Panoro Energy (PEN NO)c; Target price of NOK23.00: Revisiting Gabon - BW Energy provided an update on Dussafu with FY20 production guidance expectation marginally below previous guidance (14.25 mbbl/d versus 15 16 mbbl/d) due to COVID-19 restrictions and OPEC+ quotas. This results in FY20 opex expected to be US$19/bbl which is slightly above the previous guidance of US$17-18/bbl. The drilling of DTM-7H, and the tie-in of DTM-6H and -7H, has been deferred to mid-2021 with first oil expected in 3Q21 and our estimate of the timing of the field production ramp-up has been delayed by one quarter. BWE continues to expect production from the Dussafu area to reach >30 mbbl/d in 2023 and ~40 mbbl/d in 2024. The Hibiscus development is expected to offer 15% IRR at
Companies: TGL TGA 88E FEC JSE LUPE LUNE LNDNF LYV NOG GB_NTRM NSTRY 3NO PANR P3K PTHRF PTAL TETY TETY AOI ENOG PEN SDX EGY
PetroTal (PTAL LN)C; Target price £0.40: Important development in Peru – On August 28, 2020, the Government of Peru announced a Supreme Decree approving the financial Gap Closure Plan within a number of provinces in northeast Peru, including Loreto, the area where PetroTal operates the Bretana oil field. The decree provides for a six year financial commitment of approximately US$1.7 bn to the communities. This is important as the decree specifically addresses the local community participation criteria, that have been a recurrent key area of contention for years with some communities in Peru. US$46 mm will be designated for economic development of the localities over the next four months by the Peruvian government. Since the announcement of the Decree, government and municipality representatives have been consulting with the community representatives . After meeting with the Bretana community in the coming days, it is expected that PetroTal will restart oil production shortly thereafter.
IN OTHER NEWS
88 Energy (88E LN/AU): Update in Alaska – The final petrophysical interpretation from the recently drilled Charlie-1 well provides an increase in net pay from 280’ to 398’, with the largest contribution coming from the Lima discoveries in the Seabee Formation. These improvements are despite using higher cut-offs for both reservoir and net pay.
Alvopetro (ALV CN): Update in Brazil - In August, total sales were 1,867 boe/d. Total aggregate gross prospective resources identified at the B1 prospect (block 183) and the C1 prospect (block 182) are estimated at 59.4 bcf.
Echo Energy (ECHO LN): Operating update in Argentina - Net 2020 production at Santa Cruz Sur over the period 1 January to 7 September was 2,040 boe/d.
Exxon Mobil (XOM US): New discovery in Guyana - ExxonMobil has made its 18th discovery at the Redtail-1 well on the Stabroek Block with 70 meters of high-quality oil bearing sandstone.
Total (FP FP): Dropping operatorship of Brazilian exploration blocks – Total is resigning from its role of operator for five exploration blocks, located in the Foz do Amazonas Basin. These exploration blocks are referenced as FZA-M-57, FZA-M-86, FZA-M-88, FZA-M-125 and FZA-M-127.
Westmount Energy (WTE LN): Increasing stake in JHI Associates - Westmount has purchased 1.55 mm common shares in JHI by way of the issue of 18.3 mm new ordinary shares in Westmount, which will represent approximately 12.7% of Westmount's enlarged issued share capital. JHI holds a 17.5% carried interest in the Canje Block, offshore Guyana, where ExxonMobil is the operator. At the completion of the transaction, Westmount will hold 6.9% in JHI.
Hibiscus Petroleum: Raising ~ US$480 mm to acquire upstream assets – Hibiscus is raising up to US$480 mm from a private placement of convertible redeemable preference shares to acquire oil and gas assets.
Jadestone Energy: 1H20 results – 1H20 WI production in Australia was 12,116 bbl/d. Net cash at the end of June was US$78.3 mm. FY20 production guidance has been reduced to 11.0–12.5 mbbl/d from 12.0-14.0 mbbl/d previously, as a result of a slowdown in well interventions. Jadestone reiterated its FY20 capex guidance of US$30 35 mm. A maiden interim dividend of 0.54 US cents/share has been declared, representing a total distribution of US$2.5 mm, in line with the lower end of the FY guidance of US$7.5–12.5 mm, split approximately one-third/two-thirds between interim/final. The company anticipates to be debt free by the end of 1Q21. Most approvals are now in place with regards to the New Zealand acquisition and Jadestone expects final government approvals in 4Q20 post the upcoming general election. In Vietnam, discussions are continuing with the government on the FDP and a future gas sales agreement.
Hurricane Energy (HUR LN): Reserves downgrade in the UK – 2P reserves have been reduced from 30.7 mmbbl to 9.4 mmbbl (as of 01/09/2020) with 2C contingent resources cut from 486 mmbbl to 58 mmbbl at Lancaster and from 565 mmbbl to 45 mmbbl at Lincoln. Lancaster EPS production for September to December 2020 is expected to average 12,000-14,000 bbl/d. The company held net debt of US$123 mm at the end of June.
Reabold Resources (RBD LN) and ADX Energy (ADX AU): Partner not farming in Romania assets? – Tamaska Oil & Gas has decided not to proceed with the farmin transaction relating to the EX-10 Parta Exploration licence in Western Romania held by Danube Petroleum (49% ADX, 51% Reabold). Tamaska does not intend to proceed with the planned acquisition of 3D exploration seismic.
Serica Energy (SQZ LN): 1H20 results – 1H20 production in the UK North Sea was 21,600 boe/d. First gas at Columbus continues to be expected by the end of 2021. Serica held £101 mm in cash at the end of June.
The Parkmead Group (PMG LN): Licence awards in the UK – Parkmead has been offered 50% WI in Blocks 14/20g & 15/16g situated in the Central North Sea, adjacent to Parkmead's extensive Greater Perth Area. Two further licences have been offered to Parkmead as part of the 32nd Round. Block 14/20c (Parkmead 100%) is located in the Central North Sea and contains extensions to the Lowlander oil field and the Fynn Beauly oil discovery. Block 42/28g (Parkmead 100%) is situated in the Southern North Sea near the Tolmount gas discovery.
FORMER SOVIET UNION
Cadogan Petroleum (CAD LN): 1H20 results – 1H20 production in Ukraine was 230 bbl/d. The company held US$11.6 mm in cash at the end of June.
MIDDLE EAST AND NORTH AFRICA
Chariot Oil & Gas (CHAR LN): Resources update in Morocco – Anchois is now expected to hold 361 bcf of contingent resources (2C) and 690 bcf of prospective resources (P50).
Energean (ENOG LN): 1H20 results – 1H20 pro forma production (including Edison E&P) was 52.1 mboe/d, with FY20 production guidance unchanged at 44.5 - 51.5 mboe/d. The acquisition of Edison E&P is expected to be completed during 4Q20. The FY20 pro forma capex guidance has been reduced by US$75-125 mm to US$635 - 705 mm, primarily due to (i) the rescheduling of expected milestone payments under the Karish EPCIC contract; and (ii) expected timing of capital expenditure on Edison E&P in Egypt. Net debt at the end of June was US$597 mm.
ShaMaran Petroleum (SNM CN): Receives payment from Kurdistan – ShaMaran has received a net payment of US$6.5 mm from the Kurdistan Regional Government for Atrush oil sales invoice entitlements for the month of July 2020.
Tethys Oil (TETY SS): Production update in Oman – WI production in August was 10.8 mbbl/d.
Zenith Energy (ZEN LN): Acquisition in Tunisia – Zenith is acquiring a 26% interest in the North Kairouan permit and the Sidi El Kilani Concession, which contains the Sidi El Kilani oilfield for US$0.3 mm.
Africa Oil (AOI/SS CN): Extension of Kenya licences – The partners on the 10BB and 13T licences have been given the right to extend the second exploration period until 31 December 2020, with a further extension until 31 Dec 2021.
Kosmos Energy (KOS US/ LN): Selling frontier exploration assets for US$100-200 mm – Kosmos is selling interests in blocks offshore São Tomé & Príncipe, Suriname, Namibia, and South Africa to Shell. The consideration consists of an upfront cash payment of ~US$100 mm, plus contingent payments of US$50 mm payable upon each commercial discovery from the first four exploration wells drilled across the assets, capped at US$100 mm in aggregate. Three of the four wells are currently planned for 2021.
Tullow Oil (TLW LN): 1H20 results – 1H20 production was 77 mboe/d. Net debt at the end of June was US$3.0 bn. FY20 production guidance has been narrowed from 71-78 mbbl/d to 73-77 mbbl/d following good well performance in Ghana. During 1H20, Jubilee and TEN produced 84,700 bbl/d and 50,900 bbl/d gross respectively. This strong performance is a result of (1) increased gas offtake nominations, (2) permission to temporarily increase flaring, (3) higher than forecast facility uptime of over 95% at both FPSOs and (3) greater reliability and redundancy in the water injection facilities on the Jubilee FPSO. The Ntomme-09 production well came on stream in August and is adding c.5,000 bbl/d gross to TEN oil production. FY20 free cash flow is forecast to break even at the current Brent forward curve. The semi-annual RBL debt capacity redetermination is expected to complete in early October 2020. The next redetermination will be in January 2021. Drilling of the Goliathberg-Voltzberg North well in Block 47, Suriname, is planned for 1Q21.
Companies: 88E AOI ALV ENOG 0R1M HUR JSE KOS PMG PTAL RBD SQZ 0VH4 TPL TTA TLW
Wentworth Resources (WEN LN)C; Target price £0.40: 20% dividend increase is a testament to Wentworth’s strength – Without much surprise, given the slow pick-up in gas demand in the aftermath of COVID-19, FY20 production guidance has been marginally reduced from 65-75 mmc/f to 60-70 mmcf/d. Production has already increased to ~68 mmcf/d over July and August, including ~72 mmcf/d for August. Importantly, with US$16.7 mm in cash at the beginning of September and no debt, the company is increasing its interim dividend by 20% to US$1.2 mm with an overall expected total dividend distribution of ~US$3.6 mm (1.43p per share) for FY2020. The resulting ~9% dividend yield is one of the highest offered by the very small number of UK listed E&Ps that are still paying a dividend. Importantly Wentworth is able to pay this distribution while maintaining a healthy cash balance and even though gas sales are relatively low (60 70 mmcf/d gross). With TPDC now settling its invoices and gas realizations being effectively fixed, this level of distribution looks to be sustainable. We also note that the progressive recovery of gas demand and the near-term extension of the Kinyerezi-1 power station with 20 30 mmcf/d additional gross demand imply an increase in sales, revenue and cashflow. Wentworth’s Mnazi Bay field can already deliver 100 mmcf/d production without any additional capex.
IN OTHER NEWS
Maha Energy (MAHA-A SS): Production in August in Brazil – Average production in August was ~3,568 boe/d. A 3 day planned shutdown of the Tie Production Facilities affected production of oil and gas from the Tie field. The Tie field also suffered a string of electrical power failures and shortages during the month. Well testing and flow-back work on the GTE-4 short string (Agua Grande) necessitated the long string (Sergi) to be temporarily closed in.
President Energy (PPC LN): Well test results in Argentina – Following workover activities, well EV-x1 on the Estancia Vieja Field flowed 6.3 mmcf/d on test.
Jadestone Energy: New offtake agreements in Australia – Jadestone has developed a new operating strategy for the Stag field, utilising offtake tankers to directly offload Stag crude oil, in place of the existing long term leased FSO. This new operating model has significant environmental risk mitigants over the existing model, by eliminating the need for ship to ship oil transfers in field. These arrangements are expected to realise annual savings of approximately 20% over the current FSO operation.
EnQuest (ENQ LN): 1H20 results – 1H20 production was 66,055 boe/d. FY20 production is expected to be towards the upper part of the guidance range of 57,000-63,000 boe/d with FY20 capex of ~US$120 mm (unchanged). 1H20 gross production at Kraken was 38,967 bbl/d. Net debt at the end of June was US$1.35 bn, down from US$1.41 bn at YE19.
Ithaca Energy: Merging with third party ahead of a listing? – Media reports indicated that Delek, the owner of Ithaca Energy, is in discussions with a third party about a potential merger of its North Sea operations.
Results of UK 32nd Licensing Round - Premier Oil (PMO LN) was awarded a 50% interest in blocks 42/28e and 42/29b in the licence directly to the east of Tolmount and a 50% stake in blocks 42/27, 47/2b and 47/3g in the licence immediately to the west of Tolmount. Premier, Cairn Energy, MOL and Dyas, were also awarded block 28/9f adjacent to the Catcher Area fields. Block 28/9f contains the Cougar and Rapide prospects. Independent Oil & Gas (IOG LN) was awarded a 50% interest in a licence covering blocks 49/21e and 49/22b. Block 49/21e contains the Viper gas discovery (45 bcfe) and is located 5 km from Elland. Block 49/22b contains the Sinope South gas discovery (35 bcfe). Independent was also offered 100% WI in blocks 48/23d and 48/24c, between the Blythe and Harvey licences, containing the Allerdale, Driftwood and Bradfield prospects and a possible northwest extension of the Redwell field. Jersey Oil & Gas (JOG LN) has been awarded a 100% interest in part-block 20/5e. Part-block 20/5e is located within the Greater Buchan Area development acreage and contains an extension of the J2 oil discovery. Deltic Energy (DELT LN) has been awarded interests in blocks 41/05b (part) & 42/01b (part) (joint with Shell), 43/11 & 43/12b (part), 42/13b (part), 42/17, 42/18, 42/19, 42/20b and 42/22, 42/23 in the Southern North Sea and interests in block 22/17a (part) in the Central North Sea. Corallian Energy, in which Reabold Resources (RBD LN) holds a 34.9% interest, has been offered a 100% interest in the Victory gas discovery in block 207/1a, the Laxford gas discovery and Scourie prospects in blocks 214/29c and 214/30c, and the Oulton oil discovery in block 3/11a. Union Oil & Gas (UOG LN) has been offered a 100% interest in blocks 15/18e and 15/19c. Serica Energy (SQZ LN) has been offered a 100% interest in blocks 3/25b, 3/30, 4/26 and 9/5a. These blocks are in the vicinity of the Bruce area.
RockRose Energy (RRE LN): Acquisition by Viaro Energy completed – The transaction to acquire RockRose has now completed. The shares have ceased trading on the London stock exchange.
MIDDLE EAST AND NORTH AFRICA
Genel Energy (GENL LN): Receives payment from Kurdistan – Genel received a net payment for oil sales during July 2020 of US$11.3 mm.
Gulf Keystone Petroleum (GKP LN): 1H20 results – The Shaikan reservoir continues to perform in line with the company’s expectations, with current gross production of ~36,000 bbl/d and average 2020 gross production to 1 September 2020 of 36,272 bbl/d. Gulf Keystone has also received a net payment of US$7.8 mm for Shaikan crude oil sales during July 2020. FY20 production guidance for the Shaikan field (gross) has been set at 35-36 mbbl/d with net capex of US$40-48 mm (US$38.5 mm spent in 1H20). The company has identified a number of quick payback projects, which are expected to increase gross production by ~5,000 bbl/d for an aggregate gross cost of ~US$3 mm. Gulf Keystone held US$140 mm in cash on the 2 September.
Africa Oil (AOI/SS CN): Received dividend from Nigeria – Africa Oil has received a net payment of US$25 mm related to its 50% interest in Prime. The Company has applied US$17.7 mm of this dividend to pay down the BTG term loan, reducing the outstanding balance to US$176.9 mm. The company has received total dividends of US$137.5 mm since the closing of the Prime acquisition on 14 January 2020.
San Leon Energy (SLE LN): Investment in new Nigerian asset – San Leon is making a US$7.5 mm loan to Decklar Petroleum. Decklar is the holder of a Risk Service Agreement (RSA) with Millenium Oil and Gas Company on the Oza field in Nigeria. Until the loan and its interest are repaid, 100% of the available funds that can be distributed from Decklar’s RSA proceeds will be paid to San Leon. San Leon will also subscribe for a 15% equity interest in Decklar. The Oza Oil Field was formerly operated by Shell. The field was never tied into an export facility. The field has three wells and one side track drilled by Shell between 1959 and 1974.
EVENTS TO WATCH NEXT WEEK
09/09/2020: Tullow Oil (TLW LN) – 1H20 results
10/09/2020: Serica Energy (SQZ LN) – 1H20 results
10/09/2020: Jadestone Energy (JSE LN) – 1H20 results
11/09/2020: Hurricane Energy (HUR LN) – 1H20 results
07/09-11/09/2020: PetroTal (PTAL LN) – Potential operating update?
Companies: ENQ GKP JSE RBD WRL 0GEA PMO AOI GENL
PetroTal (PTAL LN)C; Target price £0.45: Field shut down– PetroTal has shut down the Bretana Field as a pre-emptive measure due to civil unrest outside the oil field camp. Bretana had restarted production on the 15th of July. 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 but rather are between the community and the Government. 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 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 the 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 at the field). The share price is down over 12% on the announcement to ~£0.12 per share. We believe that a return to normality would unlock £0.30 per share of value for the company based on its 2P reserves only.
IN OTHER NEWS
Alvopetro Energy (ALV CN): 2Q20 results | Bahamas Petroleum Company (BPC LN): Update in the Bahamas and Trinidad | Diversified Gas & Oil (DGOC LN): 2Q20 results and dividend increase | Touchstone Exploration (TXP LN/CN)C: 2Q20 update in Trinidad
Condor Petroleum (CPI CN): 2Q20 results | Deltic Energy (DELT LN): Increased prospectivity in the UK | Reabold Resources (RBD LN): Not acquiring Deltic Energy | Serinus Energy (SENX LN): 2Q20 results | Valeura Energy (VLU LN/VLE CN): 2Q20 results
FORMER SOVIET UNION
JKX Oil & Gas (JKX LN): 1H20 results
MIDDLE EAST AND NORTH AFRICA
ShaMaran Petroleum (SNM CN): 2Q20 results | TransGlobe Energy (TGL LN/CN): 2Q20 results
Africa Oil (AOI SS/CN): 2Q20 results | Orca Energy (ORC.A/B CN): Operating update in Tanzania
EVENTS TO WATCH NEXT WEEK
21/08/2020: Premier Oil (PMO LN) – 2Q20 results
Companies: VLU TXP TGL 0VH4 SEN RBD PTAL DGOC BPC ALV AOI
AOI last quarter closed a transaction involving minority stakes in three world-class fields offshore Nigeria. Based on USD 60 Brent from 2022, we estimate a payback time of ~3.5 years, and that ~5 SEK/sh was created in the deal. Furthermore, we believe the company is well positioned for additional value creation through increased recovery in Nigeria, other African M&A opportunities and its world-class exploration portfolio (primarily through investments).
Companies: Africa Oil Corp.
88 Energy (88E LN/AU): Update in Alaska | Echo Energy (ECHO LN): Operation update in Argentina | Subsidies to the oil industry in Argentina | Energean Oil & Gas (ENOG LN): Neptune Energy not acquiring Edison UK and Norway | EnQuest (ENQ LN): 1Q20 update | Equinor (EQNR NO): Dry hole in Norway | Hurricane Energy (HUR LN): Problem with a well at Lancaster in the UK, FY20 production will be “substantially” lower than expected | Lundin Energy (LUP SS): Reduced FY20 production on guidance of Norwegian government curtailment |SDX Energy (SDX LN): 1Q20 results | Total (FP FP): Not buying Ghana from Occidental Petroleum
Companies: 88E AOI ECHO ENOG ENQ DNQ HUR LYV SDX TLW
In this note, we analyze the indebtedness of 35 international E&Ps publicly listed in the UK, Canada, Norway, Sweden and the USA. For each company, we look at (1) cash position, (2) level and nature of debt (including covenants), (3) debt service and principal repayment framework and (4) Brent price required from April to YE20 to meet all the obligations and keep cash positions intact. We also estimate YE20 cash if Brent were to average US$20/bbl from April to YE20. While the oil demand and oil price collapse are of unprecedented historical proportions and the opportunities to cut costs much more limited than in 2014, most companies (with a few exceptions) entered the crisis in much better position than six years ago, with stronger balance sheets and often already extended debt maturities. In addition, this time around, many E&Ps have already been deleveraging for 1-2 years and are not caught in the middle of large developments that cannot be halted. The previous crisis also showed that debt providers could relax debt covenants for a certain period as long as interest and principal repayment obligations were met. This implies that as long as operations are not interrupted and counterparties keep paying their bills (Kurdistan), the storm can be weathered by most for a few quarters.
With (1) Brent price of about US$50/bbl in 1Q20, (2) reduced capex programmes, (3) material hedging programmes covering a large proportion of FY20 production at higher prices and (4) limited principal repayments in 2020, we find that most companies can meet all their costs and obligations in 2020 at Brent prices below US$40/bbl and often below US$35/bbl) from April until YE20 and keep their cash intact, allowing them to remain solvent at much lower prices for some time. In particular, Maha Energy and SDX Energy are cash neutral at about US$20/bbl. When factoring the divestment of Uganda, Tullow needs only US$9/bbl to maintain its YE20 cash equal to YE19. Canacol Energy, Diversified Gas and Oil, Independent Oil & Gas, Orca Exploration, Serica Energy and Wentworth Resources are gas stories not really exposed to oil prices and Africa Oil has hedged 95% of its FY20 production at over US$65/bbl.
Companies: ARC AOI CNEC CNE DGOC EGY ENOG ENQ GENL GKP 0MDP GTE HUR IOG JSE KOS LYV 0GEA 3SX ORC/B PENUSD PHAR PMO PTAL PXT RRE SDX SEPL TETY TGL TLW TXP WRL
GeoPark (GPRK US)C; Target: US$20 - Delivering more with less | Diversified Gas and Oil (DGOC LN): Acquisition in the US and US$87 mm equity raise | Gran Tierra Energy (GTE LN/CN): 1Q20 results| Parex Resources (PXT CN): 1Q20 results | Trinity Exploration and Production (TRIN LN): FY19 results | Touchstone Exploration (TXP LN/CN): 1Q20 results | Condor Petroleum (CPI CN): 1Q20 results | Premier Oil (PMO LN): 1Q20 update and FY20 production guidance reduction | Serinus Energy (SEN LN): 1Q20 update | Valeura Energy (VLU LN/VLE CN): 1Q20 results |Caspian Sunrise (CASP LN): Production update in Kazakhstan | Genel Energy (GENL LN): 1Q20 update | Pharos Energy (PHAR LN): 1Q20 results | ShaMaran Petroleum (SNM CN/SS): 1Q20 update in Kurdistan | TransGlobe Energy (TGL LN/CN): 1Q20 results | Africa Oil (AOI SS/CN): 1Q20 results | Vaalco Energy (EGY LN/US): 1Q20 results | Kosmos Energy (KOS LN/US): 1Q20 results
Companies: KOS 0MDP DGOC GTE PXT TRIN TXP PMO SENUSD VLU CASP GENL PHAR 0VH4 TGL AOI EGY KOS
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 VLU
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 DNQ IGAS IOG LYV OMV REP RRE SENUSD BLOE ENW GKP AOI EGY
PetroTal (PTAL LN/TAL CN US)C : Corporate Update | Gran Tierra Energy (GTE LN/CN): Revised FY20 programme | President Energy (PPC LN): Update in Argentina | Touchstone Exploration (TXP LN): Another strong flow test in Trinidad | Cairn Energy (CNE LN): FY19 results | Premier Oil (PMO LN): Trading update | Valeura Energy (VLU LN/VLE CN) : 4Q19 results | JKX Oil & Gas (JKX LN): Divesting Hungary | Pharos Energy (PHAR LN): FY19 results | TransGlobe Energy (TGL LN/CN): Corporate update and FY19 results | Africa Oil (AOI SS/CN): Reiterate 2020 guidance | Tower Resources (TRP LN): Resources update in Cameroon | Tullow Oil (TLW LN): FY19 results | Vaalco Energy (EGY LN/US): FY19 results | Wentworth Resources (WEN LN): Operational update in Tanzania
Companies: PTAL GTE PPC TXP CNE PMO VLU JKX PHAR TGL AOI TRP TLW EGY WRL
Touchstone Exploration (TXP LN/CN)1 ; BUY, £0.25: 3Q19 results | Baron Oil (BOIL LN) (not covered): Reverse take over with South East Asia business | Premier Oil (PMO LN); BUY, £1.45: Solid 3Q19 update | Serinus Energy (SENX LN)1 ; Speculative Buy, £0.20: 3Q19 results | Condor Petroleum (CPI CN) (not covered): 3Q19 results and entry into Uzbekistan | Africa Oil (AOI CN/SS): BUY, C$2.60; 3Q19 results | Tullow Oil (TLW LN); REDUCE, £1.55: Wait for further visibility on Ghana
Companies: TXP BOIL PMO SEN AOI TLW
Results in line, Eco (Atlantic) Oil & Gas announced yesterday
At September 30, 2019, cash was US$330 mm (GMPFEe: c. US$337 mm) with no debt. EOPS production in Kenya is 2,000 bbl/d (GMP FEe 4Q19: 2,000 bbl/d).
The oil encountered at Eco (Atlantic) Oil & Gas’s Jethro-1 and Joe-1 In Guyana, has been found to be heavy (12 deg API) with high sulphur content and the commerciality of the discoveries is being assessed. Africa Oil has an 18.8% holding in Eco, equating to a 2.82% WI in the Orinduilk block.
According to the operator, Tullow, FID in Kenya continues to be expected in 2H20.
uchstone Exploration (TXP LN/CN)1 ; BUY, £0.25: Debt funding to address dilution concerns | OKEA (OKEA NO) (not covered): 3Q19 results | Genel Energy (GENL LN); SPECULATIVE BUY, £3.20: Trading update in Kurdistan | ShaMaran (SNM CN) (not covered): Operation update in Kurdistan | Africa Oil (AOI CN/SS); BUY, C$2.60: Acquiring a larger share of Nigerian target
Companies: TXP GENL 0VH4 AOI
Delonex and Vitol have decided to withdraw from a deal to jointly acquire with Africa Oil, 50% interests in Petrobras Oil & Gas BV, which owns 8% WI in OML 127 and 16% WI in OML 130. Africa Oil is therefore acquiring the 50% stake available. The overall headline price for the acquisition was set at US$1.41 bn effective from 01/01/2018.
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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 £ 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.
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 JYOGF TPC1 7M7 0GEA MAHAA PEN PHAR RBD REP SENX TLW
The Prime Minister vowed last week to “restore Britain's position as the foremost naval power in Europe” and promised an extra £16.5bn in defence spending over the next four years. Mr Johnson expects this investment to “spur a renaissance of British shipbuilding across the UK”, and specifically mentioned five locations where this would occur, including Belfast and Appledore – the location of InfraStrata's shipyards. Other supportive policy initiatives emanating from the government include Mr Johnson's pledge in October that offshore wind will power every home in the country by 2030. We believe this demonstrable support from the highest level of government vindicates InfraStrata's strategy, and demonstrates the significant opportunities available to the company as it bids on numerous shipbuilding and fabrication contracts. We reaffirm our Buy rating.
Companies: InfraStrata plc
• In an Important development, PetroTal has signed a contract with an international oil trader for a pilot shipment to export 0.12 mmbbl into the Atlantic region using the Amazon river through Brazil. The shipment will be sold FOB Bretana, priced at the forward month Brent ICE price, and paid within two weeks of loading at Bretana. There are no subsequent oil price adjustments.
• At November 19, 2020, PetroTal had cash resources of US$9.8 mm, with accounts payable and accrued liabilities of ~US$39 mm, a reduction of ~US$11 mm from the end of 2Q20. The company has been paid US$5.5 mm for delivery of 0.192 mm bbl of oil to Petroperu in October. Production is constrained to ~5,000 bbl/d pending the reopening of the export pipeline.
• We understand that the pilot should start in December. This would not only provide ~US$5 mm in cash to PetroTal but also allow production to return to recent levels (11.5 mbbl/d), effectively unlocking the fundamental value of the asset.
Balance sheet considerations
The potential financial derivative liability has been reduced from US$22.5 mm at the end of June to US$17 mm at the end of September. Of the US$39 mm current payables 46% are not due before 2021 and we note that the company still holds US$13 mm in account receivables and US$4.7 mm in inventory.
Financials on “a back to normal” scenario with flat production
We are now assuming production remains constrained at 5 mbbl/d over 4Q20 with minimum capex with cashflow and receivables being used to repay the due payables over the period.
On production of just ~11.5 mbbl/d during 2021, we estimate operating cashflow of US$85 mm at US$48/bbl Brent. This would result in free cashflow of >US$40 mm assuming capex of US$20 mm to maintain production and US$20 mm to repay the remaining payables. This compares with a current market cap of just US$75 mm, suggesting FY21 free cashflow would represent over 50% of the current market cap in a no growth scenario assuming production can be exported.
Our target price of £0.45 per share represents 6x the current share price.
Companies: PetroTal Corp.
EQTEC has announced today that the Company and Scott Bros. Enterprises Limited have agreed to extend the exclusivity period of the Billingham MOU until 18 December 2020. The Billingham MOU has been subject to previous extensions, as announced on 23 October 2019, 23 June 2020 and 18 September 2020.
Companies: EQTEC PLC (KEU1:FRA)EQTEC PLC (EQT:LON)
Pantheon announced that is has contracted a rig to drill the Talitha well and that drilling operations are expected to commence in January 2021. The well will target four independent reservoirs, in three separate trapping sequences, which the company estimates has the potential to contain in the region of a billion barrels of recoverable oil, although ongoing work is required to formally delineate the full potential of the targets.
Companies: Pantheon Resources plc
Parkmead’s portfolio has evolved to the point where it is now a full-cycle E&P company with a low-cost Dutch production base and a broad spectrum of high-quality UK growth opportunities, encompassing material development projects and an attractive range of risk/reward exploration. Recently, it has diversified into renewables, future proofing its equity story and opening up a new ‘investor-friendly’ avenue of growth. A core strength of this management team is its commercial acumen and portfolio-driven approach to optimising value. Parkmead has been in portfolio construction mode to date but is now well positioned to start crystallising its intrinsic value. We initiate with a risked-NAV based price target of 155p/sh. Investors would do well to get on-board with a management team that has a strong track record of delivering shareholder value.
Companies: Parkmead Group PLC
Salt Lake Potash's AGM update reported that the Lake Way project is now 74% complete. Construction of the process plant is on-schedule with practical completion and first SOP production planned for Q1/21. Drawdown of the Senior Facility Agreement funds and repayment of the Taurus bridge loan is expected soon.
Companies: Salt Lake Potash Limited
Oil rose to the highest in nearly three months with positive Covid-19 vaccine developments paving the way for a more sustained recovery in oil demand.
Futures rose 5% in New York this week for a third straight weekly gain as Pfizer Inc and BioNTech SE requested emergency authorisation of their Covid vaccine Friday. Moderna Inc also released positive interim results from a final-stage trial and said it is close to seeking emergency authorisation. Still, further gains were limited by broader market declines amid a dispute between the White House and the Federal Reserve over emergency lending programmes.
Even with vaccines on the horizon, a recovery in oil demand faces obstacles with governments under pressure to tighten restrictions and curb the spread of the virus. UK Prime Minister, Boris Johnson's officials are considering tougher pandemic rules placed on broader regions of England next month after a national lockdown is set to end and the country returns to its tiered system. Meanwhile, the shift toward working from home may have a lasting chill on gasoline demand, according to Federal Reserve Bank of Kansas City President Esther George.
The recent climb in headline prices has been accompanied by significant moves in timespreads, where traders bet on the price of oil in different months. The spread between West Texas Intermediate for December 2021 delivery and the following month moved to backwardation, while the closely watched gap between December 2021 and 2022 WTI contracts is close to also flipping.
West Texas Intermediate for December delivery, which expired Friday, rose 41 cents to settle at $42.15 a barrel.
The January contract rose 52 cents to end the session at $42.42 a barrel.
Brent for January settlement gained 76 cents to $44.96 a barrel. The contract rose 5.1% this week.
Pfizer and BioNTech's vaccine could be the first to be cleared for use, but first it must undergo a thorough vetting. The filing could enable its use by the middle to the end of December, the companies said in a statement. Yet, it could take at least three weeks for a US Food and Drug Administration decision.
Companies: FOG PVR 88E DGOC EME TRIN UOG
Jersey Oil & Gas announced today that is has entered into an agreement to acquire the entire share capital of CIECO V&C (UK) Limited, which is currently owned by two international entities headquartered in Japan. The acquisition secures an additional 12% working interest in Licence P2170 (Blocks 20/5b & 21/1d), which provides Jersey Oil & Gas with 100% of the licence. The licence contains the majority of the Verbier oil discovery in addition to three drill ready prospects: Verbier Deep, Wengen and Cortina. The acquired entity has approximately £15M of tax losses which will provide value to Jersey Oil & Gas. Consideration will consist of £150k in cash and contingent payments of i) £1.5M upon field development plan approval of Verbier within P2170 (as already discovered) by the OGA ii) £1.0M upon the 1st anniversary of attainment of first oil. The acquisition is conditional on OGA approval amongst other technicalities, which we do not anticipate will be problematic. The acquired entity will be free of debts.
Companies: Jersey Oil & Gas PLC
Acquisition of CIECO P2170 interest
Companies: JOG JYOGF TPC1
Low cost. Quickly scalable. High impact, quality exploration
Pharos is a £55 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.
Cash engine in Vietnam
Pharos produces ~6 mboe/d from two offshore assets with ~21 mmboe 2P reserves and 13 mmboe 2C resources (WI). The key asset is the TGT field (29.7% WI) with 24 mmboe 2P reserves plus 2C resources implying just 25% recovery factor. At US$22/bbl for Brent, production can be maintained flat. At US$40/bbl, the assets generate Free Cash Flow of US$20-25 mm per year. 6 new wells will be drilled from 4Q21 to grow production to 8 mboe/d. Obtaining approval to drill 9 more wells would add 9 mmboe WI 2P.
Scalable growth in Egypt
Pharos produces ~5.5 mbbl/d from the El Fayum licence (Western Desert) with 29 mmbbl 2P and 23 mmbbl 2C. A 3D campaign and >120 wells have improved the understanding of the geology where production growth is driven by waterflood and drilling. The pace of growth is proportional to the number of rigs directly reflecting the available funding. Without further investment, the assets break even at current oil prices but production declines fast. Four rigs and early investment maximizes value but requires additional funding or a partner.
High quality exploration
At El Fayum, there are 108 mmbbl prospective resources across the shallow horizons and the deeper Pre-Khatira play. North Beni Suef is also a promising licence. Israel is about chasing giant structures (Zhor/Tamar plays). In Vietnam, Pharos holds interests in the Phu Khanh frontier basin.
With a healthy balance sheet (cash: ~US$38 mm, net debt:~US$36 mm), Pharos’ shares trade at EV/DACF multiples of
Companies: Pharos Energy PLC
Trifast has reported FY21 interim results that highlight the tough operating conditions with material falls in revenue, and operating leverage driving sharp reductions in profitability. The c.£16m equity raise helped to cushion the financial impact and the ongoing recovery exiting the first half provides some optimism for the Group heading in to FY22. We reinstate our buy recommendation.
Companies: Trifast plc (TRI:LON)Trifast plc (25D:BER)
Today's news & views, plus announcements from KGF, MRO, UU, BAB, BRW, FUTR, GNS, HICL, LIO, AEXG, FUL, KWS
Companies: AEX GNS HICL
While a three-year plan would have been more than enough, the new CEO delivered a roadmap for the next ten years. The idea is to show how Tullow’s existing assets can generate sufficient cash for the next decade. Discipline is key, with deleveraging as top priority. Spending is on a tight budget ($2.7bn for the next ten years) with 90% of it going to develop the West African assets. The quest to regain investors’ trust continues.
Companies: Tullow Oil plc
Shanta Gold (AIM: SHG) has announced this morning its production and operational results for the quarter ended 30th September 2020 – see Fig 1. Overall this was a robust performance (from one of the most consistent operators in the sector) in the face of the pandemic and a very busy quarter for the company at corporate level. QoQ production fell to 19,973 oz and AISC rose to $883/oz – both caused by a temporary drop in grade – but the ongoing strength in the gold price resulted in a 16% and 46% increase in EBITDA QoQ and YTD respectively. There was an increase in net debt to $5.1m which can be explained by the $7.1m cash outlay for the West Kenya projects as well as the reduction in the hedge book (they also have $5.9m of gold dore in the gold room). The company remains on track to hit its full year guidance of 80-85koz of production at an AISC of $830-880/oz which would make it the third year in a row they have hit their unaltered guidance for the year. This would be a remarkable achievement for a major gold miner operating in a developed market let alone one operating in the South West corner of Tanzania. Likewise the fact the company has recorded zero lost time injuries makes it nearly three years in a row with no LTIs. With the greenlight for Singida and a scoping study completed for the West Kenya Project during the quarter, the company can look forward to leveraging this operational expertise across a larger and longer life production base (c.220Koz of annualised production). We continue to believe the market is still to wake up to this given a market cap of US$219m, next to no debt and EBITDA annualising at $90m.
Companies: Shanta Gold Limited