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: VLU TXP TGL 0VH4 SEN RBD PTAL 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 PTAL 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 (SEN:TSE)IGas Energy plc (IGAS:LON)
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 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: ECO 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 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 PTAL 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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Central Asia Metals (CAML LN) following a successful ramp up at Sasa, progress in the environmental clean up and confirmation of the remedial costs in line with the previously guided US$1.5m the company has declared an interim dividend of 6p/sh. This will be paid on 11 December 2020 with a record date of 20 November 2020.
Companies: Central Asia Metals 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
• In an Important development, PetroTal has signed a contract with an international oil trader for a pilot shipment to export 0.12 mmbbl into the Atlantic region using the Amazon river through Brazil. The shipment will be sold FOB Bretana, priced at the forward month Brent ICE price, and paid within two weeks of loading at Bretana. There are no subsequent oil price adjustments.
• At November 19, 2020, PetroTal had cash resources of US$9.8 mm, with accounts payable and accrued liabilities of ~US$39 mm, a reduction of ~US$11 mm from the end of 2Q20. The company has been paid US$5.5 mm for delivery of 0.192 mm bbl of oil to Petroperu in October. Production is constrained to ~5,000 bbl/d pending the reopening of the export pipeline.
• We understand that the pilot should start in December. This would not only provide ~US$5 mm in cash to PetroTal but also allow production to return to recent levels (11.5 mbbl/d), effectively unlocking the fundamental value of the asset.
Balance sheet considerations
The potential financial derivative liability has been reduced from US$22.5 mm at the end of June to US$17 mm at the end of September. Of the US$39 mm current payables 46% are not due before 2021 and we note that the company still holds US$13 mm in account receivables and US$4.7 mm in inventory.
Financials on “a back to normal” scenario with flat production
We are now assuming production remains constrained at 5 mbbl/d over 4Q20 with minimum capex with cashflow and receivables being used to repay the due payables over the period.
On production of just ~11.5 mbbl/d during 2021, we estimate operating cashflow of US$85 mm at US$48/bbl Brent. This would result in free cashflow of >US$40 mm assuming capex of US$20 mm to maintain production and US$20 mm to repay the remaining payables. This compares with a current market cap of just US$75 mm, suggesting FY21 free cashflow would represent over 50% of the current market cap in a no growth scenario assuming production can be exported.
Our target price of £0.45 per share represents 6x the current share price.
Companies: PetroTal Corp.
Edison Investment Research is terminating coverage on Diversified Gas & Oil (DGOC), Vermilion Energy (VET) and Circle Property (CRC). Please note you should no longer rely on any previous research or estimates for these companies. All forecasts should now be considered redundant.
Companies: Diversified Gas & Oil PLC
EQTEC has announced today that the Company and Scott Bros. Enterprises Limited have agreed to extend the exclusivity period of the Billingham MOU until 18 December 2020. The Billingham MOU has been subject to previous extensions, as announced on 23 October 2019, 23 June 2020 and 18 September 2020.
Companies: EQTEC PLC (KEU1:FRA)EQTEC PLC (EQT:LON)
Pan African Resources (PAF) has announced that it is to acquire 100% of Mogale Gold and Mintails SA Soweto Cluster from Mintails’ liquidator for ZAR50.0m (US$3.2m). Combined, the two assets host a mineral resource of 243Mt (in tailings), containing 2.36Moz gold. As such, consideration equates to US$1.31 per oz of contained gold cf an average valuation of US$9.88/oz for London-listed pre-production gold assets (see Gold stars and black holes, published in January 2019). Closure of the deal is subject to the usual due diligence, including the evaluation the assets’ amenability to retreatment.
Companies: Pan African Resources PLC
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
Oil declined for a second session as rising Covid-19 cases threatened to derail demand with tougher restrictions in major US cities on the horizon.
Futures fell 2.4% in New York on Friday, but still posted the largest weekly gain in a month as optimism from news of a potential Covid-19 vaccine breakthrough jolted markets earlier in the week. Despite the measure of hope for the long-term, US cities from the West to East coasts have imposed stricter measures to slow surging case counts, raising concerns that the virus will further crimp demand for fuel. Gasoline futures also slumped.
Before concerns over lockdowns set in, futures also got support from signs the OPEC+ alliance is inching closer to delaying a planned output increase in January. But downbeat demand forecasts from the International Energy Agency and OPEC have clouded hopes of a recovery. At the same time, governors of states along the US West Coast issued travel advisories, following measures recently imposed in New York and Chicago.
Meanwhile, crude supply in Libya is rising. The country's production rose to 1.145 million barrels a day on Friday, according to a spokesman for its state-run National Oil Corp.
West Texas Intermediate for December delivery lost 99 cents to settle at $40.13 a barrel. The contract rose 8.1% this week.
Brent for January settlement slid 75 cents to $42.78 a barrel.
Gasoline for December delivery declined 2.7% to $1.1254 a gallon.
In Europe, where motorway traffic is down by almost 50% in some countries, demand is stuttering anew. That is impacting crude, with six supertankers of unwanted North Sea oil continuing to float in the region. Meanwhile, vehicle miles travelled on US highways fell last week in another sign Americans are keeping off the roads amid the pandemic.
Companies: FOG PVR 88E DGOC EME TRIN UOG
Panoro Energy (PEN NO)c; Target price of NOK23.00: Revisiting Gabon - BW Energy provided an update on Dussafu with FY20 production guidance expectation marginally below previous guidance (14.25 mbbl/d versus 15 16 mbbl/d) due to COVID-19 restrictions and OPEC+ quotas. This results in FY20 opex expected to be US$19/bbl which is slightly above the previous guidance of US$17-18/bbl. The drilling of DTM-7H, and the tie-in of DTM-6H and -7H, has been deferred to mid-2021 with first oil expected in 3Q21 and our estimate of the timing of the field production ramp-up has been delayed by one quarter. BWE continues to expect production from the Dussafu area to reach >30 mbbl/d in 2023 and ~40 mbbl/d in 2024. The Hibiscus development is expected to offer 15% IRR at
Companies: TGL TGA 88E FEC JSE LUPE LUNE LNDNF LYV NOG GB_NTRM NSTRY 3NO PANR P3K PTHRF PTAL TETY TETY AOI ENOG PEN SDX EGY
Salt Lake Potash's AGM update reported that the Lake Way project is now 74% complete. Construction of the process plant is on-schedule with practical completion and first SOP production planned for Q1/21. Drawdown of the Senior Facility Agreement funds and repayment of the Taurus bridge loan is expected soon.
Companies: Salt Lake Potash Limited
88 Energy has raised A$10m (before expenses) at a price of A$0.006 (0.33p) to fund the ongoing evaluation of the Company's portfolio and to enable it to identify and exploit new opportunities on the Alaskan North Slope. The net proceeds will fund 88E's share of any potential costs associated with the drilling of the Harrier and Merlin prospects at Project Peregrine, scheduled to commence in Q1/21. Harrier and Merlin are on trend and south of the ConocoPhillips Harpoon and Willow discoveries, and are estimated to contain >1bn boe of gross unrisked net prospective resources. Lying at a depth of 5,000ft, both prospects can be drilled at a gross cost of cUS$15m, providing shareholders with access to a huge potential resource at a relatively low cost. Following strong industry interest, a preferred bidder has been selected, with 88 Energy looking to conclude the farm-out of Project Peregrine in the next few weeks. Following yesterday's placing, we value the Merlin and Harrier prospects at 0.5p/share (risked) in aggregate, increasing to 8.0p/share unrisked. We update our target price to 2.3p (a 597% premium to the placing 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
As expected, Castings' interim results highlighted a tough period with customer shutdowns and lockdown measures causing a 43% decline in revenue. Pent-up demand, a recovering trucking industry and strong new truck orders supports activity levels that have now reached 100% of pre-COVID levels and likely to exceed this in short order. Reinstate buy rating.
Companies: Castings PLC (CGS:LON)Castings PLC (9Z9:STU)
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
We believe that Pantheon Resources is on the cusp of generating substantial shareholder value by progressing the appraisal and commercialisation of its world-class Alaskan oil & gas discoveries, all of which benefit from 3D seismic and well penetrations. Of its six identified targets in Alaska, Pantheon Resources has established resource estimates for three, which have a combined success-case recoverable resource potential of 720 million barrels of oil. Our current fair value estimate includes the equivalent of 147 million barrels of oil or 20.5% of the defined success-case potential resources. We see scope for future value creation from commercial and geological derisking. The board of Pantheon Resources has high-profile Alaskan pedigree, commercial acumen, substantive technical backgrounds and deep oil & gas experience, which we believe will favour successful value creation for shareholders. All-in, we see a positive multi-year trajectory of value creation for the company. We are initiating on Pantheon Resources and see fair value at 75p/sh.
Companies: Pantheon Resources plc