Enerplus(ERF-TSX/NYSE); BUY, C$9.00 ― 4Q19 and well performance review | Gibson Energy (GEI-TSX); BUY, C$30.00 ― Growth rates and return metrics continue to significantly outpace the peer average | Journey Energy (JOY-TSX); HOLD, C$1.50 ― Reports 2019 reserves and 1H20e guidance; uncertainty surrounding KRC Duvernay JV | PHX Energy Services(PHX-TSX); BUY, C$5.50 ― FLASH: Strong 4Q19 results and another consecutive U.S. market share record
Companies: ERF GEI JOY PHX
IMPACT: Neutral. AFFO was 2% behind the Street. We and the Street had modeled slightly stronger Q/Q liquids growth than the 14% number achieved. The midpoint of ERF’s tightened 2019 guidance ranges for total and liquids production were unchanged and in line with the Street, while cash G&A expense guidance came down 3%. ERF has repurchased another 4% of its shares since June 30th and has used up all of the room on the 7% NCIB, which the Board is seeking approval to expand to 10%.
Companies: Enerplus Corporation
ERF’s Q4 saw strong cash flow. Production was previously disclosed. YE18 reserves metrics were generally strong but showed creep in FDC per boe. However, FDC/boe estimates for unbooked contingent resources in both the Bakken and Marcellus fell significantly Y/Y, while EUR per well estimates for contingent resource locations increased.
Q3 saw a solid beat on production and FFO, improvements to the midpoint of 2018 production guidance, and news of strong 90-day IP rates from four more DJ Basin wells. The apparent de-risking of ERF’s 35k net acre DJ Basin position is potentially a game changer for ERF, as concerns regarding ERF’s need/desire to make major acquisitions should diminish. We have reduced our ‘19e/’20e liquids production forecasts by 11%/8% (we were previously an outlier, now allowing for erosion in capital efficiency on DJ Basin infrastructure build out) but still assume Y/Y growth of 13%/15% in ‘19e/’20e, self-funded by cash flow at ~midUS$50s WTI. We expect ERF to frame a strong multi-year outlook for liquids growth when it provides 2019 guidance (December). $21.50/share TP implies 6.0x ‘20e EV/DACF at strip (5.0x at our deck). BUY.
Q2 saw a 21% Q/Q increase in liquids production. The midpoint of 2018e guidance for capex/total production/liquids production has increased by 4.5%/4.0%/3.0%. Management attributed most of the capex increase to increased non-operated activity (Marcellus, North Dakota), while cost inflation had a minor impact. Our ‘18e/’19e estimates are up 4%/3% for CFPS, and 3%/2% for production. TP up $1.00 to $22.00. BUY. ERF remains one of our Best Ideas.
ERF’s Q1 CFPS was better than we had forecast despite weaker oil production. We estimate ~$130-$150 mm of FCF in 2018e. Management is comfortable with 2018e guidance (20% liquids growth adjusted for asset sales), and aims to beat it. Our production and CFPS estimates are little changed. $20.00/share TP and BUY rating maintained.
Production guidance of 86-90 mboe/d was slightly weaker than expected. Our ‘18e production estimate is down 4% to 89 mboe/d. However guidance for costs and diffs was better than we expected. Our ‘18e CFPS estimate is essentially unchanged, while our ‘19e CFPS estimate is down 1%. No change to our $17.00 TP and BUY rating.
With a ~20% liquids CAGR on the horizon, a very strong balance sheet and a transformed cost structure, ERF is attractively positioned to grow in a ~US$50/bbl world, and trades at a significantly lower DACF multiple than peers with similar debt-adjusted growth rates. Our $17.00 target price implies 38% upside and at strip pricing equates to a reasonable 7.0x DACF multiple on our 2019e estimates. We expect improving basis differentials and continued strong operational performance will drive the shares higher.
Enerplus reported 2Q16 results that came in ahead of expectations with controllable cash costs coming in 14% below our forecast. With cost reductions continuing to hit the tape, Management has reduced operating and G&A cost guidance for the second time this year, leading to a positive boost to our cash flow outlook. Given a significantly improved balance sheet and lower cost structure, Management has increased the 2016e capital budget by $15 mm, which will position the Company for growth heading into 2017e. In light of an 8% increase to our 2017e cash flow view, we have increased our target price to $11.50 per share and reiterate our Outperform ranking
Impact - positive with second quarter results coming in ahead of both our expectation and the consensus, while strong results to date have led to revised guidance that should see favorable moves to our forecast
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: 0UG9 ARX BTE BNP 0UR7 ERF POU 0VCO 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
With this publication we highlight forecast revisions associated with our commodity price update (Natural Gas Update; Crude Oil Update), reaffirming a view of commodity price recovery in 2017e. In the interim until then, 2016e Canadian oil price realizations are up ~11% in the synthetic and Edmonton Light streams, with heavy WCS crude up ~20% which is amplified by Canadian oilsands output curtailments. While 2016e Canadian natural gas prices are projected to be ~20% lower, we expect much of this effect to be mitigated by strong hedging positions this year, and remain focused on price recovery next year with very strong increases reflected in both the strip and our revised forecast. Overall, broad valuations are flat to slightly higher coming out of this exercise, with oil/ liquids levered entities observing the highest 2017e CFO uptick. We remain constructive on the space, though the market will need to look past a trough of potentially weak pricing this summer.
Companies: ARX 0UR7 ERF TOU POU CJ PPY SRX LXE
Coming off restriction from our participation in the Company’s latest equity financing, whereby Enerplus issued 33.4 mm common shares at a price of $6.90 per share for gross proceeds of $230 mm, we update our estimates. Since the end of 2015 Management has done an exemplary job of right sizing its capital and dividend programs and driving down its cost structure, while also rationalizing non-core assets, and now with this latest financing is well positioned to accelerate growth in the event of a sustained run in the crude oil tape. Our updated outlook reflects a markedly improved balance sheet with debt levels almost cut in half compared to year-end, while the Company is virtually undrawn on its $800 mm credit facility. On the back of a more constructive view on 2017e, specifically in the context of the current forward strip, we have increased our target price to $9.00 per share while upgrading Enerplus to an Outperform ranking, and would buy the stock here.
Enerplus reported 1Q16 results that were in line with production while coming in comfortably ahead on cash flow, primarily as a result of controllable cash costs and royalties that were 9% below forecast.
Impact: Positive, cash flow came in above both FirstEnergy and consensus expectations due to lower controllable cash costs, which are now being guided lower for the year.
Research Tree provides access to ongoing research coverage, media content and regulatory news on Enerplus Corporation. We currently have 48 research reports from 3 professional analysts.
Central Asia Metals (CAML LN) is our top pick for exposure to copper and following the recent operational and financial normalisation the shares have jumped, up 16% since our last note. Our copper price forecast assumptions implied that during Q4 2020 the price, at that point up 47% from March lows would pause. This has not come to pass, now up 60% to eight year highs of US$7,688/t, indicating a higher starting point in 2021F and we have upgraded our forecasts accordingly.
Companies: Central Asia Metals Plc
Today's news & views, plus announcements from AZN, LLOY, WEIR, TATE, GFTU, INCE, DELT, SOLG, HYVE
Companies: LLOY SOLG INCE
Touchstone’s Ortoire block exploration programme onshore Trinidad has again exceeded expectations with its Cascadura Deep-1 well delivering another major gas discovery, its fourth in a row after Coho, Cascadura and Chinook. Further testing is required to determine the ultimate potential of the discovery, but this well again confirms the accuracy of Touchstone’s geological model and extends the runway for future production growth from this prolific acreage. Our risked-NAV and price target rise 58% to 188p/sh as a result of this discovery and a higher Royston pre-drill resource assumption.
Companies: Touchstone Exploration Inc
We are replacing our preliminary valuation of i3 Energy, which had been premised on the valuations of GLJ and Sproule, with our own valuation model and our own commodity price assumptions. The resource estimates assumed in our valuation remain aligned with those of i3 Energy's resource evaluators, namely, GLJ, Sproule and AGR Tracs. Our fair value amounts to 15.0p/share, which compares to our prior and preliminary valuation of 17.7p/share. Our valuation is premised on the proven and probable reserves of the company's Canadian assets; therefore, we believe that the company's current share price provides an opportunity to acquire a compelling investment at a steeply discounted entry price.
Companies: i3 Energy Plc
AMERICAS 88 Energy (88E LN/AU): Farm out in Alaska – 88 Energy is selling 50% WI in the Peregrine project to Alaska Peregrine Development Company (APDC). in return, APDC will contribute US$11.3 mm towards the cost of the Merlin-1 well (estimated gross cost US$12.6 mm). APDC is a special purpose investment vehicle organized for Project Peregrine. Its members are a consortium of private US entities. Bahamas Petroleum Company (BPC LN)C: PSC contract in Trinidad renewed and Resources update – The company has entered into a new PSC for the Goudron Block with Heritage. The contract is valid until 30 June 2030. 2P reserves on the company’s licences are estimated at 1.3 mmbbl. In addition, the company is estimated to have 7.5 mmbbl contingent resources in Trinidad and Suriname, excluding the Saffron discovery. The company’s base programme for 2021 will include (1) the drilling of the Saffron well with up to 7 production follow-on wells on success; (2) an EWT at Weg Naar Zee in Suriname in February 2021 followed by up to 6 development wells; and (3) up to 2 exploration wells on the South West Peninsula of Trinidad. The programme is expected to cost US$20 mm. An accelerated programme (US$35 mm capex) would include 8 further Saffron wells in Trinidad, 3 further Weg Naar Zee wells and one exploration well in the SWP. Echo Energy (ECHO LN): Update in Argentina – Production in Santa Cruz from 1 January to 17 November 2020 was 1,990 boe/d. Touchstone Exploration (TXP LN/CN): Drilling results in Trinidad – The Cascadura Deep-1 well encountered natural gas pay totalling ~1,315 net feet in four unique thrust sheets in the Herrera sands. This includes 308 net feet in two previously untested Herrera thrust sheets located below the sands observed in the Cascadura-1ST1 well. While the well was originally planned to be drilled to a total depth of 10,600 feet, the gas sands encountered in the deepest sheet proved difficult to manage, and the decision was made to cease drilling at a depth of 8,303 feet to preserve the substantial pay section encountered in the well. ASIA PACIFIC Jadestone Energy (JSE LN): Trading update – Group production from January to November was11,356 bbl/d. FY20 production guidance remains 11,000–12,500 bbl/d. At the end of November Jadestone held net cash of US$82.6 mm. The Maari acquisition is now expected to close in 1H21 rather than by YE20 as previously anticipated as a result of delays caused by COVID-19 and New Zealand’s recent general election. EUROPE Providence Resources (PVR LN) and Lansdowne Oil & Gas (LOGP LN): Farm out in Ireland – Providence and Lansdowne are farming out 50% WI in Baryroe to SpotOn. In return SpotOn will provide a non-recourse loan to Providence and Lansdowne for their share of the development cost. The funding will incur a blended average annual interest rate of less than 8% through the repayment period which will be repayable from SEL 1/11 production cashflow. SpotOn is entitled to 80% of the net production cashflow from SEL 1/11 until the debt is repaid. UK Oil & Gas (UKOG LN): Consent for UK project refused - Surrey County Council has refused planning consent for the company's 100% owned Loxley-1/1z Portland gas appraisal project. FORMER SOVIET UNION Block Energy (BLOE LN): Raising new equity – Block has raised ~£5.3 mm of new equity priced at £0.03 per share (almost a 30% discount to the previous day close). Caspian Sunrise (CASP LN): Update in Kazakhstan – The MJF field is currently producing at rates between 1,300 and 1,550 bbl/d. A consistent flow of oil has not been established at Deep Well A8 and the company had another stuck pipe at the Deep Well A5. The result of the acid treatments at Deep Well A6 have to date have been inconclusive. The domestic oil prices in Kazakhstan are only US$6/bbl. MIDDLE EAST AND NORTH AFRICA Genel Energy (GENL LN): Gulf Keystone Petroleum (GKP LN), ShaMaran Petroleum (SNM CN): Payment in Kurdistan – Genel, ShaMaran and Gulf Keystone have received respectively net payments of US$10.3 mm, US$7.5 mm and US$5.44 mm from the Kurdistan Regional Government for oil sales for the month of October 2020. TransGlobe Energy (TGL LN/CN): Restructuring of Egypt Licences - The West Gharib, West Bakr, and North West Gharib concessions will be merged into the Merged Concession with a new 15-year development term and a 5-year extension option. Cost recovery terms are being improved and the production sharing terms will be scaled to oil price. The increased cash flows is expected to fund new investments in incremental recovery projects. Near-term operational netbacks are estimated to increase by respectively US$5-7/bbl at US$40/bbl (Brent), US$7-9/bbl at US$50/bbl and US$9-11/bbl at US$60/bbl. The company has estimated that the new terms increase the company’s risked economic contingent resources (best case) by 59.1 mmbbl. In return TransGlobe will make an initial equalization payment of US$15 mm and a bonus payment of US$1 mm on ratification. There will be five further annual equalization payments of US$10 mm each being made over five years. United Oil & Gas (UOG LN): Operational update in Egypt – WI production from Abu Sennan is on target to exceed previous guidance of 2,300 boe/d for 2H20. SUB-SAHARAN AFRICA Eco (Atlantic) Oil & Gas: Licence update in Namibia- Four new Petroleum Exploration Licenses have been agreed on the company’s existing offshore blocks, leading to the expansion of its acreage position. The new licences cover approximately 28,593 km2, with over 2.362 Billion BOE of prospective P50 resources. FAR Limited (FAR AU): Woodside Petroleum pre-empts divestment in Senegal – Woodside is pre-empting the sale by FAR to ONGC of its interest in the Rufisque, Sangomar and Sangomar Deep assets.
Companies: RO1 CASP ROXIF BPC 0VH4 SNM 3B8 SNM SHASF TXP UKOG 0UK UKLLF 88E GENL JSE TGL TGL TRP TGA TGL TGA
Brent oil edged lower but was on track for a fourth weekly gain -- amid signs of division among OPEC+ members just days before a key policy meeting on whether to extend production curbs. Futures in London traded near $48 a barrel after falling 1.7% in the previous session. West Texas Intermediate dropped 2% from Wednesday, with prices not closing on Thursday due to the Thanksgiving holiday in the US. While most analysts surveyed by Bloomberg are forecasting OPEC+ will postpone a planned supply hike by three months to March at a meeting early next week, some see a chance of a shorter delay amid resistance from the United Arab Emirates and Iraq, which are eager to resume oil sales. OPEC's president said the group must remain cautious, with internal data pointing to the risk of a new surplus early next year if output is hiked in January. That came after Iraq's deputy leader criticised the cartel, saying the economic and political conditions of member countries should be considered before they are asked to withhold production. The recent rally gives leverage to members who want to pump more, Standard Chartered Plc said in a note. Crude is up around 6% this week as signs Covid-19 vaccines could soon be rolled out brighten the consumption outlook, even as a resurgent virus led to more lockdown measures, particularly in Europe. There was also fresh evidence the demand recovery in Asia is gaining traction. Chinese industrial profits rose at the fastest pace in almost nine years in October, while Indian economic growth data due Friday is forecast to show a sharp recovery last quarter. Prices Brent for January delivery declined 0.4% to $47.59 a barrel on the ICE Futures Europe exchange at 7:43 a.m. in London and is up 5.8% this week. WTI for the same month January delivery fell 2% from Wednesday to $44.80 on the New York Mercantile Exchange. Crude futures on the Shanghai International Energy Exchange rose 0.2% to 289.1 yuan per barrel and have risen around 11% this week.
Companies: FOG PVR 88E DGOC EME TRIN UOG
Savannah’s acquisition of a key strategic Nigerian gas asset with strong growth potential has been ignored by the market. Its significant exploration success in Niger has also gone unrewarded. Delivery of the strong free cash flow potential these assets offer will re-rate the shares, which are materially undervalued. Management’s tenacity in getting the Seven Energy acquisition across the line alongside the impressive early progress with the acquired assets should give investors confidence. We initiate with a Buy rating and risked-NAV based price target of 49p/sh.
Companies: Savannah Energy Plc
Jubilee today releases its audited annual accounts for the year ending June 30 2020. As expected, the results show the real progress made through the year. Production up, revenues up (132% to £54.8), Operating profit up (226% to £15.9m and EPS up (96% to 0.94/sh). We have seen solid progress on the expansion in the chrome and PGM projects in South Africa and consolidation of ownership of the projects against a background of Covid – which Jubilee successfully navigated. The year also saw robust plans for expansion in Zambia at the Sable Refinery in Kabwe. Security of supply has been achieved by three transactions which tie up dump resources all set to feed into the (to be) expanded Sable Refinery and making Jubilee a producer of scale in Zambia. We see fair value in Jubilee at 12p and present our first forecasts for the company (FY2021E).
Companies: Jubilee Metals Group PLC
Parkmead’s portfolio has evolved to the point where it is now a full-cycle E&P company with a low-cost Dutch production base and a broad spectrum of high-quality UK growth opportunities, encompassing material development projects and an attractive range of risk/reward exploration. Recently, it has diversified into renewables, future proofing its equity story and opening up a new ‘investor-friendly’ avenue of growth. A core strength of this management team is its commercial acumen and portfolio-driven approach to optimising value. Parkmead has been in portfolio construction mode to date but is now well positioned to start crystallising its intrinsic value. We initiate with a risked-NAV based price target of 155p/sh. Investors would do well to get on-board with a management team that has a strong track record of delivering shareholder value.
Companies: Parkmead Group PLC
The Prime Minister vowed last week to “restore Britain's position as the foremost naval power in Europe” and promised an extra £16.5bn in defence spending over the next four years. Mr Johnson expects this investment to “spur a renaissance of British shipbuilding across the UK”, and specifically mentioned five locations where this would occur, including Belfast and Appledore – the location of InfraStrata's shipyards. Other supportive policy initiatives emanating from the government include Mr Johnson's pledge in October that offshore wind will power every home in the country by 2030. We believe this demonstrable support from the highest level of government vindicates InfraStrata's strategy, and demonstrates the significant opportunities available to the company as it bids on numerous shipbuilding and fabrication contracts. We reaffirm our Buy rating.
Companies: InfraStrata plc
GeoPark (GPRK US)C; Target price of US$20.00: Divesting non-core asset in Brazil - GeoPark is selling its 10% non-operated working interest in the Manati gas field in Brazil to Gas Bridge for US$27 mm. We do not see much upside to the Brazilian asset (in terms of growing reserves or through exploration opportunities) and this divestment may allow GeoPark to reallocate resources to its core operations. We would rather see management remaining focused on deploying capital on higher return assets such as Colombia and Ecuador. Even after this week’s share price appreciation, our Core NAV continues to be 60% above the current share price. Our unrisked NAV for the 2021 drilling programme is ~US$9.00 per share, which represents ~90% of the current share price. Panoro Energy (PEN NO)c; Target price of NOK23.00: 2021 will be a transformational year - 2020 has been a difficult year for the oil and gas industry and 2021 is a turning point for Panoro. In Gabon, development activities at Ruche are expected to return to normal with gross production set to grow to 20 mbbl/d. The company will also appraise Hibiscus to test the 155 mmbbl upside case (=2x existing 2P reserves). The development of Hibiscus is expected to be sanctioned. Importantly, while the existing FPSO has a nominal oil processing capacity of 45-45 mbbl/d, processing expansion is possible which allows for a potential oil production plateau of 70 mbbl/d. We estimate the value of Panoro’s reserves in Dussafu at NOK10.40 per share. Derisking the contingent resources in Gabon could add ~NOK3 per share. We estimate that the upside at Hibiscus has a further unrisked NAV of ~NOK10 per share for a total unrisked NAV of NOK23 per share for the discovered and “to be appraised” volumes in Gabon. Overall, including Nigeria, South Africa and Tunisia, we estimate the unrisked value of the 2021 activities at NOK30 per share; which represents 2.3x the share price. Our target price of NOK23 per share has been set close to our ReNAV. Pharos Energy (PHAR LN)c; Target price of £0.35: Low cost. Quickly scalable. High impact, quality exploration – Pharos is a £[67] mm market cap, ~12 mboe/d oil producer that acquired the Egyptian assets of Merlon in 2019. Under the stewardship of a blue-chip management team that turned Cairn Energy from a micro-cap into a successful E&P that returned US$4.5 bn to shareholders, Pharos has undergone a multi-faceted transformation, enhancing governance and rebalancing its asset portfolio. Given the recent macro challenges, this process appears to have gone unnoticed by many investors. Pharos now holds ~50 mmboe 2P reserves in Egypt and Vietnam. Vietnam provides stable cash flows even at low oil prices. Egypt production can be increased rapidly (up to x2.5 to 13 mbbl/d) with additional investment. Pharos also holds world class exploration assets in Israel, Egypt and Vietnam. With a healthy balance sheet (cash: ~US$38 mm, net debt:~US$36 mm), Pharos’ shares trade at EV/DACF multiples of 5,000 bbl/d, increasing production from the Shaikan field by~15%. FY20 gross production is expected to be at the upper end of the 35,000 – 36,000 bbl/d production guidance, with the field currently producing at ~39,000 bbl/d. SUB-SAHARAN AFRICA LEKOIL (LEK LN): Requisition from large shareholder to change the board of the company - LEKOIL has received a letter from Metallon, holding 15.4% of the company, requisitioning an extraordinary general meeting to vote on the replacement of the Chairman and the appointment of Michael Ajukwu, Thomas Richardson and George Maxwell as directors of the company. Orca Exploration (ORC.A/B CN): 3Q20 results - 3Q20 WI production in Tanzania was 60.9 mmcf/d. At the end of September, Orca held US$79.2 mmm in working capital including US$98.5 mm in cash and long-term debt of US$54.2 mm. Tullow Oil (TLW LN): Capital Market Day – 2020 production to date averages 75 mbbl/d with FY20 production guidance of 73-77 mbbl/d. Assuming an oil price of US$45/bbl in 2021 and US$55/bbl flat nominal from 2022 onwards, Tullow expects to generate US$7 bn of operating cashflow over the next 10 years with capex of US$2.7 bn. The first phase of investment will start in 2Q21 with the commencement of a multi-well drilling programme in Ghana. In Suriname, the prospective Goliathberg-Voltzberg North-1 well will spud in 1Q21. Victoria Oil & Gas (VOG LN): Positive licence update in Cameroon – The duration of the onshore Matanda licence has been extended by one year to December 2021. The gross unrisked prospective resources are now estimated at 1,196 bcf, up from 903 bcf previously. 19 gas prospects haven identified in shallower Tertiary-aged reservoirs, plus 7 prospects in deeper, Cretaceous-aged prospects. The Company believes the largest of these prospects has mean unrisked Prospective Resources of >65 bcf, with geological Chance of Success estimated at >40%.
Companies: VOG BPC ENQ GPRK JOG JYOGF TPC1 7M7 0GEA MAHAA PEN PHAR RBD REP SENX TLW
October production payment received
Companies: GKP GUKYF GVP1
Davenport has raised A$10m at 4.5A¢ with a 2 year one for two option at 8A¢ subject to Shareholder approval (expected in mid-January). This will fund a confirmatory drilling programme in 2021 at its Ohmgebirge project to upgrade the 325Mt @ 13.14% K2O for 43Mt of K2O resource from the Inferred category to Measured and Indicated and facilitate the release of its scoping study. Work will also commence on Ohmgebirge's Definitive Feasibility Study with the balance of funds raised to be used for working capital purposes.
Companies: Davenport Resources Ltd.
88 Energy has executed definitive farmout documents to farmout a 50% working interest at Project Peregrine in exchange for a US$10m carry on in the Merlin-1 exploration well. Given the current oil and gas environment, to be able to achieve a close to two for one deal is quite remarkable, and is testament to the quality of the Project Peregrine acreage. The Merlin-1 exploration well is on track to spud in February 2021, and will be targeting the 645mmbbl Merlin prospect, situated on trend with the ConocoPhillips Willow and Harpoon discoveries. Lying at a depth of 5,000ft, the Merlin well can be drilled at a gross cost of US$12.6m, providing shareholders with access to a huge potential resource at a relatively low initial cost. We update our model, increasing our target price to 2.4p (from 2.3p), a 475% premium to the current share price and reiterate our BUY recommendation.
Companies: 88 Energy Limited
Hargreaves’ AGM statement confirms a positive start to FY21, building on the resilient FY20 performance. Trading is in line with expectations, the Industrial Services business has won a number of new contracts, and Hargreaves Land is said to be close to announcing the completion of its first plot sale at Blindwells. In our view, the shares are yet to reflect the earnings growth forecast for the next three years or the prospect of a 20p total dividend, which is expected to be paid first in FY22 as previously restricted HRMS profits are distributed. A further update on trading will be provided in early December, ahead of interims at the end of January.
Companies: Hargreaves Services plc
