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InfraStrata's acquisition of the iconic Harland & Wolff (H&W) shipyards in Northern Ireland has been transformational for the group, and with a carefully planned growth strategy, there is a clear route to cash breakeven in the short term. Over the medium to long term, these facilities could support a c£400m revenue business. With the company trading at a c30% discount to its H1/20A book value and c65% to its Adj NAV, we initiate with a Buy recommendation.
BP acquisition and creditors update
Companies: Premier Oil
Anglo Asian Mining is an AIM listed precious and base metals producer running flagship Gedabek operations in western Azerbaijan which include three producing mines and processing facilities. The Company targets 75-80koz GEOs in 2020 with low cost operations providing capital for organic growth opportunities within the highly prospective +1,000km2 land package, with the potential for additional attractive targets outside Azerbaijan as well as 25% of FCF dividend programme.
Companies: Anglo Asian Mining
President is again demonstrating its ability to adapt rapidly to extreme macro conditions to maintain the balance sheet and keep its asset portfolio intact. A further US$6m subscription from Trafigura alongside a US$4.1m debt for equity swap will reduce debt to ~US$15m. Working capital will also be boosted by up to US$3.1m from the equity placing plus £2.2m from the retail offering. These not only materially improve the balance sheet but also bring President into strategic alignment with a strong industry partner. This, together with the benefit of Argentine fixed oil prices, leaves it primed to pursue a dynamic growth plan.
Companies: President Energy
The El Salmiya-5 well has come in significantly ahead of pre-drill expectations, encountering 120m of net pay, and testing 8,700boepd from the primary Kharita target formation. When coupled with the ASH-2 well which is still producing over 3,000boepd, net production levels from Abu Sennan are likely to rise to over 2,500boepd in the coming weeks. We model 2020 net production averaging c2,100boepd, generating a gross profit after royalties and opex of cUS$5.8m and EBITDA of cUS$3.6m. We increase our price target from 6.5p to 7.3p, a 152% premium to the current share price and reiterate our BUY recommendation.
Companies: United Oil & Gas
Falcon is uniquely placed in the current challenging commodity price environment with its strong cash position (US$11.5m at 31 March 2020), fully funded drilling programme and high quality assets. Following the farm down of a 7.5% participating interest to partner Origin Energy in return for an A$150.5m increase in the gross cap carry, we believe Falcon is fully funded through one of the greatest periods of uncertainty the oil and gas industry has ever faced. At a time when many in the industry fight for their very survival, we believe Falcon has managed to secure a fantastic deal for shareholders, which should see the Company through to the potential monetisation of its 22.5% participating interest. We maintain our price target at 40p, a 426% premium to the current share price and reiterate our BUY recommendation.
Companies: Falcon Oil & Gas
Sylvania's share price has fallen 53% since its peaked on the 21st Feb, as the global economy hit the brakes. The short term demand outlook for PGMs is miserable, with supply chains breaking down as both luxury goods and car sales sales collapse.
Companies: Sylvania Platinum
Savannah Energy is an AIM-listed E&P company with two sets of assets: (i) in-production gas and oil fields and a regional monopoly gas distributon network in South East Nigeria (well away from the risky Delta area); and (ii) licenses over 50% of a prolific oil basin in Niger.
Companies: Savannah Energy
2019 was a significant year for United Oil & Gas, dominated by the acquisition of Rockhopper Egypt and its 22% working interest in the Abu Sennan concession. The acquisition has transformed United into a full-cycle E&P with c1,760boepd of production. With low operating costs (cUS$6.5/bbl) and drilling costs, Abu Sennan remains cash flow positive with oil prices below US$20/bbl. Additional downside protection comes from the Company's pre-payment facility with BP, effectively hedging 6,600bbls per month at US$60/bbl until September 2022 and its long-term fixed gas contracts, insulating 20% of United's production from the current price volatility. We update our model, accounting for slightly higher operating costs, setting our price target at 6.5p a 242% premium to the current share price and reiterate our BUY recommendation.
Shearwater sells resilience and today's trading update shows us how resilient demand has been for its products and services. The Group has swung to EBITDA profitability and cash flow is well ahead of expectations. The macro themes of cyber security and remote working are supportive of robust demand levels going forward. We are maintaining our forecasts. Buy.
Companies: Shearwater Group
Oil posted its biggest monthly advance on record, just a few weeks after prices made a dramatic plunge below zero. Crude surged about 88% in May, with US futures on Friday rising above $35 a barrel for the first time since March, driven by massive supply curbs by producers across the world. Still, prices are well below levels at the start of the year, and demand that was crushed by the coronavirus crisis may need to show a sustained improvement for the rally to extend further.
For now, the outlook for consumption looks bleak, though it is on the mend. While virus-related lockdowns are easing, demand is not yet roaring back in the US Fuel sales that were clobbered in European nations such as Spain and Italy will take time to recover. China is a bright spot, but the rest of Asia is still struggling.
The number of rigs drilling for oil in the US fell for the eleventh week, stemming the massive glut of crude that flooded the market. Yet there is a risk that oil's advance could tempt producers to turn on their taps again.
US crude futures fluctuated Friday, as Federal Reserve Chairman Jerome Powell defended aggressive action to shield the economy as the coronavirus pandemic took hold. Prices surged at the close, with West Texas Intermediate oil settling 5.3% higher at $35.49 a barrel, after falling as much as 4% earlier in the day. Futures posted the biggest monthly jump in data going back to 1983.
Brent crude for July, which expires Friday, rose 4 cents to $35.33, closing below WTI for the first time since 2016. The global benchmark has rallied almost 40% this month. The more active August contract rose 5% to settle at $37.84.
Meanwhile, US President Donald Trump is poised to sign a measure that would punish Chinese officials for imprisoning more than one million Muslims in internment camps, as he looks to rebuke Beijing over its crackdown in Hong Kong and its response to the coronavirus. He has also discussed putting targeted sanctions and trade measures on China's financial sector.
More on the oil market:
As the fallout from crude's historic plunge continues, the Securities and Exchange Commission and the Commodity Futures Trading Commission have both opened probes into the $4.64 billion United States Oil Fund ETF.
As China's demand recovery outpaces the rest of Asia, falling fuel exports from the refining giant are providing a much-needed buffer for other processors in the region still grappling with lowered consumption and poor margins.
An early look at Saudi Arabia's crude exports for May shows that historic production cuts have done little to squelch the kingdom's flood of oil to China, which is just getting back on its feet from the coronavirus.
Companies: FOG PVR 88E DGOC EME TRIN UOG
88 Energy (88E LN/AU): Update in Alaska | Echo Energy (ECHO LN): Operation update in Argentina | Subsidies to the oil industry in Argentina | Energean Oil & Gas (ENOG LN): Neptune Energy not acquiring Edison UK and Norway | EnQuest (ENQ LN): 1Q20 update | Equinor (EQNR NO): Dry hole in Norway | Hurricane Energy (HUR LN): Problem with a well at Lancaster in the UK, FY20 production will be “substantially” lower than expected | Lundin Energy (LUP SS): Reduced FY20 production on guidance of Norwegian government curtailment |SDX Energy (SDX LN): 1Q20 results | Total (FP FP): Not buying Ghana from Occidental Petroleum
Companies: 88E AOI ECHO ENOG ENQ EQNR HUR LUPE SDX TLW
Panoro Energy (PEN NO)C; NOK20.00 Target Price: Foot on the accelerator in Tunisia
Diversified Gas & Oil (DGOC LN): Completing US acquisitions | Maha Energy (MAHA-A SS): 1Q20 results, reducing production guidance | Touchstone Exploration (TXP LN)C: New debt facility
ASIA AND AUSTRALASIA
China discovery estimated to hold 730+ mmbbl | Empyrean Energy (EME LN): Resources update in Indonesia | Jadestone Energy (JSE LN): 1Q20 results
Reabold Resources (RBD LN): Acquisition of further interests in West Newton in the UK | Neptune Energy: 1Q20 results | OKEA Energy (OKEA NO): Update in Norway
MIDDLE EAST AND NORTH AFRICA
DNO ASA (DNO NO): FY20 guidance | Genel Energy (GENL LN): Production update at Tawke in Kurdistan | ShaMaran Petroleum (SNM CN): Payment from Kurdistan
Orca Exploration (ORC.A/B CN): 1Q20 results – Gas deliveries in Tanzania were 56.3 mmf/d over the period. As at March 31 the Company held US$82.9 mm in working capital | Tullow Oil (TLW LN): No pre-emption by CNOOC in Uganda
Companies: DNO GENL PEN TXP TLW
PetroTal (PTAL LN/TAL CN)C: Update in Peru - Based on discussions with Petroperu, PetroTal expects that in July 2020, the oil sales pipeline will re-open allowing for Bretana oil field operations to recommence. As a result of the recent recovery in oil prices, the Company estimates that the contingent liability has decreased from US$42 mm to approximately US$35 mm as of May 28, 2020. The Company is in discussions to facilitate an arrangement whereby the contingent liability, when crystallized, will be settled over a three-year period from future cash flow.
Gran Tierra Energy (GTE LN/CN/US): Corporate update | Maha Energy (MAHA-A SS): Production update in Brazil | President Energy (PPC LN): Placing and conversion of debt into equity | Trinity Exploration and Production (TRIN LN): Finance update | Great Eastern Energy Corporation: FY results for the year ending 31/03/2020 | Getech Group (GTC LN): FY19 results | Premier Oil (PMO LN): More attractive terms for the acquisition price for BP assets in the North Sea reduced and agreement with creditors | UK Oil & Gas (UKOG LN): Equity placing
| United Oil & Gas (UOG LN): Well results in Egypt | Canadian Overseas (COPL LN): Agreement with Essar E&P in Nigeria
Companies: GTC PMO SLG
Shearwater is on track to meet our FY19E estimates. The acquisition of Brookcourt completed post the balance sheet date and so does not feature in the interim results. The integration is going well and underlying cash generation is positive. The recent sell-off in the shares leaves the stock trading at a 15% discount to the recent Placing price. Buy.