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: AKERBP AOI CNE CNE DGOC EGY ENOG ENQ GENL GKP GPRK GTE HUR IOG JSE KOS LUNE MAHAA OKEA ORC/B PEN PHAR PMO TAL PXT RRE SDX SEPL TETY TGL TLW TXP WRL
Panoro Energy (PEN NO)C: Initiating coverage | 88 Energy (88E LN/AU): Acquisition in Alaska | BP (BP LN): Transaction in Alaska with Hilcorp renegotiated | Columbus Energy Resources (CERP LN): Oil discovery in Trinidad | Premier Oil (PMO LN) and Rockhopper Exploration (RKH LN): Sea Lion farm out (Falklands) exclusivity period extended | BP (BP LN): 1Q20 results | Equinor (EQNR NO): Dry hole in Norway | Getech (GTC LN): Business update | Hurricane Energy (HUR LN): Business update in the UK North Sea |IGas Energy (IGAS LN): Shutting some production in the UK | Lundin Energy (LUP SS): 1Q20 results | OKEA (OKEA NO): 1Q20 update in Norway | OMV (OMV AG): 1Q results | Premier Oil (PMO LN): Court approves schemes of arrangement | Royal Dutch Shell (RDSA/B LN): 1Q20 results and dividend reduction | RockRose Energy (RRE LN): Operational update in the UK | UK Oil & Gas (UKOG LN): £1.275 mm equity raise | Caspian Sunrise (CASP LN): Operating update in Kazakhstan | Exillon Energy (EXI LN): February and March production in Russia | Nostrum Oil & Gas (NOG LN): 1Q20 update in Kazakhstan | PetroNeft (PTR LN): Operations update | Genel Energy (GENL LN): Update in Kurdistan – While negotiations are ongoing the KRG will not exercise the notice of an intention to terminate the Bina Bawi PSC | ShaMaran Petroleum (SNM CN): Business update in Kurdistan | Tethys Oil (TETY SS): Production reduction in Oman | Total (FP FP): Dry hole in Lebanon | Aminex (AEX LN) and Solo Oil (SOLO LN): Licence extension in Tanzania | Far Limited (FAR AU): Update in Senegal | Lekoil (LEK LN): Final payment with Nigerian partner rescheduled | Orca Exploration (ORC.A/B CN): FY19 results | Savannah Energy (SAVE LN): Financial and operating update in Nigeria | San Leon Energy (SLE LN): Special dividend | Seplat Petroleum (SEPL LN): 1Q20 results
Companies: 88E AEX PEN BP/ CASP CERP EQNR EXI FAR FP HUR GENL GTC IGAS LEK LUNE NOG OKEA OMV ORC/B PMO PTR RKH RDSA RRE SAVE SLE SEPL SNM TETY SOLO UKOG
Canacol Energy (CNE CN) (not covered): 3Q19 results | Geopark (GPRK US)1 ; BUY, U$26.00: FY20 work programme, launching a dividend | Gran Tierra Energy (GTE CN/LN); HOLD, C$2.00: Struggling for consistency in 3Q19 miss, lower volumes and higher capex on deck for 4Q19e | Aker BP (AKERBP NO) (not covered): Dry well in the North Sea | I3 Energy (I3E LN)1 ; SPECULATIVE BUY, £1.50: Raising £5 mm of new equity with Junior Loan Notes holders | Orca Exploration (ORC.A/B CN) (not covered): Independent gas report in Tanzania
Companies: CNE GPRK GTE I3E ORC/B
Bahamas Petroleum Company (BPC LN) (not covered): Statement re potential fundraising | Igas Energy (IGAS LN) (not covered): New debt facility signed | Orca Exploration (ORC.A/B CN) (not covered): Operational update in Tanzania |
Companies: BPC IGAS ORC/B
Phoenix Resources (PGR LN) (not covered): Vaca Muerta update in Argentina | Africa Oil (AOI CN/SS): BUY, C$2.60; 2Q19 results | Orca Exploration (ORC.A/B CN) (not covered): 2Q19 results
Companies: PGR AOI ORC/B
Range Resources (RRL LN/RRS AU) (not covered): China transaction update | Eni (ENI IM) (not covered): 2Q19 results | Equinor (EQNR NO) (not covered) & Lundin Petroleum (LUPE SS) (not covered): Small oil discovery at the Utsira High | Independent Oil & Gas (IOG LN)1 ; BUY, £0.50: Game changing farm out of assets to a company of Warren Buffet | Block Energy (BLOE LN) (not covered): Production resumption in Georgia | Orca Exploration (ORC.A/B CN) (not covered): Review of strategic alternatives
Companies: RRL ENI IOG BLOE ORC/B
Petrobras (PETR3 BZ) (not covered): To sell shallow water assets, in Brazil, for US$1.5 bn | ENI (ENI IM) (not covered): Discovery in Vietnam | Equinor (EQNR NO) (not covered): 2Q19 results | Total (FP FP) (not covered): 2Q19 results | Orca Exploration (ORC.A/B CN) (not covered): Operational update in Tanzania
Companies: Eni SpA Orca Energy Group, Inc.
PetroTal (PTAL LN/TAL CN)1; BUY, £0.40: £20 mm equity placing to grow production to 10 mbbl/d by YE19 | i3 Energy (I3E LN)1; Speculative Buy, £1.80: Closing of £22 mm junior facility is very good news | Rockhopper Exploration (RKH LN) (not covered): Egypt update | Orca Exploration (ORC.A/B CN) (not covered): Rejection of offer
Companies: TAL I3E RKH ORC/B
PetroTal (PTAL LN/TAL CN)1 ; BUY, £0.40: Very positive operational update in Peru | i3 Energy (I3E LN)1 ; Speculative Buy, £1.80: Investment and further commitment to the junior facility | Ithaca Energy acquires Chevron’s UK North Sea assets | Neptune Energy: 1Q19 results | Cadogan Petroleum (CAD LN) (not covered): Well update in Ukraine | Greenfields Petroleum (GNF CN) (not covered): 1Q19 results | Orca Exploration (ORC.A/B CN) (not covered): New gas sales agreement with TPDC in Tanzania
Companies: TAL I3E CAD GNF ORC/B
Echo Energy (ECHO LN) (not covered): Portfolio restructuring & new CEO | Volga Gas (VGAS LN) (not covered): Operational update in Russia | Orca Exploration (ORC.A/B CN) (not covered): 1Q19 results
Companies: ECHO VGAS ORC/B
Alvopetro Energy (ALV CN) (not covered): FY18 results in Brazil | PetroTal (PTAL LN/TAL CN)1; BUY, £0.40: YE18 2P reserves flat, but value up | BP (BP LN) (not covered): Exiting shale gas assets in China | Europa Oil & Gas (EOG LN) (not covered): Results for the 6 month period ending 31/01/2019 | Tethys Oil (TETY SS)1,6; HOLD, SEK85: Production update in Oman | Orca Exploration (ORC.A/B CN) (not covered): FY18 results
Companies: ALV TAL BP/ EOG ORC/B TETY
Ascent Resources (AST LN) (not covered) | Carlyle buys a stake in Cepsa | Volga Gas (VGAS LN) (not covered): FY18 results | SDX Energy (SDX LN/CN)1,6; BUY; £0.65 – Delisting from the TSX and potential delays at South Disouq | Orca Exploration (ORC.A/B CN) (not covered): Reserves update in Tanzania | Tlou Energy (TLOU LN) (not covered): New equity issue for Southern Africa
Companies: AST VGAS ORC/B TOU SDX
Columbus Energy Resources (CERP LN) (not covered): Operational update in Trinidad | President Energy (PPC LN) (not covered): Production update in Argentina | Regal Petroleum (RPT LN) (not covered): Ukraine update | Soco International (SIA LN) (not covered): Trading update | Faroe Petroleum (FPM LN); HOLD, £1.75: DNO increases its offer for Faroe | Independent Oil & Gas (IOG LN); BUY, £0.70: Boosting the value of the core developments | Lundin Petroleum ( LUPE SS) (not covered): Dry hole in Norway | Orca Exploration (ORC.A/B CN) (not covered): Operational update in Tanzania
Companies: CERP PPC ENW PHAR FPM IOG LUNE ORC/B
Canacol Energy (CNE CN) (not covered): 2Q18 results | Ecopetrol (EC US) (not covered): 2Q18 results | ENI (ENI IM) (not covered): Dry hole in Vietnam | Condor Petroleum (CPI CN) (not covered): 2Q18 results | Woodside Petroleum (WPL AU) (not covered): Transaction in Bulgaria | Africa Oil (AOI CN/SS): BUY, C$2.30: 2Q18 results | Orca Exploration (ORC.A/B CN) (not covered): 2Q18 results | Savannah Petroleum (SAVP LN) (not covered): Discovery in Niger | Weekly Crude Oil Cut Price direction: sideways (or modestly lower).
Companies: CNE ECOPETL ENI CPI WPL AOI ORC/B SAVE
Cabot Energy (CAB LN)1 ; Speculative BUY, £0.10: Operational update | Faroe Petroleum (FPM LN)6 ; BUY, £1.60: Additional well in the 2018 exploration programme in Norway | OMV (OMV AG) (not covered): 1Q18 results | Gulf Keystone Petroleum (GKP LN) (not covered): Payment in Kurdistan | Orca Exploration (ORC CN) (not covered): 1Q18 results
Companies: FPM OMV GKP ORC/B CAB
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Trinity has announced a strong set of interim results during a highly volatile period, with production increasing by 9% year-on-year to 3,282bopd (H1/19 3,007bopd). Operating break-even's post hedging in H1/20 reduced to US$22.3/bbl, a 15% year-on-year reduction and a 65% reduction since 2014. Similarly, a relentless drive to improve efficiencies and reduce costs has seen G&A and opex fall by 67% and 65% respectively since 2014. Despite the dramatic fall in oil prices, Trinity's strong production performance combined with its receipt of VAT receivables via a VAT Bond sale and the drawdown of a small working capital facility facilitated cash balances increasing by 43% to US$19.7m from YE2019. Trinity is well positioned to grow both organically and inorganically, with Trinity signing MoU's and submitting EOI's (in consortium with Cairn Energy Plc) to pursue new opportunities of scale. We set our price target a 31p/share, a 248% premium to the current share price and reiterate our BUY recommendation.
Companies: Trinity Exploration & Production Plc
Central Asia Metals (CAML LN) announced robust Q2 2020 operating statistics which highlight that there were no COVID-19 related interruptions, in part due to stringent measures put in place by the company. Q2 2020 copper output of 3.4kt was down 6% YoY, up 6% QoQ, however, H1 2020 total production was flat at 6.6kt indicating the company is on track for our 13.4kt 2020F target. Q2 Lead and zinc production of 7.5kt and 6.1kt were up 3% and 5% YoY although both were down 1% QoQ respectively. For H1 2020 12.2kt of zinc and 15.1kt of lead were up 5% and 6% which was primarily due to higher throughput.
Companies: Central Asia Metals Plc
Oil posted its first back-to-back weekly loss since April's rout with the end of the summer driving season and concern about OPEC's production compliance weighing on prices.
Futures in New York edged up on Friday, but prices fell 6.1% this week coinciding with a retreat in U.S. equities. Traders are also examining data indicating the United Arab Emirates since July has been regularly exceeding its quota under a deal between the Organization of Petroleum Exporting Countries and its allies.
The uncertainty over how much supply OPEC+ is returning to the market adds another wrench in the recovery for oil prices still reeling from the pandemic-driven blow to consumption. While U.S. supplies had grown tighter in past months and producers were expected to restrain production amid a weak financial backdrop, stockpiles rose again last week for the first time since mid-July.
Companies: XOM HES KOS JSE 88E ADV CAD CHAR ECHO ENOG EME I3E PMG RBD SQZ SOU TLW VGAS WTE PHAR
SDX Energy is a £35 mm market cap full cycle exploration and production company with low cost (6 mboe/d) and reserves (>10 mmboe) in Egypt and Morocco. In contrast to most peers, SDX’s business is insulated from oil price moves with ~90% of the production being fixed-price gas on LT contracts. Recent drilling successes have opened up additional low risk/low cost/short cycle exploration and development upside in both countries. SDX will soon embark on a multi-year exploration programme. With infrastructure already in place, any discovery will be highly accretive and can be developed from SDX’s own source of funds. With the financial support of Waha Capital, a large Middle East fund and a >19% shareholder in SDX, the company is looking to make accretive acquisitions.
Morocco: capturing growing demand with very profitable supply
SDX holds 75% WI in five Gharb basin licences onshore with ~6 mmcf/d gross production. WI 2P reserves are only ~6 bcf over multiple small pools but gas is sold at U$10-11/mcf and costs US$7 mm. Gas demand in the area is growing but it is still constraining potential production. Recent drilling success opened up >40 bcf of additional WI resources, which could allow SDX to capture new customers in new markets and materially grow production and cash flow.
Egypt: >110 bcf in production. Growing inventory of low risk prospects. High capital efficiency
The key asset is the South Disouq licence (SDX WI: 55%) onshore Nile Delta. SDX is chasing four different proven plays. SDX has already discovered >110 bcf with 1H20 production of ~53 mmcf/d (gross). ~100 bcf gross prospective resources have been mapped across five prospects with typical chance of success (CoS) of ~40-50%. The prospective resources volumes are expected to grow materially with the ongoing mapping of additional targets. Although realized prices are fixed at ~US$2.85/mcf, a typical 20 bcf discovery costs only US$0.35/mcf to drill and tie back. NPV15 for a gas discovery is ~US$0.6 mm/bcf (US$0.6/mcf), implying ~70% return on risked exploration capex.
SDX shares trade at EV/DACF multiples of ~1.3x in 2020. Our 2P NAV is £0.27 per share, representing 70% upside. The prospective resources already identified have an unrisked NAV of £0.12 per share for Egypt (+75%) and £1.03 per share for Morocco (+600%). The main exploration drilling programme is restarting in 2021 but the company should test the LMS-2 well in Morocco in 4Q20, should COVID-19 restrictions be lifted. A success would derisk ~5 bcf WI resources at LMS-2 (+£0.13 per share) and a further ~20 bcf WI resources in the wider La Mimouna area (+£0.50 per share). Our target price of £0.40 per share (~ our ReNAV) represents ~150% upside.
Companies: SDX Energy Plc
Discussions on alternative transactions
Companies: Premier Oil Plc
Three day CMD to detail how BP will redeploy hydrocarbons’ capital into renewables. The latter are expected to grow by 12% CAGR by 2030, which surely is more exciting than oil. Returns do not compare though, but BP intends to make good use of its trading division to bridge part of the gap. Lowering the dividend took care of the rest. Overall, BP diversifies its risks early, which might prove right if oil stays under $50.
Companies: BP Plc
The COVID-19 pandemic has had a significant impact globally in many areas. While primarily a health issue, it has had wide-ranging implications for stock markets, which have now rallied after the plunge in share prices in mid-March when the full severity of the emerging pandemic became more widely appreciated. Nonetheless, the FTSE 100 Index remains almost 20% off its late February 2020 figure.
Companies: AVO ARBB ARIX CLIG DNL GDR ICGT NSF PCA PIN PXC PHP RECI STX SCE TRX SHED VTA YEW
Shanta Gold (AIM: SHG), the East Africa-focused gold producer has today announced a summary of historic exploration drilling carried out at its recently acquired West Kenyan project. We have included the significant drill intercepts that the company highlighted in the announcement.
Companies: Shanta Gold Ltd.
Salt Lake released an update on the Lake Way project which is now 60% complete on an earned value basis. Construction of the process plant is on-schedule with practical completion and first SOP production planned for the March quarter 2021. Major vendor procurement packages are over 90% committed with fixed costs. At the process plant site concrete foundations are more than 80% complete, installation of structural steel supplied has commenced and first carbon steel tanks have been installed. Long lead procurement items have commenced arriving on site including the crystallisers with associated components and tanks, and transformers. Vendor packages currently in transit to site include lump breaker, attritioners, wet screens and centrifuges. All permanent buildings are now on site and installed and 4G communications has been installed across site.
Companies: Salt Lake Potash Ltd.
Technical review update; H1 2020 results
Companies: Hurricane Energy Plc
Phoenix today provides a further update from its summer drilling program in Idaho. Results in from the Empire deposit continue to show promise in extending the resource, with the targeted zones all at shallow depths and several high-grade intercepts. The inclusion of a recognised high-grade gold zone and additional zones of copper mineralisation will, in all likelihood, lead to an increase in the size and grade of the mineral resource and the overall metal inventory in our opinion. A new resource calculation and updated PEA are expected in Q4 2020; Phoenix are continuing their fast track study on the deposit.
Companies: Phoenix Copper Ltd. (United Kingdom)
Placing raising £7m; H1 2020 results
Companies: Union Jack Oil Plc
Against a challenging sector backdrop, Union Jack successfully navigated the first six months of 2020, progressing its core asset portfolio in addition to securing additional interests in key projects (Wressle and Biscathorpe). The remainder of the year promises to be a transformational period for the Company, with first commercial oil production at Wressle in addition to the imminent drilling of the West Newton B-1 well and an Extended Well Test at the West Newton A-2 appraisal discovery. We therefore retain our rating and 0.82p/share TP.
Shanta Gold (AIM: SHG), the East Africa-focused gold producer, has announced drill results from the New Luika Gold Mine (NLGM) and Black Tree Hill Deposit as well as a new reserves and resources statement for the combined group. We have included a summary of the new inventory below.
Possible all-share offer for Deltic Energy
Companies: Independent Oil & Gas Plc