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Technical review and operational update
Companies: Hurricane Energy Plc
Jubilee Metals successfully processes chrome tailings in South Africa to produce chrome concentrate and PGMS. It also owns the commissioned Sable copper refinery at Kabwe in Zambia and is looking to build a zinc-lead treatment plant at Kabwe next to the Sable refinery to process old tailings from the Kabwe mine. Today Jubilee announces that it has secured access rights to process 2Mt of Run-Of-Mine material grading in excess of 2% copper in Zambia with the potential to add a further 2.5Mt of tailings – Project “Roan”; an as yet an undisclosed project location in Zambia. This material will be upgraded at the “Roan” site with the concentrate shipped off to Jubilee's Sable Refinery to produce copper cathode. Initial target is set at 10kt contained copper/yr from Roan, and Jubilee hopes to begin production in 4 months' time with full production reached in 8 months – advanced preparations have been made, plans drawn up and discussion with equipment manufacturers already accomplished – Jubilee is ready to hit the ground running.
Companies: Jubilee Metals Group Plc
GeoPark (GRPK US)C; Target price US$20: Cash tax reduction and high impact drilling– The only item of interest in the 2Q20 financials was the fact that GeoPark did not pay any cash tax in 2Q20 (we were carrying a payment of US$40 mm). This explains why the cash balance at the end of June was so much higher than we expected at the time of the 2Q20 operating update in July). This also reflects important positive changes in Colombia. First, US$20-25 mm cash taxes in 2020 have been deferred to 2021 leaving only US$15-20 mm due in 2H20. In addition, Colombia is accelerating the reimbursement of income tax credits. GeoPark has already collected US$15 mm in July that will offset the remaining 2H20 cash tax. Overall in 2020, the company could potentially obtain a total refund of US$25 mm of income tax (out of which US$15 mm is firm and collected in July) plus US$15-20 mm of VAT. The key wells to focus on in 2H20 will be the 1-2 wells to be drilled at CPO-5 (GeoPark WI: 30%). While these wells are expected to increase production, they will also allow the company to start derisking the exploration upside associated with the block. The first well will be a development/appraisal well in Indico where the oil water contact has not been encountered yet. The second well is an exploration well at Aguila targeting the same play concept. The share price continues to trade at ~45% discount to our Core NAV of ~US$19 per share. Overall there could be 350-700 mmboe gross prospective resources across its Llanos blocks (including CPO-5). Our target price of US$20 per share reflects our ReNAV and attributes only ~US$1 per share to exploration. It represents over 100% upside to the current levels.
IN OTHER NEWS
Frontera Energy (FEC CN): 2Q20 results | Gran Tierra (GTE LN/US/CN): 2Q20 results | i3 Energy (I3E LN): Acquisition of Canadian assets and £30 mm funding | Maha Energy (MAHA-A SS): Production update in Brazil | Parex Resources (PXT CN): 2Q20 results
Pharos Energy (PHAR LN): Licence extension in Vietnam and RBL confirmation
bp (BP LN): 2Q20 results and change of strategy | Hurricane Energy (HUR LN): Technical update in the UK | Neptune Energy: Discovery in Norway | Spirit Energy: Dry hole in Norway
MIDDLE EAST AND NORTH AFRICA
Genel Energy (GENL LN): 1H20 results
Kosmos Energy (KOS US/LN): 2Q20 results | San Leon Energy (SLE LN): Acquires 10% Interest In new Nigerian oil export system | Vaalco Energy (EGY LN/US): 2Q20 results
EVENTS TO WATCH NEXT WEEK
10/08/2020: Diversified Gas & Oil (DGOC LN) – 2Q20 results
11/08/2020: JKX Oil & Gas (JKX LN) – 2Q20 results
13/08/2020: Africa oil (AOI CN/SS) – 2Q20 results
Companies: BP/ FEC GENL GPRK I3E PXT PHAR HUR KOS MAHAA EGY
In the midst of another attempted takeover by stealth, Petropavlovsk PLC (LSE: POG) announced their trading results for H1 2020 which leaves them on track to deliver one of their best years ever, operationally and financially, with more to come in 2021. This is down to the perseverance, skillset and hard work of the workforce out in the Amur Region and their CEO Dr Pavel Maslovskiy, who has staked his reputation on the successful build out of the POX plant. Any corporate raider (and shareholder alike) should realise, whether it be Vekselberg or UGC, that without the support of Dr Maslovskiy you won’t win the hearts and minds of the workforce essential for the smooth running of the organisation. Meanwhile, the gold price has run through $1,900/oz; clearly a positive for this leveraged business. Incorporating this and the results into our modelling delivers a new Target Price of 50p and the set of financials shown in the right-hand column.
Companies: Petropavlovsk Plc
For this Monthly, we are delighted that Rooney Nimmo and 24Haymarket have allowed us to reproduce a recent report they jointly published, entitled An analysis of UK exits (2015-2019), which provides a granular analysis by sector of the activity in our dynamic private companies world. We hope you find the insights of interest.
Companies: AVO AGY ARBB ARIX CLIG ICGT NSF PCA PIN PXC PHP RECI SCE TRX SHED VTA
Oil fell in tandem with equities as concerns over renewed tensions between the US and China, and a murky outlook for further relief from Washington cast an economic pall.
Futures dropped 1.7% in New York on Friday, the biggest decline in a week. US President Donald Trump's latest attack on Chinese tech companies and new sanctions on Chinese officials further stoked tensions between the countries. Meanwhile, another round of negotiations with Democrats on a virus relief plan ended without any agreement, indicating a long road ahead for a demand recovery. The Bloomberg Dollar Spot Index rose as much as 0.8% on Friday, reducing the appeal for commodities priced in the greenback.
Crude is testing the upper bound of its recent trading range after hitting a five-month high this week amid declines in US stockpiles. But the spotty recovery in oil consumption is restraining a potential breakthrough, with crude imports into China shrinking in July. Drillers cut exploration in US oil fields to a 15-year low as billions of barrels from old discoveries became worthless and explorers abandoned growth plans. The 3-2-1 refining margin for combined gasoline and diesel against US WTI -- a rough profit gauge for processing a barrel of crude -- slumped more than 5% to below $10 a barrel as the pandemic keeps Americans at home during what is typically the summer driving season.
In physical markets, Poseidon crude, a heavy sour oil, rose 5 cents to 45 cents above Nymex oil futures on Friday, the largest premium in over two months. Earlier this week, the discount on Bakken crude for delivery at Clearbrook, Minnesota, narrowed to 5 cents below Nymex WTI futures, its smallest discount since May.
A fresh round of stimulus in the US could boost sentiment over the demand outlook, but lawmakers have yet to reach an agreement. No progress was made at the end of the week and it is not clear whether there will be additional discussions. Treasury Secretary Steven Mnuchin said he will recommend Trump move ahead with executive actions to halt evictions and possibly restore some unemployment aid.
Meanwhile, OPEC+ is returning supply to the market this month as it tapers its record output curbs, but habitual quota cheat Iraq has promised to make deeper cuts following a call with Saudi Arabia on Thursday. Oil Minister Ihsan Abdul Jabbar pledged that Iraq will cut output by an extra 400,000 barrels a day in August and September, on top of a previous commitment to slash 850,000 barrels a day in each month.
Companies: FO PRP 88E DGOC EME TRIN UOG
Savannah Resources controls the Mina do Barroso lithium project in northern Portugal, the only large-scale lithium spodumene project in Europe. The main attraction for equity investors is Barroso’s strategic value. Lithium chemicals are in demand by Europe’s fast-growing battery manufacturing sector, and the industry will need to import some raw materials from outside the region. However, the European Commission’s target (for its battery industry) is to “boost primary and secondary production from European sources”. We see this as very supportive of European ‘battery metals’ mining projects such as Barroso.
Barroso’s progress, in terms of permitting, technical studies and funding, will help determine SAV’s share performance over the next 12 months. A large part of this progress is funding, and Savannah received a significant boost in May when it signed an agreement with the EU-backed organisation EIT InnoEnergy. EIT InnoEnergy has invested €570m in the sustainable energy sector and represents a proven source of direct and indirect/introduced funding for projects like Barroso.
Companies: Savannah Resources Plc
Caspian Sunrise announced a capital raise of £1.0M at 2.75p to accelerate the repayment of its trade creditor positions. We note the company had previously announced its relatively tight working capital position following the switch to export status at the MJF structure in 2019, the impact of the measures taken to combat the Covid-19 virus and weakness in crude oil prices. The company indicated that the capital raised allows its trade creditor position to be brought into balance and that another capital raise is not expected in the current financial year and probably not all.
Companies: Caspian Sunrise Plc
Hargreaves’ FY20 results are very solid indeed. As previously reported, the only noticeable impact from COVID was in the slippage of Blindwells’ land sales, which were due to conclude during the lockdown period. Site activity has resumed and sales remain on track to conclude in the current year. A final dividend of 4.5p has been declared and the outlook statement is measured but confident. We reintroduce forecasts today, effectively reinstating our pre-COVID expectations. Hargreaves is well positioned to deliver a period of significant, renewed growth with the prospect of a double digit dividend yield from FY22 as HRMS profits are distributed.
Companies: Hargreaves Services Plc
Centamin (CEY LN) – H2 profits rise 280% as company maintains 2020 production guidance | Chaarat Gold* (CGH LN) - BUY– H1/20 production in at 27koz with FY20 guidance reiterated at 55koz, Tulkubash
funding closure on course for YE20 | Edenville Energy* (EDL LN) – Rukwa coal operations restart | Pensana Rare Earths (PRE LN) – Final drilling results from Longonjo | Serabi Gold* (SRB LN) – Extension to drawdown period for the convertible loan | Versarien (VRS LN) - Launch of graphene enhanced protective face mask
Companies: CEY CGH EDL PRE SRB VRS
Swedish Stirling is building momentum with the signing of a new agreement with Glencore for an additional 88 PWR BLOK waste gas to energy units. This deal is with South Africa’s largest ferro chrome smelter and shows that the company’s technology is gaining acceptance as a go to solution in the industry in South Africa. Swedish Stirling has benefited from its in-country team which has meant that COVID 19 restrictions has not prevented progress. The company now has a strong pipeline of deals which should drive sales in future years.
Companies: GLEN GLEN STRLNG
• PetroTal has shut down the Bretana Field as a preemptive measure due to civil unrest outside the oil field camp. Bretana had restarted production on the 15th of July and was producing 8 mbbl/d as of the 27th of July (restricted rate).
• An altercation between the police and protestors resulted in a dozen injuries and three deaths among the protestors. The civil unrest has been conducted by the same group that took over Petroperu’s Pump Station No.5. PetroTal indicated that this group is not from the Bretana area and that it is seeking Government assistance against the COVID-19 crisis. The community’s complaints are not related to PetroTal that is caught in the crossfire between the government and this community. We understand that the protestors also attempted without success to burn the home of the local mayor. The district prosecutor was on location and witnessed the sequence of events, including the breaking of a COVID-19 curfew by the protestors.
• PetroTal will keep the field closed until things settle down and the local district prosecutor files its report, which is expected in the next few days. We also note that some of the key Peruvian ministers, including the Energy and Mines minister, made comments that the government will undertake the promised Amazonian investment plan to help the local communities.
What if the shutdown last longer?
We estimate PetroTal’s cash position at ~US$20 mm at the end of June. PetroTal has produced ~0.2 mmbbl and delivered a total of 0.08 mm bbl to Iquitos and to Petroperu pipeline equating to ~US$1.6 mm of cash inflow (net of transport and barging cost) since the field restarted mid-July. While the field is shutdown, we estimated PetroTal cash costs at ~ US$1 mm per month (including US$0.6 mm on the field). Cash capex (including
Companies: PetroTal Corp.
Salt Lake Potash has received commitments to raise A$15m through the placement of unsecured zero-coupon Convertible Notes to Equatorial Resources (ASX:EQX) and institutional investors. The Convertible Notes have been structured as deferred equity with zero coupon and mandatory conversion into equity at the lower of 45c/share or a 5% discount to any future equity raising of at least A$10m. These funds will enable Salt Lake Potash to continue to develop Lake Way to the project schedule through July as they finalise debt financing. Plant practical completion and first SOP sales remain on schedule for the March 2021 quarter. The debt financing process in its final stages and with an agreement expected to be executed within weeks.
Companies: Salt Lake Potash Ltd.
EQTEC provides engineering and design services and sells its EQTEC Advanced Gasification Technology to waste-to-energy operators and enterprise partners. The company works together with multiple parties involved in W2E projects including the developers, waste owners, building contractors and funders with a view to ultimately providing its advanced gasification technology, associated engineering & design services and O&M services.
Companies: EQTEC Plc
Companies: JSE HUR RDSA