Chinook reported 2Q19 financial and operational results that were largely in line, though can be summarized through the negative $1.7 mm in funds flow reported (CFPS -$0.01 vs. GMPFE -$0.01 vs. consensus $0.00). The corporation estimates total unbridled standing capability of ~4,000 boe/d, though current output is zero, as Chinook is further touched up by the Brookfield (Enbridge) McMahon plant outage, with 100% of its output offline since July 30th (to resume August 13th).
Companies: CHINOOK ENERGY
Chinook reported 1Q19 financial and operational results that were largely in line (CFPS $0.00 vs. GMPFE $0.00 vs. consensus $0.00).
Chinook reported 4Q18 financial and operational results that were largely in line (CFPS $0.00 vs. GMPFE $0.00 vs. Consensus $0.00).
Chinook reported 3Q18 financial and operating results which were mixed, with production of 4,807 boe/d eclipsing both GMPFE and consensus estimates by >6%, while CFO of ~$2.3 mm split GMPFE and consensus estimates of $2.4 mm and $2.2 mm, respectively.
2Q18 was quiet for Chinook, with financial and operating results largely in line with consensus expectations. Volumes during the quarter were negatively impacted by maintenance issues on Enbridge’s Oak 16” gathering line, resulting in 3rd party capacity constraints. If not for this restriction, 2Q18 volumes are estimated to have been 20% higher (~5,300 boe/d), in line with GMPFE’s prior forecast of 5,025 boe/d.
Chinook reported 4Q17 financial and operating results which were in line with both GMP FE and consensus expectations. Chinook commissioned the +25 mmcf/d expansion of its Birley/Umbach compressor station in 4Q17 bringing total capacity to 50 mmcf/d. Once 3 rd party restrictions ease in April 2018e, the company will finally have capacity to produce from all 13.0 (11.2 net) wells in the region. There are no further updates with regards to formal 2018e guidance at this juncture, as the company continues to defer formal guidance until commodity prices stabilize. Maintain $0.25/sh target price and reaffirm HOLD rating.
Recall, during 2Q17 Chinook was drilling 4 (3.63 net) wells at its Birley/Umbach NE BC property. In this update, Chinook announced that the drilling and completion costs per well were expected to approximate ~$4.24mm/well, slightly ahead of our type curve drilling and completion costs of $3.225mm/well.
Chinook announced second quarter financial and operating results that were in line with expectations. In light of the Company’s strategic alternatives process, we reiterate our Speculative Buy ranking and $0.50 per share target price on the stock though aim to provide a more fulsome review with potential changes to the sum of the parts components within our NAV methodology.
Impact: Slightly negative. Second quarter results lagged our forecasts, though were largely overshadowed by the closing of a material asset rationalization late in the quarter.
Some Recovery on Segmented Cash Flow Generation Over Q1 Though Still Down 56% Y/Y. In aggregate, the Intermediate, Mid, and Small Cap groups are expected to generate 2Q16e cash flow of $1,281 mm, $183 mm, and $53 mm, or $1.517 billion in total, that while depressed relative to the same period last year (~$2.647 billion combined), is up 17% sequentially from the prior quarter, largely on the strength of crude oil price recovery in the period. Severely weak natural gas pricing picture markedly reversed into summer, market likely to ignore financials for natural gas producers and look ahead to winter and formalization of sell-side 2018e estimates in coming months. Spot AECO natural gas prices recently crested C$2.60/mcf, and with a reasonable alignment of previously distressed NE BC Stn2 differentials, augmented by a withdrawal expected next week, view the market psyche as constructive and looking ahead, with the analogy that this market is shaping up to mirror 2012 still holding. That said, with crude oil poised to retest support levels, combined with strong stock price performance broadly observed YTD, we would characterize sentiment as slightly pessimistic in the near-term which could reduce or unwind momentum-based investment strategies that have worked thus far in 2016.
Companies: AAV ARX BTE BNP CPG ERF POU PEY PGF PWT PSK VII TOU VET WCP BNE CJ CR DEE JOY KEL LTS NVA PPY PNE RRX RMP SRX SGY TOG TET ATU CKE GXE IKM LXE MQL PRQ SPE SKX TVE TVETF YO
Chinook announced a divestiture of its non-Montney assets to Tournament Exploration for a ~70% shareholding in a recapitalized entity, the stock of which will eventually be dividended out to Chinook shareholders. Most importantly, this now isolates Chinook as a pure Montney levered growth vehicle, characterized by production of ~2,675 boe/d (19% oil & NGLs), 18.3 mmboe 2P of reserves, and 175 (122 net) sections of Montney prospective lands, coupled with the preservation of a strong balance sheet with ~$21 mm of cash and positive working capital post-deal.Directionally, we view this deal positively, though reiterate an unchanged 12-month target price of $0.50/sh.
Impact: Positive. The transaction supports the broader corporate strategy of a Montney focused growth vehicle at Birley/Umbach and Gold Creek. We expect the Montney pure play entity ahead to look compelling in terms of resource leverage within an NAV-rich premise, though will not trade at a discount valuation over the next 18 months.
Impact: Neutral to slightly positive. We view the $7.5 mm transaction as not overly material, though a potential positive data point in terms of the current state of the broader A&D environment, which would be notionally positive given Chinooks near-term rationalization stratagem.
Chinook released first quarter financial results that were strong from a volume perspective though trailed our expectations financially.
With this publication we briefly summarize our projections for 1Q16e quarterly results for the Junior E&P (Intermediate, Mid & Small Cap) segments of our coverage universe
Companies: AAV ARX BTE BNP CPG ERF POU PEY PGF PSK VII TOU VET WCP BNE CJ CR DEE JOY KEL LTS LRE NVA PPY PNE RRX RMP SRX SGY TOG TET ATU CKE GXE IKM LXE ROAOF MQL RE SPE SKX TVE TVETF YGR YO
Research Tree provides access to ongoing research coverage, media content and regulatory news on CHINOOK ENERGY. We currently have 42 research reports from 2 professional analysts.
Trinity has proven the sustainability and resilience of the Company's business model, increasing both production and cash despite significant challenges in 2020. FY20 average production volumes increased 7% on 2019 to 3,226bopd despite no new drilling activity in 2020. Cash at 31 December 2020 was US$20.2m, a 27% YoY increase – driven by strong operating cash flow, and achieved despite a 36% reduction in average oil price realisations versus 2019. Average production volumes in Q4/20 increased by 2% on Q3/20 to 3,206bopd, with Trinity offsetting natural production declines through its rigorous approach to production management. Post-period, the Trinidad and Tobago Government lifted the threshold for the imposition of SPT for small onshore producers from US$50/bbl to US$75/bbl in 2021 and 2022, providing a considerable boost to Trinity's cash generation potential. With a high number of growth initiatives underway across the energy spectrum, Trinity is well positioned to broaden its portfolio and create further value as it looks to further scale the business. We increase our price target to 34p (from 32p), almost 3x the current share price and reiterate our BUY recommendation.
Companies: Trinity Exploration & Production Plc
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
Gas composition data from the Kyalla 117 well has confirmed the presence of liquids-rich gas within the Lower Kyalla Shale, with less than 1% CO2. Analysis of the Kyalla 117 well has shown that the gas stream contains c65% methane gas, with c33% being other liquid gases such as ethane and butane. The analysis also supports the view that the Kyalla gas stream will have elevated LPG and condensate yields. Operations are scheduled to recommence at Kyalla 117 at the beginning of the dry season in Q2/21 and will initially focus on flowing back sufficient hydraulic fracture stimulation water to allow the Kyalla 117 well to flow continually without assistance.
Companies: Falcon Oil & Gas Ltd.
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
Oil slid by the most in three weeks as a stronger dollar and weak US economic data stoked concerns over an economic rebound. Futures in New York tumbled 2.3% on Friday after a rally in oil earlier in the week pushed the benchmark into overbought territory. The US dollar strengthened, reducing the appeal of commodities priced in the currency. US consumer sentiment cooled more than forecast in January and other economic data such as sluggish retail sales and producer prices also portray the obstacles still facing the country as it emerges from the pandemic. Meanwhile, President-elect Joe Biden said he will ask Congress for $1.9 trillion to fund immediate relief for the US economy that has been pummelled by the pandemic. But the large price tag and inclusion of initiatives opposed by many Republicans set up the aid package for a drawn out legislative battle. Despite the pullback in oil futures, vaccine breakthroughs and Saudi Arabia's pledge earlier this month to deepen output cuts are expected to support prices. JPMorgan Chase & Co said a “nasty deficit” could emerge in the oil market later this year. Meanwhile, technical indicators had been flashing warnings signs all week. The 14-day Relative Strength Index for both US and global benchmark crude futures traded above 70 this week in a sign they were overbought, though both slipped under that level Friday. Prices West Texas Intermediate for February delivery fell $1.21 to settle at $52.36 a barrel. Futures rose less than 1% this week. Brent for March settlement lost $1.32 to end the session at $55.10 a barrel. The contract fell 1.6% during the week. The market's structure has also softened. Brent's prompt timespread dipped back into contango on Friday, a bearish structure where nearby prices are cheaper than later-dated ones. This week has seen the annual commodity index rebalancing take place -- a move that was expected to see as much as $9 billion flow into the oil market. Since it began last Friday, there has been a surge in so called trading-at-settlement volumes, an instrument often used by participants with index exposure. For Brent, average volumes over the last five days have reached a record. Other oil-market news:
Companies: FO PRP 88E DGOC EME TRIN UOG
Foresight Group , the award-winning infrastructure and private equity investment manager to IPO on the Main Market (premium). The Offer will primarily comprise a sale of shares by existing shareholders (c.80% of the Offer) with a smaller offering of new shares (c.20% of the Offer) to be issued by the Company. Details TBA. Cornish Metals (TSX-V: CUSN) intends to list on AIM. The Company is proposing to raise £5 million by way of private placement of new Common Shares (the "Fundraising") to advance the United Downs copper-tin project. The Company expects that Admission will become effective in February 2021. The Company's Common Shares will continue to be listed and trade on the TSX-V in Canada. VH Global Sustainable Energy Opportunities plc, a closed-ended investment Company focused on making sustainable energy infrastructure investments, today announces intends to launch an initial public offering of shares on the Official List (Premium) of the Main Market of the London Stock Exchange. Due by Early Feb.
Companies: TYM W7L BEG CRPR EUZ IRR CMCL FARN KETL AUG
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
Results from the 2020 soil-till sampling campaign have been reported today and are positive with widespread anomalous gold values, including the highest soil-till assay results to date, along strike to the east and west of BAM Gold for a total length of 8 kilometres. Numerous new drill targets have been identified which have the potential of being advanced into additional resources to continue the rapid growth of the BAM Gold Project. Drilling has commenced in the area to the west and has intersected similar geological lithology and mineralisation to BAM Gold. The drilling programme for 2020-21 at the BAM Gold Deposit is progressing as planned with a total of 6,518 metres of HQ diamond core, comprising 30 drill holes, completed to date. All drill holes have successfully intersected prospective mineralised zones associated with the BAM Gold Deposit. The drill core has been logged, processed, and sent to ALS Minerals of Thunder Bay for analysis to date. Assay results are pending, with increased exploration activity in Canada, the labs are full, with assays now taking 7-8 weeks. The current funded drilling programme is expected to complete in April 2021.
Companies: Landore Resources Limited
Salt Lake Potash Lake Way Project is nearing completion with the Process Plant and NPI well advanced. The overall project, including all on-lake infrastructure, was 81% complete on 31 December 2020. The Project remains on track for first SOP production in March 2021 and first SOP sales in April, with the project capital budget unchanged at A$264m. Funds from the first US$105m tranche of the Project Development Facility have been received enabling repayment of the US$45m Bridge Facility and completion of project construction. The Process Plant was 88% complete on 31 December 2020 (on an earned value basis). Approximately 27kt of potassium rich kainite and schoenite salts have been harvested for commissioning plant feed from the Train 1 cells. Harvesting activities will re-commence in March ahead of plant commissioning. Process Plant commissioning is expected to commence in February with introduction of first feed salts to the plant in March.
Companies: Salt Lake Potash Limited
AEX Gold Inc (AEXG LN) –Operational update Cornish Metals* (CUSN LN) – AIM Admission – Writing the next chapter in Cornwall's long mining history Cornish Metals* (CUSN CN) – CLICK FOR PDF Europa Metals Limited (EUZ LN) – Drilling starts at Europa's Toral zinc, lead, silver project in Spain Caledonia Mining* (CMCL LN) – Record mine production at Blanket GoldStone Resources (GRL LN) – Settlement of Claim by Former Director IronRidge Resources* (IRR LN) – Further results from Zaranou gold exploration project, Cote d'Ivoire Oriole Resources (ORR LN) – Exploration projects update Tertiary Minerals* (TYM LN) – New copper exploration project in Nevada
Companies: CUSN CMCL AEX GRL ORR TYM EUZ IRR
Companies: AAZ AAU CNR GLEN RIO TSG CCZ IRR
Panoro Energy (PEN NO)C; Target Price: NOK23.00: BW Energy (BWE NO) provides update in Gabon – BW indicated that 4Q20 gross production from the Tortue field was ~13,500 bbl/d, as an 11 day downtime took place in October for the annual maintenance program and to comply with Gabonese production allocations to meet OPEC quotas. A drilling contract for one development well (DTM-7H) and one exploration well has been recently awarded. There is also the option for another exploration well subject to the results of the drilling campaign. Pharos Energy (PHAR LN)C; Target Price: £0.40: Raising US$11.7 mm of new equity – Pharos has raised US$11.7 mm of new equity price at 19.25 p per share. The proceeds will be invested in Egypt to arrest production decline and boost production ahead of securing a farm in partner. IN OTHER NEWS ________________________________________ AMERICAS ExxonMobil (XOM US): Dry hole in Guyana – The Hassa wildcat on the Stabroek block was dry. Gran Tierra Energy (GTE LN/CN): Transaction to divest shares in PetroTal terminated – Gran Tierra, has terminated the purchase agreement with Remus Horizons regarding the proposed sale of 218,012,500 common shares in the capital of PetroTal. In a separate announcement Gran Tierra reported that 109 mm shares with private purchasers for US$14.8 mm Kosmos Energy (KOS US/LN): Discovery in the US Gulf of Mexico – The Winterfell well on the Green Canyon Block 944 encountered ~26 meters of net oil pay in two intervals in the sub-salt Upper Miocene. The well de-risks prospectivity in several neighbouring blocks held by Kosmos, with approximately 100 mmbbl of gross potential within Kosmos' acreage position. Pantheon Resources (PANR LN): Acquisition of acreage in Alaska - Pantheon Resources is acquiring 10.8% WI in each of the 16 leases in the 44,463 acre Talitha Unit from Otto Energy. The consideration consists of 14,272,592 shares of Pantheon. Upon completion of the acquisition, Pantheon will own a 100% WI in the Talitha Unit. Predator Oil & Gas (PRD LN): Operation update in Trinidad – The Pilot CO2 EOR results support pre-injection desktop production plateau forecasts of 243 -547 bbl/d from the Herrera #2 Sand. The CO2 sequestration potential is confirmed. At WTI oil price of US$50/bbl, projected EBITDA net-backs for the P50 and P10 pre-Pilot CO2 EOR production profiles at plateau production are estimated to be in the range US$15 – 25/bbl. Trinity Exploration & Production (TRIN LN): Operating update in Trinidad – 4Q20 production was 3,206 bbl/d. Trinity held net cash of US$17.5 mm at YE20. Westmount Energy (WTE LN): Acquiring further interest in Guyana explorer – Westmount has purchased 287,500 common shares in JHI for an aggregate cost of C$718,750. Westmount holds a total of 5,651,270 shares in JHI, representing ~7.7% of the issued common shares in JHI. Drilling operations at the first well in the Canje drilling campaign, Bulletwood-1, are ongoing, with completion of the well anticipated around mid to late February. Additional Canje drilling will follow-on in 1H21. EUROPE Aker BP (AKERBP NO): Trading update in Norway – Aker BP produced 223.1 mboe/d in 4Q20. FY20 capex was US$1.3 bn, exploration spend was US$246 mm and abandonment spend was US$178 mm. YE20 net debt was US$3.6 bn. Cairn Energy (CNE LN): Trading update – FY20 net production at Catcher and Kraken was just over 21,000 bbl/d, in line with guidance. FY20 cash capex was US$160 mm. FY21 net production is estimated to be 16,000 – 19,000 bbl/d with capex of US$85 mm (including US$10 mm at Kraken and Catcher). At YE20 Cairn held US$570 mm in cash with no drawn debt. In 2021, Cairn is planning to drill an exploration well on Block 10 in Mexico and there is an optional drilling opportunity for an appraisal well of the Saasken discovery (Cairn 15% WI). In the UK, Cairn will participate in the Shell-operated Jaws exploration well on P2380 (Cairn 50% WI). In Côte d’Ivoire, Cairn has assumed Operatorship (90% WI) in blocks CI-301 and CI-302 from Tullow which has exited both licences. The JV has exited blocks CI-518, CI-519, CI-521 and CI-522 effective end December 2020. ExxonMobil (XOM US): Progress at selling UK assets – Media reports indicated that ExxonMobil has entered exclusive discussions with HitecVision/NEO Energy with regards to the divestment of Central and Norther North Sea assets. Repsol (REP SM): Trading update – 4Q20 production was 628 mboe/d. Norway: Exploration licence award – Norway has awarded 61 licences to 30 companies. Equinor, Aker BP, Lundin Energy, DNO, Neptune Energy, Wintershall DEA, OKEA Energy, Var Energy and Spirit Energy were awarded interests in respectively 17, 10, 19, 10, 6, 16, 4, 10 and 3 licences. Serica Energy (SQZ LN): Operating update in the UK North Sea – Estimated FY20 net production from Serica's interests in Bruce, Keith, Rhum (BKR) and Erskine averaged 23,800 boe/d. With regards to the R3 operations, the removal of the 2005 completion is taking longer than anticipated due largely to the unexpectedly poor condition of the equipment being recovered from the well. As a result, R3 operations are now expected to continue into March 2021. Union Jack Oil (UJO LN): Further acquisition of interests in UK asset – Union Jack Union is acquiring a 15% interest in PEDL253, containing the Biscathorpe project from Humber Oil & Gas, increasing its interest to 45%. The consideration consists of £0.5 mm in cash plus a contingent payment of £0.5 mm. FORMER SOVIET UNION JKX Oil & Gas (JKX LN): Operating update in Ukraine and Russia – FY20 production was 10,238 boe/d including 5,389 boe/d in Russia and the balance in Ukraine. JKX held US$24.5 mm in cash at YE20. IG146 was completed to the Devonian in Ignativske (Ukraine) and encountered 2.6 m of net hydrocarbon bearing thickness. After initially testing of the IG146 well at an oil rate of 497 bbl/dd and a gas rate of ~200 boe/d in November the rate declined and the well is currently producing 35 boe/d. MIDDLE EAST AND NORTH AFRICA Apex International Energy: Discoveries in Egypt – The SEMZ-1X well discovered Bahariya oil with 17 feet of indicated pay and and tested at a rate of 100 bbl/d. The well will be fracced to maximize flow rate. The SEMZ-11X well encountered 65 feet of oil pay in the Cretaceous sandstones of the Bahariya and Abu Roash G formations. Testing of the Bahariya resulted in a peak rate of 2,100 bbl/d of oil and no water. DNO (DNO NO): Operating update – FY20 WI production was 95,100 boe/d including 17,300 boe/d in Norwar and the balance in Kurdistan. FY20 capex was US$515 mm increasing to US$700 mm in 2021. DNO held US$475 mm in cash at YE20. The KRG has put a plan in place to make payments towards DNO’s arrears (US$259 mm) such that if Brent prices exceed US$50/bbl in any month, the incremental revenue will be shared 50 50 between the KRG and the Tawke license partners. Energean (ENOG LN): Trading update – FY20 pro forma WI production was ~48.3 mboe/d with pro forma capital expenditure (including exploration expenditure) of US$558 mm. FY21 production is expected to be 35.0 40.0 mboe/d with capex of US$515 – 590 mm, Genel Energy (GENL LN): Operating update in Kurdistan – Gross operated production from the Tawke licence averaged 110,300 bbl/d in 2020, about evenly split between the Tawke and Peshkabir fields. FY20 production at Taq Taq was 9,670 bbl/d with a production rate of 8 mbbl/d at YE20. Sarta produced 520 bbl/d. The Sarta-3 well has produced at an average of ~5,500 bbl/d so far in 2021. Production from Sarta-2 is now expected in February. The 2021 appraisal drilling campaign is targeting a material portion of the 250 mmbbl of existing contingent resources, and prospective resources, in Jurassic formations. The Qara Dagh 2 well is expected to be spudded in 1Q21. FY21 WI Production is expected to be slightly above FY20 (31,980 bbl/d) with capex of US$150-200 mm. Genel held US$354 mm in cash (net cash of US$10 mm) at YE20. The KRG has submitted a reconciliation model for repayment of the receivable relating to the US$159 mm in unpaid invoices, whereby for each cent above a monthly dated Brent average of US$50/bbl, 0.5 cent per working interest barrel shall be paid towards monies owed. TransGlobe Energy (TGL LN): Operating update – Production averaged 12.4 mboe/d (including 11,178 boe/d in Egypt) in 4Q20 and 13.5 mboe/d during FY20. At YE20, TransGlobe held >US$30 mm in cash and had no net debt. SUB-SAHARAN AFRICA BW Energy (BWE NO): Equity raise – BWE has raised US$75 mm of new equity priced at NOK27 per share, representing a 9.5% discount to the previous day close. The net proceeds will be used for capital investments in the Dussafu licence in Gabon, development of the Maromba discovery in Brazil, new ventures and for other general corporate purposes. Total (FP FP) and Royal Dutch Shell (RDSA/B LN): Divestments in Nigeria – Oil Mining Lease (OML) 17 in the Eastern Niger Delta, and associated infrastructure, have been sold to TNOG Oil and Gas for a consideration of US$533 mm net to Shell (30% WI) and US$180 mm net to Total (10%). EVENTS TO WATCH NEXT WEEK ________________________________________ 27/01/2021: Tullow Oil (TLW LN) – Trading update 28/01/2021: Lundin Energy (LUNE SS) – 4Q20 results
Companies: AKERBP CNE DNO ENOG XOM GENL GTE JKX KOS PEN TAL PHAR REP RDSA SQZ FP TGL
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
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
Pantheon announced that it is acquiring the 10.8% of the Talitha Unit it does not already own, bringing its interest to 100% in the unit. The vendor, Otto Energy Alaska, will be provided with 14,272,592 shares in Pantheon Resources as consideration. The company continues to drill ahead with the Talitha#A well. The transaction is value accretive for Pantheon and we increase our fair value estimate to 89p from 83p. As a reminder, our fair value estimate includes 25% of our successcase valuations in respect of two of the four targets that the Talitha#A well is intended to evaluate, namely, the Talitha Brookian Shelf Margin Deltaic and the Talitha Kuparuk
Companies: Pantheon Resources plc
