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: VLE TXP TGL SNM SEN RBD TAL DGOC BPC ALV AOI
PetroTal (PTAL LN/TAL CN)C; Target: £0.45: Initiating coverage – PetroTal is a production and reserve growth story in Peru with a market cap of ~£90 mm. Management’s experience of operating in the jungle and their deep in country relationships are key. Project execution has been excellent. The Bretaña field (48 mmbbl 2P reserves) was acquired from Gran Tierra in late 2017 with production of 1 mbbl/d achieved in 3Q18. By YE19 that figure had grown to >13 mbbl/d. While COVID-19 forced a shut down of the export infrastructure and Brent prices collapsed to ~US$20/bbl, PetroTal has managed to negotiate with Petroperu a reduction in transport fees and a rephasing of a contingent payment. With the recent US$18 mm equity raise strengthening the balance sheet and production expected to restart in July, PetroTal is returning to growth. Bretaña could produce 20 mbbl/d. PetroTal’s shares trade at ~ one quarter of our Core NAV of £0.46 per share and at one third of the company’s value based on its 2P reserves only (2P NAV of £0.28 per share). On flat production, the share price implies EV/DACF multiples of 1.0x in 2021 turning negative in 2022. Importantly PetroTal’s only material liabilities consist of (1) an oil linked contingent payment over three years to Petroperu on very flexible terms and (2) trade payables of US$49 mm with attractive payment terms. We forecast ~US$45 mm of capex (incl. servicing the payables) in 2H20. This is covered by (1) US$28 mm in cash from a recent equity raise plus collecting pending invoices from oil sales, (2) >US$10 mm of VAT receivables and (3) ~US$25 mm operating cash flow (US$11-12/bbl net backs) in 2H20 at US$38/bbl. At ~US$45/bbl and 12 mbbl/d in 2021, we forecast PetroTal generates ~US$90 mm cash flow with ~US$35 mm cash capex (incl. servicing the payables). Our target price of £0.45 per share (~our Core NAV) represents 4.5x the current share price.
i3 Energy (I3E LN): Corporate update | Parex Resources (PXT CN): Trading update in Colombia | Phoenix Global Resources (PGR LN): FY19 results | Royal Dutch Shell (RDSA/B LN): Dry hole in Brazil | IGas Energy (IGAS LN): Trading update | Serinus Energy (SEN LN): Deferred EBRD debt repayment | Union Jack (UJO LN): Additional interest in UK asset | SDX Energy (SDX LN): Update in Egypt and Morocco| ShaMaran Petroleum (SNM CN): Payment from KRG and debt restructuring | United Oil & Gas (UOG LN): Reserves and production update in Egypt | FAR (FAR AU): Not paying cash call in Senegal | Lekoil (LEK LN): Update in Nigeria | San Leon Energy (SLE LN): FY19 results | Savannah Energy (SAVE LN): Trading update | Victoria Oil & Gas (VOG LN): Trading update in Cameroon
Companies: SEN SDX TAL PGR VOG PXT SAVE RDSA FAR
Serinus Energy (SENX LN) - Moftinu well flows 6.0MMscf/d on test, Romania | IGas Energy (IGAS LN): 2P NPV10 increases by US$20m
Companies: SERINUS ENERGY IGas Energy Plc
This note takes a look at UK oil and gas sector equities from the supermajors down to the small cap E&Ps, the extent to which they outperform a simple bet on oil prices, and whether there are common characteristics that can allow investors to pick winners in the space. We conclude that outperformance is possible and has been achieved by numerous names in the last ten years, with the core hallmarks being asset base augmentation, either by progressing assets and/or via acquisition, and possessing the agency to achieve this. We also include profiles of the oil and gas stocks in our coverage.
Companies: BLVN GENL GEEC GKP HTG HUR IOG JOG LAM PANR PMO RKH SEN
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 CPI AOI TLW
Serinus has released its Q3 2019 results. These report Q3 production of 2.1mboe/d (1.7mboe/d from Romania and 0.4mboe/d from Tunisia), making for 1.2mboe/d for the Q1-Q3 period, and representing a significant increase on the 0.7boe/d reported for H1 2019. This has been achieved mainly on the back of the Moftinu gas plant in Romania (brought onstream in April), but also the Chouech Es Saida field in Tunisia being brought back into production over the summer. This, alongside strong realised Romanian gas prices averaging US$7.3/mcf over Q1-Q3, has driven Q3 EBITDA of US$4.1m, for a total of US$5.2m for Q1-Q3; and Q3 FCF of US$1.6m, for a total of US$2.3m for Q1-Q3. Net debt at the end of September was US$28.2m, from US$29.1m at the end of June. Unit OPEX was US$11.8/boe for Q1-Q3, from US$16.5/boe in H1, with the positive impact from higher production partly countered by increased costs in Tunisia bringing Chouech Es Saida back onstream.
Companies: SERINUS ENERGY
3Q19 WI production was 1.5 mboe/d (GMP FEe: 1.4 mboe/d), comprising 1.0 mboe/d in Romania (GMP FEe: 1.0 mboe/d) and 0.4 mboe/d in Tunisia (GMP FEe: 0.4 mboe/d).
October production was 1.3 mboe/d (GMP FEe 4Q19: 1.4 mboe/d), comprising 0.7 mboe/d in Romania (GMP FEe 4Q19: 0.9 mboe/d) and 0.6 mboe/d in Tunisia (GMP FEe 4Q19: 0.5 mboe/d).
In Romania, October production was impacted by routine maintenance of the Moftinu gas plant from October 14 to October 20 and the subsequent ramping up of the Moftinu production on a smaller choke.
In Tunisia, the company recommenced production at the Chouech Es Saida field during the quarter and exited October with production from the field of 277 bbl/d.
End 3Q19 net debt was c. US$27.1 mm (GMP FEe: c. US$27.8 mm).
Eco (Atlantic) Oil & Gas (ECO): Encouraging Guyana Operational Update | Serica Energy (SQZ): Receipt of OFAC License and Assurance for Rhum | Serinus Energy (SENX): 12-month extension at Satu Mare, Moftinu-1004 to be drilled in January 2020
Companies: EOG SQZ SEN
Serinus has been granted a 12-month extension on the third exploration phase of the Satu Mare Concession in Romania. The company is proceeding with the drilling of the Moftinu - 1004 production well in 1Q20. The third exploration phase was set to expire on 26 October 2019.
Petro Matad (MATD LN) (not covered): Operating update in Mongolia | Equinor (EQNR NO) (not covered): 3Q19 results | Serinus Energy (SENX LN); SPECULATIVE BUY, £0.20: Licence extension in Romania | Serica Energy (SQZ LN) (not covered): North Sea update | Waldorf Production acquiring UK North Sea assets
Companies: MATD SEN SQZ
Serinus has announced that the Romanian regulator has granted a 12- month extension to the current phase of its Satu Mare block, in order to allow the existing work commitment to be met. The commitment is for a minimum 120 sq. km of 3D seismic. Serinus now has a 148 sq. km programme fully permitted, but this was not achieved in time to meet the original 26 October 2019 deadline (the company has to negotiate with numerous local landowners). As such, the licence phase has now been extended until 28 October 2020, and the new seismic programme is expected to go ahead in Q2 2020 in order to take advantage of local weather conditions.
Following continued delays of a Brexit agreement, few sectors within the UK market have remained attractive to investors despite low valuations. One sector which has continued to outperform despite the political drama has been the UK video gaming sector (henceforth UK gaming), which we are fans of. We believe a combination of sector-leading growth, strong cash conversion and timely cyclical positioning support our positive view on the UK video gaming sector.
Companies: ABBY AMS ANX ARS ATYM AVON BLVN PIER BUR CGS CAML CDM CSRT TIDE CYAN JET2 DEMG ELM EMR FPO FDEV GTLY GENL GHH GRI GEEC GKP HMI HAYD HEAD HILS HTG HUR IBPO IOG INDI JHD JOG KAPE KEYS KWS KCT KGH LAM LIT LOK MACF MANO MOD OXIG PCA PANR APP SRE PHC PMO RBW RMM RBGP REDD RSW RNO ROR SUS SCPA SEN SHG SOLG SOM SUMO TM17 INCE TWD TRAK TRI VNET VTC ZOO ZTF
Jadestone Energy (JSE): Southwest Vietnam Field Development Plan | Echo Energy (ECHO) – Acquisition agreement withPhoenix Global Resources | Block Energy (BLOE): Successful Cementing of Casing at Well WR-38Z | PetroTal (PTAL) – PetroTal achieves record production at Bretaña, Peru | Serinus Energy (SENX) - Moftinu gas production has resumed | Lekoil (LEK) - Phase Two Development Project Sanctioned
Companies: JSE ECHO BLOE TAL SEN LEK
African Export-Import Bank a supranational financial institution w hose purpose is to facilitate, prom ote and expand intra- and extra- African trade, of its potential intention to publish a registration document, the Bank hereby confirms its intention to proceed with an Initial Public Offering. The GDRs are expected to be admitted to the standard listing segment of the Official List of the FCA and to trading on the Main Market of the LSE.
Companies: GFIN WRES BEG MIND BLOE JAY DXRX ASH SEN EMIS
Bahamas Petroleum Company (BPC LN) (not covered): Equity raise and convertible for Bahamas | Serinus Energy (SEN LN); Speculative Buy, £0.20: Operating update | Regal Petroleum (RPT LN) (not covered): Operating update in Ukraine | Tethys Oil (TETY SS)1,6; BUY, SEK85: September production in Oman | TransGlobe Energy (TGL LN/CN)1,6; BUY, £2.40: Operating update
Companies: BPC SEN ENW TGL TETY
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In H1, 2020 and the period directly following (Q3, 2020), EQTEC has made substantial operational progress, significantly boosting its project pipeline and strengthening its balance sheet with an over-subscribed £10m fund raising in July 2020. Revenue generation in H1, 2020, however, was constrained due to the impacts of Covid-19 and severe fires in California. We now forecast revenue of €2.4m in 2020E, compared with our previous forecast of €7.0m. Importantly, no projects have been cancelled. Delayed revenue is expected to flow into 2021E. Select new projects, having been secured in 2020, are expected to reach financial close in 2021E and 2022E, in addition to those existing projects under development in those years. As a result, we are increasing our 2021E and 2022E forecasts.
Companies: EQTEC Plc
Adriatic Metals* (ADT1 LN) – Annual results and review of exploration | AfriTin (ATM LN) –– H1 report highlights production ramp-up at the Uis mine | Ariana Resources* (AAU LN) – US$30m partial disposal of Turkish Assets | Anglo Asian Mining* (AAZ LN) – BUY – Gedabek continue unaffected by the Nagorno-Karabakh conflict | Cornish Lithium (Private) - Cornish Lithium looking to bring the EV supply chain closer to home | IronRidge Resources* (IRR LN) – FY20 results: well positioned to continue de-risking portfolio projects with A$7.3m in the bank | Kavango Resources (KAV LN) – Resuming field exploration of the Kalahari Copper Belt, Botswana | Power Metal Resources (POW LN) – Exploration gets underway on Botswana joint-venture | Rambler Metals and Mining* (RMM LN) – Interims and refinancing of debt and planned restoration of mine production at higher copper grade | Renascor Resources (RNU AU) – Offtake agreement with Chinese anode manufacturer highlights China’s dominance of supply chain | Trans-Siberian Gold (TSG LN) – 8c interim dividend declared reflecting robust FCF and strong outlook | Versarien* (VRS LN) – New Advisory Panel brings together global leaders in graphene within Versarien
Companies: ADT1 ATM AAU AAZ IRR KAV POW RMM RNU TSG VRS
The offtake agreement between Piedmont lithium (ASX:PLL) and Tesla (NasdaqGS:TSLA) announced on 28.09.2020, whereby Piedmont will supply a new lithium hydroxide plant to be built by Tesla in Texas with spodumene concentrate, has created some strong buying momentum for lithium stocks in North America and Australia. The Piedmont share price was up over 200% after the announcement with Tesla – though the magnitude of the rise perhaps had more to do with the Tesla brand.
Companies: Savannah Resources Plc
Talitha Shelf Margin Deltaic LKA resource report
Companies: Pantheon Resources Plc
The stock was up 12% on Friday, 25/09, sparked by the positive outcome on Vodafone’s dispute with the Indian tax authorities. This is encouraging for Cairn, but note that both cases differ. While the tax authorities simply erased Vodafone’s tax bill, they owe up to $1.4bn to Cairn, and could offer more resistance.
Companies: Cairn Energy Plc
Another set of record results from Iofina, with H1 2020 benefiting from improved iodine pricing, solid cost controls and robust operational performance. Some of the shine will be taken off by the cautionary tone over the impact of COVID-19 on current iodine demand and pricing. Nevertheless, these results on top of the recent debt refinancing again demonstrate the continued improvements Iofina is delivering both operational and financially. It now has a solid platform of diversified low cost iodine production from five plants, a range of iodine and non-iodine specialty chemicals products, an improved balance sheet and a new lending partner with which to deliver its ‘prudent growth’ ambition.
Companies: Iofina Plc
Jersey Oil & Gas has announced that it has selected a greenfield four-legged platform to develop the Greater Buchan Area which will utilise existing export pipeline infrastructure. We see near-term scope to increase materially our fair value estimate from 268p. We believe that today's news is price material and that it sets the scene for a near-term catalyst rich outlook for the company. It is an opportune time, in our opinion, to gain exposure to the Jersey Oil & Gas investment opportunity.
Companies: Jersey Oil & Gas Plc
On Monday, Piedmont Lithium announced a Tesla offtake agreement for 30% of its future spodumene concentrate production. Piedmont’s shares jumped from A$0.10 cents to A$0.38 cents and closed at A$0.30 cents this morning. In addition to the positive association with Tesla, we believe that the market now recognises the reality of Piedmont’s project and upcoming spodumene shortages. Key takeaways for Savannah shareholders are:
Since our last note, KEFI has continued to advance towards its goal of achieving production in FY22. Among other things, this has included raising £3.7m in equity in May and establishing early-stage mining specialist, RAB Capital, as a cornerstone investor. More recently, it has also announced a maiden mineral resource at Hawiah (in Saudi Arabia) of 19.3Mt at a grade of 1.86% copper equivalent containing 359kt CuE (or 1.2Moz AuE) and a corresponding preliminary economic assessment (PEA), which confirms it as a high priority target. The company has consistently maintained its goal of formally agreeing its full funding structure with all participants in October 2020, ahead of construction in FY21 and first gold in FY22 and, to this end, development activities have continued unabated, despite COVID-19.
Companies: KEFI Gold & Copper Plc
Stable platform agreement with creditors extended
Companies: Premier Oil Plc
Central Asia Metals (CAML LN) reported robust interim results in the context of the H1 2020 backdrop; solid production and the company’s fundamentally low cost base meant that CAML remained profitable despite the sharp pullback in commodity prices during the period which led to a 17% YoY decline in revenue to US$70.8m. Consequently, EBITDA was down 25% YoY to US$42.5m despite a decline in unit costs of 6% YoY at Kounrad and 9% YoY at Sasa to US$0.48/lb and US$0.43/lb respectively which cushioned the impact of the weaker the top line. With no significant one offs in the period, EPS of US$0.10/sh. was 33% lower YoY.
Companies: Central Asia Metals Plc
H1 2020 results; progress on concept selection
H1/20 has been a highly successful period for United Oil & Gas, during which time it has successfully transformed into a full-cycle E&P company. Key to this success has been the Abu Sennan acquisition, with net production increasing to 2,700boepd at the end of June. The significant production and reserve additions delivered as part of the 2019-20 drilling campaign emphasises the considerable upside that still remains in the block. Post period, United were granted a 100% operated working interest and an 18-month extension to the Walton-Morant licence, offshore Jamaica. At 229mmbbls, the Walton-Morant licence has the potential to have a major impact on United, which we value at US$724.3m or 76.8p/share unrisked. We update our valuation, increasing our price target to 19.1p/share, a 549% premium to the current share price and reiterate our BUY recommendation.
Companies: United Oil & Gas Plc
Chariot’s interims represent something of a line in the sand for the new management team, with historic oil-focussed deepwater exploration spend written-off, demonstrating its recent corporate and strategic ‘reboot’, which has ushered in a more entrepreneurial approach. Strategy has shifted away from higher-risk frontier exploration in favour of opportunities that better fit the energy transition. With the annual cash burn cut 45% to US$2.5m, no remaining work commitments and period-end cash of US$5.8m, management has a clear path ahead to deliver on its ambitions.
Companies: Chariot Oil & Gas Ltd.
Hargreaves’ FY20 results are very solid indeed. As previously reported, the only noticeable impact from COVID was in the slippage of Blindwells’ land sales, which were due to conclude during the lockdown period. Site activity has resumed and sales remain on track to conclude in the current year. A final dividend of 4.5p has been declared and the outlook statement is measured but confident. We reintroduce forecasts today, effectively reinstating our pre-COVID expectations. Hargreaves is well positioned to deliver a period of significant, renewed growth with the prospect of a double digit dividend yield from FY22 as HRMS profits are distributed.
Companies: Hargreaves Services Plc