Due to COVID-19 Pipeline Closure | Cairn Energy (CNE LN): Dry hole in Mexico – The Ehecatl-1 exploration well on Block 7 did not encounter hydrocarbons | Diversified Gas and Oil (DGOC LN): 1Q20 trading update and dividend payment | Frontera Energy (FEC CN): 1Q20 update; dividend suspended; FY20 production guidance withdrawn | Maha Energy (MAHA-A SS): Low production in Brazil in April | G3 Exploration (G3E LN): Production suspended by receivers in China | Aker Bp (AKERBP NO): Reducing FY20 capex, cutting dividends | Equinor (EQNR NO): 1Q20 results | Total (FP FP): 1Q20 results, maintaining dividend | Repsol (REP SM): 1Q20 results and discoveries in Mexico | Cadogan Petroleum (CAD LN): FY19 results | DNO (DNO NO): 1Q20 results and well results in Kurdistan | Genel Energy (GENL LN): 1Q20 production update at Tawke |Tethys Oil (TETY SS): 1Q20 results | Aminex (AEX LN): Agreeing to pay CGT in Tanzania to complete farm out
Companies: PEN TAL DNO GENL AEX CAD FP EQNR REP TETY AKERBP G3E MAHAA DGOC CNE
Decent results, which will help to withstand the foreseeable slump in Q2. Management believes the worst is over in Repsol’s US gas markets and in consumption in Spain with the end of the lockdown. This outlook, combined with the resilience plan led management to maintain the dividend policy.
Ascent Resources (AST LN): Entering Cuba | Diversified Gas and Oil (DGOC LN): Acquisition in the US | Phoenix Global Resources (PGR LN): Production shutdown and licence termination in Argentina | Premier Oil (PMO LN): Exiting Area A in Alaska following drilling results | Coro Energy (CORO LN) and Empyrean Energy (EME LN): Resources increase in Indonesia | Falcon Oil & Gas (FOG LN/FO CN): Farm out transaction in Australia | Oil Search (OSH AU): US$700 mm equity raise| Discovery in Norway | Baron Oil (BOIL LN)/Upland Resources (UPL LN): Relinquish UK licence | EnQuest (ENQ LN): FY19 results | IGas Energy (IGAS LN): FY results | Ithaca Energy (Delek): Cutting capex for the North Sea | OMV (OMV AG): 1Q20 trading update | Repsol (REP SM): 1Q20 update | Valeura Energy (VLE CN/VLU LN): Constrained gas sales in Turkey | Block Energy (BLOE LN): Shutting production in Georgia | Regal Petroleum (RPT LN): FY19 results | Chariot Oil & Gas (CHAR LN): Corporate update | Energean Oil & Gas (ENOG LN): Resources increase in Israel | SDX Energy (SDX LN): FY19 results and discovery in Egypt | Tethys Oil (TETY SS): Reduction of extraordinary dividend, capex reduction, FY20 production guidance maintained | Africa Oil (AOI SS/CN): Tax update in Kenya | Giant gas development projects delayed | Kosmos Energy (KOS LN/US): Cost reduction and RBL redetermination | Vaalco Energy (EGY US/LN): Production update in Gabon
Companies: 88E AOI BLOE BOIL CHAR CORO DGOC EGY EME ENOG ENQ IGAS KOS OSH OMV PGR PMO REP ENW SDX TETY UPL VLE
Bahamas Petroleum Corporation (BPC LN): Delaying exploration activities in the Bahamas | i3 Energy (I3E LN): Canadian acquisition | Touchstone Exploration (TXP LN/CN): FY19 results | Cairn Energy (CNE LN): FY20 capex reduced but production guidance maintained | ENI (ENI IM): Capex reduction and new production guidance | Equinor (EQNR NO): Reducing spending | IGas Energy (IGAS LN): Update in the UK | Independent Oil & Gas (IOG LN): FY19 results | Lundin Petroleum (LUP SS): Reducing dividends, increased plateau at Johan Sverdrup | OMV (OMV AG): Reducing costs | Repsol (REP SM): Corporate update | RockRose Energy (RRE LN): Corporate update, maintaining dividends | Serinus Energy (SEN LN): FY19 results | Block Energy (BLOE LN): Acquiring Georgian assets from Schlumberger | Regal Petroleum (RPT LN): Acquisition in Ukraine | Gulf Keystone Petroleum (GPRK LN): Operating update in Kurdistan | Africa Oil (AOI SS/CN): Reserves update | Vaalco Energy (EGY US/LN): Operating update in Gabon
Companies: BPC I3E TXP CNE ENI EQNR IGAS IOG LUNE OMV REP RRE SEN BLOE ENW GKP AOI EGY
The additional buy-back announcement has eclipsed the consensus miss, part of which is due to higher exploration costs this quarter. Facing low gas prices, the group is lowering its production forecast for 2020. We reckon this is needed as gas prices in North America might need more than a cold winter before bouncing back up. Lastly, the release did not elaborate further on the energy transition strategy, but will do so in May.
Repsol aims to achieve zero net emissions by 2050. With this announcement, Repsol maintains its leading position in the oil & gas sector on the energy transition. Setting the long-term goal of net zero emissions is an ambitious one, and will leave ESG investors scratching their heads on whether an oil & gas stock can be a green investment.
Research Tree provides access to ongoing research coverage, media content and regulatory news on Repsol SA. We currently have 57 research reports from 5 professional analysts.
Central Asia Metals (CAML LN) has reported Q4 2020 production with 3,365t of copper taking full year output to 13,855 in line with our forecast of 13.9kt and at the top end of guidance. Q4 lead output was 7,442t meaning 29,741t over the full year, up 2% YoY and in line with our forecast of 30kt while zinc output of 5,848t took full year output to 23,815t again in line with our forecast of 24kt and up 2% YoY despite the disruption at Sasa which CAML has overcome rapidly as we expected.
Companies: Central Asia Metals Plc
Jubilee put out an intraday press release yesterday updating on the performance in the first half (ending Dec 2020) of the FY 2021. Once again Jubilee delivers; significantly increased revenues and profits from its chrome and PGM division in South Africa and a small, but important, contribution from Zambia. Notably this improvement isn't just from commodity price performance; rather increased production, productivity, throughput, renegotiated contracts and all set alongside the strong performance of commodity prices –rhodium, palladium and platinum. We see this as still only the start for Jubilee as we look forward to the first copper oxide concentrates from the Roan project in Zambia to the Sable Refinery – where the Roan plant is currently under construction. Once again we are struck by the speed at which Jubilee moves to advance its projects and, with its South African cash engine showing no signs of slowing down. Jubilee can choose to move its wider ambitions in Zambia forward from internally generated cash flow. On the back of the strong performance we put our forecasts under review.
Companies: Jubilee Metals Group PLC
Anglesey Mining (AYM LN) – Mineral resources and PEA for Parys Mountain Castillo Copper (CCZ LN) – Further assay results from drilling at the Big One project in Queensland Central Asia Metals (CAML LN) – Stable production reported in 2020 with final dividend to be announced in March IronRidge Resources* (IRR LN) – Sale of non-core gold project Keras Resources* (KRS LN) – Keras increase stake in the Daiamond Creek organic phosphate mine to 51% Power Metal Resources* (POW LN) – Molopo Farms drilling highlights nickel and PGM potential Tertiary Minerals* (TYM LN) – Progress of Nevada exploration
Companies: POW AYM CAML KRS TYM CCZ IRR
The revised threshold for the imposition of Supplemental Petroleum Tax (SPT) has now been implemented, with the threshold at which SPT is due increasing from US$50/bbl to US$75/bbl for the financial years 2021 and 2022. As a result, we expect Trinity to be exempt from SPT across all of its onshore licences below US$75/bbl. Using the forward WTI oil price curve as the basis for our model, we currently forecast Trinity paying no SPT during 2021 and 2022. We estimate that at the current forward price curve (2021: US$52/bbl) cUS$3.6m of SPT would have previously been payable by Trinity in 2021. As such, these SPT reforms represent a considerable boost to potential cash flow generation from Trinity's onshore licences should realisations average above US$50.01/bbl for any calendar quarter during 2021 and 2022. We update our model, increasing our price target to 32p (from 31p) a 160% premium to the current share price and reiterate our BUY recommendation.
Companies: Trinity Exploration & Production Plc
Trading update
Companies: Hurricane Energy Plc
Union Jack Oil (UJO) has announced that the workover rig, associated services and equipment were mobilised to the Wressle oilfield development site during the week commencing 4 January 2021. The company, which holds a 40% economic interest in Wressle, expects that operations to enable the primary Ashover Grit reservoir to be flowed will be completed prior to the end of January 2021. With the field expected to commence production at a constrained rate of 500 bopd, UJO’s net production will be boosted by an additional 200 bopd providing valuable cash flow to the company in 2021.
Companies: Union Jack Oil Plc
We put forward a fair value estimate to 82.8p for Pantheon Resources from “under review for an upward revision” as from 25 November 2020 and from 75p as per our initiation note dated 11 November 2020.
Companies: Pantheon Resources plc
Arc Minerals* (ARCM LN) – Arc Minerals extends exclusivity agreement with Anglo for a further 180 days Cornish Metals* (CUSN CN) – Intention to float on AIM market Greatland Gold (GGP LN) – Newcrest approves A4146m for preparatory mining work at Havieron IronRidge Resources* (IRR LN) – Drilling defines multiple targets at Ewoyaa Lithium Project Kenmare Resources (KMR LN) – 2020 production and 2021 guidance Sunrise Resources (SRES LN) – Progress report on projects Zamare Minerals* (Private) - Zamare announce agreement with First Quantum Minerals over the Ntambu exploration license in Zambia
Companies: CUSN ARCM GGP KMR SRES IRR
European Metals has recently enjoyed a long overdue share price re-rating. The shares have increased ten-fold from Covid lows in April 2020 on the back of a marked improvement in lithium sector sentiment. EMH’s market cap is now £127m. Covid has in many ways accelerated the push towards EVs and the low carbon agenda. Europe is now the battleground for Electric Vehicles (“EVs”) where material sources, security of supply and the entire value chain is coming under ever increasing scrutiny. The DFS at EMH’s Cinovec project is due for completion by the end of 2021.The time has come for EMH and over the next 12 months we should see with more clarity how Cinovec fits into Europe’s growing EV and battery industry. We see no other project better placed to dovetail into the European battery market and supply battery-grade lithium at scale.
Companies: European Metals Holdings Limited
Bahamas Petroleum Company (BPC LN)C; Target Price: 6.70p: Funding update – BPC has exercised a put option to raise £3.75 mm priced at 2p per share. PetroTal (PTAL LN/TAL CN)C: Target Price increased from £0.45 to £0.50: US$100 mm bond to accelerate activities and grow production - PetroTal is launching a bond issue to raise US$100 mm. This would allow the firm to accelerate drilling and development activities at Bretana (~US$40 mm), clean up its balance sheet, put in place a hedging programme and allow the firm to consider regional acquisitions. Assuming the extra funding is put in place, we are increasing our capex programme for 2021 from US$40 mm to US$90 mm. We are also increasing our production forecast for 2021 from ~11 mbbl/d to ~15 mbbl/d that we maintain broadly flat in 2023 as we assume PetroTal will drill additional wells before production starts to decline from 2024. We note that the 3P case only assumes five additional wells (~US$70 mm) compared to the 2P case. With more production, we are now forecasting operating cashflow of ~US$170 mm in 2022 and ~US$155 mm in 2023. We are also increasing our Core NAV from £0.43 per share to £0.52 per share. The additional funding would also allow the company to drill exploration wells such as the 70 mmbbl Constitucion prospect (£0.40 per share Unrisked). Pharos Energy (PHAR LN)C; Increasing our target price from £0.35 to £0.40 per share on reserves uplift – The highlight of Pharos’ operational update is the ~40% increase in 2P reserves in Egypt expected as at YE20 (YE19 28.5 mmbbl). This reflects improved waterflood performance based on recent field data, and a new drilling and workover plan for 2021 onwards. Drilling is expected to recommence in Vietnam in 3Q21, a quarter earlier than previously announced. We have increased our target price from £0.35 per share to £0.40 per share to factor in the expected increase in reserves in Egypt. We estimate the value of Pharos based on Vietnam only at £0.23-0.27 per share. This is 15-35% above the current share price. Securing a partner to fund a development programme with four rigs in Egypt would increase the value of the ~ 40 mmbbl 2P reserves in Eqypt and unlock the contingent and 108 mmbbl prospective resources. Our incremental unrisked value for the four rig programme is £0.17-0.19 per share (~85% upside to the current share price). Successfully negotiating new terms with EGPC could lead to an improvement of up to US$6/bbl in the breakeven price. We have previously estimated that securing similar terms to TransGlobe would boost our Core NAV by £0.10-0.12 per share and ReNAV by £0.13-0.15 per share. TransGlobe Energy’s share price has tripled since the new terms on its licences were announced. Tethys Oil (TETY SS)C; Target Price: SEK75.00: Production update in Oman – Production at Block 3&4 in December was 11,481 bbl/d. Vaalco Energy (EGY LN/US)C; Target Price: £4.00: Initiating Coverage - VAALCO is a US and UK listed ~£75 mm market cap, ~10 mbbl/d oil producer (pro-forma) with West African assets. VAALCO has an excellent track record as an operator having grown a 30 mmbbl discovery in Gabon to a field that has produced >118 mmbbl so far with an additional 37 mmbbl remaining 2P reserves plus ~80 mmbbl upside at YE19. The shares have suffered in the past from (1) a lack of materiality as VAALCO held only ~31% of its main asset, with G&A viewed as representing a disproportionate amount of cash flow and (2) lack of visibility on how the significant amount of cash on the balance sheet would be deployed. The US$44 mm acquisition of an additional ~28% WI in Etame announced in November, thereby almost doubling production, reserves and resources overnight, has addressed these issues. The story is now about continuing to grow reserves at the producing Gabonese field and to replicate this success elsewhere. With estimated net cash of >US$25 mm at the end of 1Q21, VAALCO’ s shares trade at less than half our 2P NAV of ~£2.70 per share. The current share price discounts an EV/DACF multiple of 1.2x in 2021. Low risk infill drilling of contingent resources could add ~£0.45 per share (30% of share price) with an overall unrisked value for the upside at the producing asset of £4.80 per share (~4x the current share price). Finalizing the farm out of its asset in Equatorial Guinea could start unlocking a further £4.20 of unrisked value. Our target price of £4.00 per share (~ our ReNAV) represents ~230% upside. Wentworth Resources (WEN LN)C; Target Price: £0.40: >100 mmcf/d reached in December - FY20 gross production was 65.36 mmcf/d (in the middle of the 60-70 mmcf/d guidance) with ~83 mmcf/d on average during the month of December. Repairs to the MB-2 flowline were completed on 9 December, increasing the capacity of the field to over 100 mmcf/d. Production reached 103 mmcf/d for five days during that month. Gross production guidance for FY21 is 65-75 mmcf/d, below the 80 mmcf/d we were carrying as production growth is pushed back by a year. Cash on hand of ~US$18 mm is in line with our expectations. With 70 mmcf/d gross production in 2021 and almost no capex, we forecast FY21 Free Cash Flow of ~US$10 mm. With FY20 dividends of only US$3.2 mm and ~US$18 mm in cash, we believe there is scope to increase the dividend. At the current share price, the FY20 dividend represents a yield of ~6%. Even after the recent share price appreciation, the shares continue to trade at EV/DACF multiples of 2.9x in 2021 and 2.2x in 2022. This compares with 3.8x for 2020, suggesting there is room for multiple expansion given the stable nature of the business. IN OTHER NEWS ________________________________________ AMERICAS 88 Energy (88E LN/AU): Acquisition in Alaska – 88 Energy is acquiring the Umiat Oil Field, located on the North Slope of Alaska. The proceeds consist of a 4% overriding royalty interest and the assumption of the abandonment liability of two historic wells (at an estimated cost of ~US$1 mm). Umiat is an historic oil discovery, made in 1945 in shallow Brookian (Nanushuk) sandstones, located immediately adjacent to southern boundary of Project Peregrine. The Umiat-23H well was flow tested at a sustained rate of 200 bbl/d with no water in 2014. Gross 2P reserves were estimated at 123.7 mmbbl on 1 December 2015. Equinor (EQNR NO): Farming down Argentinian offshore exploration to Shell - Equinor and YPF farm-down 30% interests in the CAN 100 block, located in the North Argentinian Basin to Shell. Pantheon Resources (PANR LN): Dispute in East Texas and acquisition of new acreage - Kinder Morgan has filed a petition against Pantheon, seeking payment of ~US$3.35mm with respect to the early termination of a Gas Treating Agreement between Kinder Morgan and Vision Operating Company. In a separate statement, the company indicated it has acquired 100% interest in ~66,000 acres in the State of Alaska's North Slope Areawide Lease Sale. The new leases are positioned in two areas contiguous to the company’s current acreage. Parex Resources (PXT CN): Operation update in Colombia – 4Q20 production was 46,550 boe/d compared to Parex’ guidance of 45,500-47,500 boe/d. 1Q21 production is expected to average 46,500-47,500 boe/d. The Brent/Vasconia differential is currently ~US$2/bbl. Parex estimates a cash position of US$325 mm at YE20. Total (FP FP): Discovery in Suriname - The Keskesi East-1 well, in Block 58, encountered a total of 63 meters net pay of hydrocarbons, comprised of 58 meters net black oil, volatile oil, and gas pay in good quality Campano-Maastrichtian reservoirs, along with 5 meters of net volatile oil pay in Santonian reservoirs. EUROPE Independent Oil & Gas (IOG LN): Operating update in the UK – Phase 1 remains on schedule for First Gas in 3Q21. Drilling is expected to start in early 2Q21. Hurricane Energy (HUR LN): Operating update in the UK North Sea - Production for the final four months of 2020 averaged 12,500 bbl/d. Current water cut is 25%. YE20 net free cash was US$106 mm, compared to US$87 mm at 30 November 2020. Lundin Energy (LUNE SS): Resources increase in Norway – YE20 2P reserves are 670.9 mmboe (+ 39.3 mmboe versus YE19). The YE20 2C resources are 275.5 mmboe (+90.2 mmboe et YE19). OMV (OMV AG): Trading update – 4Q20 production was 472 mboe/d including 290 mboe/d of natural gas. FORMER SOVIET UNION Enwell Energy (ENW LN): Operating update in the Ukraine – 4Q20 production was 4,444 boe/d. At YE20, the company held US$61 mm in cash. Petroneft (PTR LN): Potential acquisition in Russia – Petroneft is looking to acquire an additional 40% interest in Licence 67 from Belgrave Naftogas for US$2.9 mm including US$1.2 mm in shares and the balance in cash. MIDDLE EAST AND NORTH AFRICA Gulf Keystone Petroleum (GKP LN): Operating update in Kurdistan – FY20 gross production at Shaikan was 36,625 bbl/d with current production of 44,000 bbl/d. As at 12 January 2021, the Company had a cash balance of US$147 mm. FY21 gross production guidance has been set at 40,000 to 44,000 bbl/d with US$15 to $20 mm net capex and US$2.5 to US$2.9/bbl opex. ShaMaran Petroleum (SNM CN): Terms update for bonds – ShaMaran is looking to use free cash in excess of US$15 mm to buy back its Bonds in the market to satisfy the cash sweep redemption requirements. United Oil & Gas (UOG LN): Production update in Egypt – 2H20 WI production was 2,340 boe/d in line with guidance for the period of 2,300 boe/d. SUB-SAHARAN AFRICA BW Energy (NEW NO): Farm-in transaction in Namibia – BW Energy is acquiring 39% WI in the Kudu offshore licence from the National Petroleum Corporation of Namibia (NAMCOR). BW will pay US$4 mm in cash and carry NAMCOR’s share of development costs until first gas. NAMCOR will also have the opportunity to acquire an additional 5% working interest post first gas. Orca Energy (ORC.A/B CN): Update in Tanzania – FY20 sales volumes were 57.7 mmcf/d. Cash and short-term investments totalled US$103.8 mm at YE20. As at YE20 there were no current receivables due from TANESCO. The TANESCO long-term trade receivable was US$27.6 mm. EVENTS TO WATCH NEXT WEEK ________________________________________ 18/01/2021: Repsol (REP SM) – Trading update 19/01/2021: Genel Energy (GENL LN) – 4Q20 trading update 20/01/2021: Cairn Energy (CNE LN): Trading update
Companies: 88E BPC EQNR HUR LUNE PXT PHAR SNM TETY TETY FP EGY WEN
Central Asia Metals (CAML LN) is our top pick for exposure to copper and following the recent operational and financial normalisation the shares have jumped, up 16% since our last note. Our copper price forecast assumptions implied that during Q4 2020 the price, at that point up 47% from March lows would pause. This has not come to pass, now up 60% to eight year highs of US$7,688/t, indicating a higher starting point in 2021F and we have upgraded our forecasts accordingly.
Oil posted the biggest weekly gain since late September as Saudi Arabia's plan to slice output spurred a surge in physical crude buying. Futures in New York advanced $3.72 this week and Brent oil topped $55 a barrel for the first time since February. Saudi Arabia's pledge earlier this week to cut production by 1 million barrels a day in February and March has made for a tighter supply outlook sooner than anticipated. Meanwhile, prospects for additional stimulus under a Biden administration spurred broader market gains. Saudi Arabia's surprise cut appears to have caught some Asian buyers by surprise and demand for US crude for export to Asia has gained this week. Unipec, the trading arm of China's largest refiner, bought its eighth cargo of North Sea crude in a pricing window run by S&P Global Platts this week and was seeking more in what may be the heaviest buying of its kind on record. Brent's move above $55 a barrel caps a stellar few months for the oil market, with crude emerging as a favoured play to bet on coronavirus vaccines and global reflation. Saudi Arabia's pledge has led analysts to rethink their projections for crude's price recovery. Citigroup Inc boosted its price forecasts on Friday, saying the kingdom's actions should accelerate stockpile draws. Meanwhile, annual commodity index rebalancing may provide another tailwind, with as much as $9 billion of oil contracts possibly being bought over the five days of activity that start Friday, Citigroup said. Prices Brent for March settlement advanced $1.61 to end the session at $55.99 a barrel. West Texas Intermediate for February delivery rose $1.41 to settle at $52.24 a barrel. Both benchmarks are at the highest since late February. The kingdom's shock move has rippled across the oil market this week, with the difference between the price of oil for different months firming markedly in recent sessions. WTI's nearest contract traded at a premium to the following month for the first time since May, while the closely watched spread between the nearest two December contracts is at its strongest intraday level since last January.
Companies: FO PRP 88E DGOC EME TRIN UOG
Wressle update
• PetroTal is launching a bond issue to raise US$100 mm. This would allow the firm to accelerate drilling and development activities at Bretana (~US$40 mm), put in place a hedging programme and allow the firm to consider regional acquisitions. • Some of the proceeds of the bond issue will be used to repay the US$16.6 mm derivative liabilities to Petroperu that was formalized in November. However, with the recent upwards shift of the forward curve, the potential derivative liabilities is now an asset and Petroperu is expected to owe PetroTal ~US$8 mm. Under the current forward curve, PetroTal should therefore now receive a total of ~US$25 mm (=US$16.6 mm + US$8 mm) from Petroperu from the settled oil profits during 1Q21. • Assuming the extra funding is put in place, we are increasing our capex programme for 2021 from US$40 mm to US$90 mm. We are also increasing our production forecast for 2021 from ~11 mbbl/d to ~15 mbbl/d that we maintain broadly flat in 2023 as we assume PetroTal will drill additional wells before starting to decline from 2024. We note that the 3P case only assumes five additional wells (~US$70 mm) compared to the 2P case. • Current production has now increased from 9.5 mbbl/d last week to 10 mbbl/d. • PetroTal has now also signed an agreement for a second pilot shipment through Brazil in February 2021, of up to 220,000 barrels of oil. Positive impact on cash flow and NAV With more production, we are now forecasting operating cashflow of ~US$170 mm in 2022 and ~US$155 mm in 2023. We are also increasing our Core NAV from £0.43 per share to £0.52 per share. The additional funding would also allow the company to drill exploration wells such as the 70 mmbbl Constitucion prospect (£0.40 per share Unrisked). We are increasing our target price from £0.45 per share to £0.50 per share in line with our new Core NAV. Our target price represents over 3x the current share price.
Companies: PetroTal Corp.
Bluejay Mining* (JAY LN) – BUY, Valuation 29.4p – Bluejay agrees jv with Rio Tinto over the Enonkoski Project in Finland Bushveld Minerals* (BMN LN) – BUY - Valuation 37.7p – Ferro-Vanadium prices jump 11.6% in the US Edenville Energy* (EDL LN) – Funding agreement refinanced and £900k raised Kodal Minerals* (KOD LN) – Further progress at West African gold assets Lucara Diamonds (LUC CN) – Karowe mine yields 341 carat diamond Serabi Gold* (SRB LN) –Q4 production results continue modest recovery of Q3
Companies: LUC JAY BMN EDL KOD SRB
