Yangarra reported first quarter results, which on the whole we would characterize as in line to slightly behind our expectations.
Companies: Yangarra Resources Ltd.
With this publication we briefly summarize our projections for 1Q16e quarterly results for the Junior E&P (Intermediate, Mid & Small Cap) segments of our coverage universe
Companies: 0UG9 ARX BTE BNP 0UR7 ERF POU 0VCO PGF PSK VII TOU VET WCP BNE CJ CR DEE JOY KEL LTS LRE NVA PPY PNE RRX RMP SRX SGY TOG TET ATU CKE GXE IKM LXE ROAOF MQL RE SPE SKX TVE TVETF YGR YO
With this publication we highlight various metrics and statistics forthcoming from yearend reserve books for our Domestic E&P coverage universe (Integrateds, Large Cap, Oilsands, Intermediate, Mid Cap, and Small Cap). Similar charts for YE2014 reserves can be found in our Statistical Package dated April 7, 2015.
Companies: 0UG9 ARX BTE BNP 0UR7 ERF POU 0VCO PGF PWT VII TXP VET WCP BNE CJ KEL LTS LRE NVA PPY PNE RRX RMP SRX SGY TOG TET ATU BXO CKE GXE IKM LXE MQL SKX TVE TVETF YGR YO
Yangarra reported year-end results with production, cash flow, capital expenditures, and net debt all largely as expected, as the Company had provided preliminary year-end estimates in an early January operations update. Recall the Company released its year-end reserve report one month ago as detailed in our Facts dated February 17, 2016. While previously alluding to a cash flow budget for 2016e, Management has put forth more formal guidance, with the Board of Directors approving a $24 mm capital budget that is expected to generate average annual production of 2,750- 3,000 boe/d. We have incorporated actual fourth quarter results and updated our forecast to align with Management’s new guidance. Based on the positive moves to our forecast we have maintained our Outperform ranking on a revised target price of $1.25 per share.
Current production volumes appear reasonably in line with our 1Q16e forecast. Yangarra reported year-end reserves which were up ~9% on a 2P basis, while the 2P NPV was up ~26% benefitting from improved economics as a result of the use of cemented liner technology, extended reach wells, and lower costs. We have updated our NAV methodology which continues to point towards considerable upside from current trading levels. We maintain our Outperform ranking on an elevated target price of $1.00 per share, which is based upon our updated NAV methodology on current strip pricing.
Impact: Slightly positive. Yangarra reported lower y/y reserves on a per share basis, but incorporated higher NPVs given improvements to play economics for the Company's core properties in central Alberta. For the year ended 2015, Deloitte has assigned PDP reserves of 5.6 mmboe, 1P reserves of 24.7 mmboe, and 2P reserves of 40.6 mmboe. This resulted in y/y per share growth of -18% for PDP, 3% for 1P, and -7% 2P. The Company noted significant improvements to economics throughout its central Alberta land base as a result of the use of cemented liner technology and extended reach wells, which helped boost corresponding NPVs despite a 40% decrease in Deloitte's US$ WTI forecast. Corresponding NPVs came in at $98 mm for PDP, $316 mm for 1P, and $500 mm for 2P based on Deloitte's year-end price deck.
With this publication we highlight forecast revisions associated with our crude oil commodity price update. Concurrent within a dynamic time for E&Ps, some of which have already begun the process of 2016 capital budget downdrafts, revised estimates attempt to directionally capture a shift towards capital conservation, though severely weakened futures curves have influenced our thinking for the better part of 6 months anyway. We expect further capital investment reductions forthcoming from E&Ps in the coming weeks.
Companies: 0UG9 ARX BNP 0UR7 ERF POU 0VCO SPE SGY TVE TOG TOU VET GXE KEL NVA PPY BTE PGF PSK PWT VII WCP BNE CJ CR DEE JOY LTS LRE PNE RRX RMP SRX TET ATU BXO CKE IKM LXE ROAOF MQL RE SKX TVETF YGR YO
Impact - neutral to slightly positive with no changes to the Company's previously released guidance while operationally the Company remains on track with recent well results looking to be in line to slightly ahead of our type curve assumptions.
“Worse? How could they get any worse? Take a look around you, Ellen. We’re at the threshold of hell”. These are the words spoken by Clark Gris-wold in the holiday classic “Christmas Vacation”, and seem aptly suited for the general sentiment in the Canadian energy space at the moment as we roll out a summary of our regular forecast revisions extending from our most recent crude oil and natural gas price forecast update.
Companies: 0UG9 ARX BTE BNP ERF POU 0VCO PGF PSK PWT VII TOU VET WCP BNE CJ CR DEE JOY KEL LTS LRE NVA PPY PNE RRX RMP SRX SGY TOG TET ATU BXO CKE GXE IKM LXE ROAOF MQL RE SPE SKX TVE TVETF YGR YO CPG
Canadian Natural Resources Limited (CNQ) Royalty Sale | PrairieSky Royalty Ltd. (PSK) Buying CNQ’s Royalty Assets and 3Q15 Results | Seven Generations Energy Ltd. (VII) Reports 3Q15 Financial Results Ahead of Expectations, Outlines 2016e Capital Budget of $1.10-$1.15 billion | Vermilion Energy Inc. (VET) Reports Third Quarter Results, Provides Preliminary 2016e Capital
Spending Guidance | Yangarra Resources Ltd. (YGR) Announces 3Q15 Results In Line With Recently Revised Expectations | Tullow Oil Plc (TLW LN) & Africa Oil Corp. (AOI CN/SS): All Upstream Assets are Not Created Equal
Companies: CNQ PSK VII VET YGR TLW AOI ESI ENF
Impact: Neutral as the Company reported results that were largely in line with recently revised expectations
Yangarra provided an operations update with 2H15e production volumes coming in short of our expectations as the Company continues to work through ongoing TCPL restrictions in the region. That said, operationally the Company looks strong with significant cost reductions in both drilling and completions hitting the tape, and promising results from its latest 1.5 mile horizontal Cardium well, which should bode well for future development of the play.
With this publication we briefly summarize our projections for 3Q15e quarterly results for our Junior E&P (Intermediate, Mid & Small Cap) coverage universe. Within the backdrop of continued weakness in the commodity price complex that saw the retrenchment of crude oil pricing during the quarter, after what was a short lived rally during the second quarter, we are anticipating yet another lacklustre reporting period in the Junior E&P space, with the key themes coming out of the quarter likely to be centered on further reductions to capital programs, ongoing takeaway capacity constraints, potential dividend cuts, reduced bank lines from fall credit reviews, continued weakness in the Station 2 and CREC natural gas price markers, and for some, the rollout of formal 2016e budgets.
Companies: 0UG9 ARX BTE BNP 0UR7 ERF POU 0VCO PGF PWT PSK VII TOU TET VET WCP BNE CJ CR DEE JOY KEL LTS LRE NVA PPY PNE RRX RMP SRX SGY TOG ATU CKE GXE IKM LXE ROAOF MQL RE SPE SKX TVE TVETF YGR YO
Impact - negative in the near-term given lower than anticipated 2H15 production volumes as a result of TCPL restrictions, although operationally the Company looks strong with significant cost reductions in both drilling and completions and promising results from its latest 1.5 mile horizontal Cardium well, while the Company's first glimpse at 2016e guidance is reasonably in line with our thinking
With this publication we highlight forecast revisions stemming from an interim commodity price update centered around the crude oil pricing complex. Moves for crude oil weighted producers are significant, with 2016e cash flows down 12%-15%, and portended NAVs reduced sizably on the employment of a materially lower terminal value within the scope of the forecast period, though not reflective of the potential attrition in E&D capital investment and dividend policy should the current forward strip come to fruition in the cash market.
Companies: 0UG9 BTE BNP 0UR7 ERF POU 0VCO PGF PSK PWT VII TOU VET WCP BNE CJ CR DEE JOY KEL LTS LRE NVA PPY PNE RRX RMP SRX SGY TOG TET CKE GXE IKM LXE ROAOF MQL RE SPE SKX TVE TVETF YGR YO
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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
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.
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.
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.
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.
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 £ 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.
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