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
U.S. futures and European stocks dropped on Friday as investors mulled a reported conflict among policy makers over a stimulus package for the single-currency region, as well as political upheaval in France.
The Stoxx 600 Index fell after Bloomberg News reported the European Central Bank is facing a potential rift over how much their emergency bond-purchase program should stay weighted toward weaker countries such as Italy. The euro fluctuated following French President Emmanuel Macron's decision to name a new prime minister after asking his government to resign. Rolls-Royce Holdings Plc slumped after the British jet-engine maker said its exploring options to raise funds to strengthen its balance sheet.
The dollar was slightly down, posting its first weekly drop in a month, while American cash equity and bond markets were shut for Independence Day. President Donald Trump will attend an early July 4 celebration at Mount Rushmore with thousands of guests who won't be required to wear masks, while his U.K. counterpart Boris Johnson urged Britons to act responsibly as pubs prepare to re-open and the government lifts quarantine rules on travel for 60 countries.
The friction at the ECB highlights the risk to markets should promised stimulus measures fall short. Investors continue to weigh policy support and upbeat economic data against relentless new outbreaks of the virus. U.S payrolls figures Thursday fuelled optimism of a V-shaped recovery in the world's biggest economy, even as Florida reported that infections and hospitalizations jumped the most yet, and Houston had a surge in intensive-care patients. Emerging-market stocks posted the biggest weekly gain in a month.
Elsewhere, crude oil dipped but remained on track for a weekly gain.
Companies: TGL JSE IAE ADME BP/ DGOC ENOG NTQ NTOG PMO RBD ZPHR RDSA UKOG TRIN
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
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 GPRK DGOC GTE PXT TRIN TXP CPI PMO SEN VLE CASP GENL PHAR SNM TGL AOI EGY KOS
Energean Oil & Gas (ENOG LN): 32% uplift in resource base delivers firm gas sales contracts | Regal Petroleum (RPT LN): FY19 Results - Revenues cash flows hit by subdued Ukrainian commodity pricing | IGas Energy (IGAS LN): Robust FY19 results despite volatile pricing | TransGlobe Energy (TGL LN): Further hedging protection secured
Companies: ENOG ENW IGAS TGL
88 Energy (88 LN/AU)/Premier Oil (PMO LN): Drilling update in Alaska | Eco (Atlantic) Oil & Gas (ECO LN/EOG CN): Update in Guyana | Maha Energy (MAHA-A SS): Acquisition in USA and production update | Parex Resources (PXT CN): Low capex programme and production update in Colombia | Total (FP FP): Significant discovery in Suriname | Aker BP (AKERBP NO): Small discovery on Norway | BP (BP LN): 1Q20 update and capex reduction | Providence Resources (PVR LN): US$3 mm equity raise | RockRose Energy (RRE LN): FY19 results, guidance revision | Royal Dutch Shell (RDSA/B LN): 1Q20 update | Valeura Energy (VLE CN/VLU LN) : Update in Turkey | Caspian Sunrise (CASP LN): Production update in Kazakhstan | JKX Oil & Gas (JKX LN): FY19 results | Nostrum Oil & Gas (NOG LN): Corporate update in Kazakhstan | Energean Oil & Gas (ENEOG LN): Progress at Edison E&P acquisition | Payment from Kurdistan received | TransGlobe Energy (TGL LN/CN): Operating update in Egypt | United Oil & Gas (UOG LN): Update in Egypt | Aker Energy: Postponing development in Ghana | Canadian Overseas Petroleum (COPL LN/XOP CN): US$63 mm legal claims by Essar against ShoreCan | Tullow Oil (TLW LN): RBL redetermination in line, no further principal repayment until 2021 and further capex reduction
Companies: 88E AKERBP BP/ CASP XOP DNO ENOG GENL GKP JKX MAHAA NOG PMO PXT PRP RDSA RRE TGL TLW UOG VLE
TransGlobe Energy (TGL LN): Cost measures in place to preserve cash position | Volga Gas* (VGAS LN): Production remains stable, cash flow healthy | United Oil & Gas (UOG LN): Production in Egypt increases, capex deferred
Companies: TGL VGAS UOG
Oil posted the biggest weekly plunge since 2008, capping its most dramatic week in recent memory as major producers prepare to drench the market with supply just as the coronavirus crushes demand. But prices jumped following the close, after President Donald Trump said the U.S. would fill the nation's strategic reserve. Losses for the week totalled 23% after the collapse of talks between members of the OPEC+ group triggered the biggest crash in a generation. Instead of reaching a deal to cut output to mitigate the fallout from the virus, producers led by Saudi Arabia and Russia embarked on a war for market share and pledged to pump more.
Companies: TGL TXP VLE EGY GTE CNE DGOC ENQ SQZ UKOG TRIN TLW PHAR
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: TAL GTE PPC TXP CNE PMO VLE JKX PHAR TGL AOI TRP TLW EGY WRL
TransGlobe Energy (TGL LN): Capital programmed reduced; dividend suspended | Pharos Energy (PHAR LN): FY19 results, dividend postponed, production guidance curtailed | Touchstone Exploration (TXP LN): Cascadura well tests deliver 10,600boepd
Companies: TransGlobe Energy Corp. Touchstone Exploration, Inc.
San Leon Energy (SLE LN): ACEOS to be commissioned in May 2020 | Serica Energy (SQZ LN): Production from Bruce, Keith and Rhum fields suspended | Echo Energy (ECHO LN): CLix-1001 encounters the top of its primary target | TransGlobe Energy (TGL LN): Incremental production added in Canada
Companies: SLE SQZ ECHO TGL
Touchstone Exploration (TXP LN): COHO-1 produces at a rate of 46MMcf/d | Echo Energy (ECHO LN): Mobilisation of drilling rig to Palermo Aike | TransGlobe Energy (TGL LN): Slight natural decline in production
Companies: TXP ECHO TGL
i3 Energy (I3E LN)1 ; SPECULATIVE BUY, £1.50: Very good well results at Serenity | OMV (OMV AG) (not covered): 3Q19 results | Total (FP FP) (not covered): 3Q19 results | Block Energy (BLOE LN) (not covered): Gas sales agreement in Georgia | Tethys Oil (TETY)1,6; BUY, SEK85: Farm in transaction in Oman | TransGlobe Energy (TGL LN/CN)1,6; BUY, £2.40: FY19 production guidance at the higher end of the range | Eland Oil & Gas (ELA LN) (not covered): Operating update in Nigeria | Panoro Energy (PEN NO) (not covered): Reserves increase in Gabon | Vaalco Energy (EGY LN/US)1 ; BUY, £2.40: More resources than previously expected in the Dentale reservoir
Companies: I3E OMV BLOE TGL ELA PEN EGY TETY
3Q19 production was 15,943 boe/d including 13,750 boe/d in line with previous indications. Production to date in October averaged approximately 15,206 boe/d including 13,228 boe/d in Egypt. 2019 production guidance is now expected to range from 15.5 to 16.0 mboe/d (GMP FEe: 16.1 mboe/d), up from 15.0-16.0 mboe/d.
Companies: TransGlobe Energy Corp.
3Q19 WI production was 15.9 mboe/d including 13.7 mbbl/d in Egypt. Egypt production in September was 12.9 mbbl/d. Production in the Western Desert is still expected to start in 4Q19. TransGlobe sold ~0.38 mmbbl of entitlement oil to EGPC in the quarter. The next cargo lifting of entitlement oil is scheduled for the end of October.
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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
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
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
H1 2020 results; progress on concept selection
Companies: Jersey Oil & Gas Plc
EQTEC announced (last Friday afternoon) an extension of the exclusivity period of the Billingham MOU until 22 November 2020. The extension of the MOU exclusivity period is with the aim of finishing the preparation of a legally binding option agreement with Scot Bros. which, if agreed, will grant EQTEC and its partners the right, but not the obligation, to purchase the entire issued share capital of Billingham EFW Limited (the project SPV) from Scott Bros. subject to an agreement on consideration and other terms.
West Newton B-1 drilling update
Companies: Union Jack Oil Plc
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
Ready to steppe it up – initiating coverage
Companies: Enwell 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
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
A number of REITs have the ability to thrive in current market conditions and thereafter. Not only do they hold assets that will remain in strong demand, but they have focus and transparency. The leases and underlying rents are structured in a manner to provide long visibility, growth and security. Hardman & Co defined an investment universe of REITs that we considered provided security and “safer harbours”. We introduced this universe with our report published in March 2019: “Secure income” REITs – Safe Harbour Available. Here, we take forward the investment case and story. We point to six REITs, in particular, where we believe the risk/reward is the most attractive.
Companies: AGY ARBB ARIX BUR CMH CLIG DNL HAYD NSF PCA PIN PXC PHP RE/ RECI SCE SHED VTA
Davenport owns three perpetual mining licenses and two exploration licences covering 659km2 in the South Harz potash basin in central Germany. Davenport's experienced European-based management is now focussed on developing Europe's largest potash inventory of 5.3 billion tonnes at 10.8% K2O.
Companies: Davenport Resources Ltd.
There was less tension this quarter, as Shell had already cut its dividend in Q1. The trading units rose to the occasion, bringing a positive surprise in this horrendous quarter. The company has recorded a very large impairment, and is poised to announce a strategic shift once 2020 is in the books.
Companies: Royal Dutch Shell Plc
A reassuring set of interims from IOG, whose management team continues its exemplary execution on multiple workstreams for Phase 1 of its core SNS gas project, keeping the project on track for start-up in Q3 2021…no mean feat given COVID-19 challenges. Our 42p/sh risked-NAV and price target remain unchanged, but recovering UK gas prices should encourage investors to revisit and rerate this impressive UK gas development company ahead of the onset of its growth journey next year.
Companies: Independent Oil & Gas Plc