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 Yoho capital constrained and limited options available through this sustained period of low commodity prices, the transaction provides liquidity to shareholders at a significant premium to recent trading prices in what continues to be an extremely challenging operating environment for Small Cap companies.The transaction is subject to the customary court and regulatory approvals and the approval of 66.7% of Yoho shareholders. That said, the Board of Directors and officers of Yoho, whom represent an aggregate of ~20% of outstanding shares, have entered into voting support agreements with One Stone.As a result of the acquisition agreement, we have placed a Tender ranking on the stock while revising our target price to $0.475 per share.
Companies: YOHO RESOURCES
Impact - positive as the transaction provides liquidity to current shareholders at a significant premium to recent trading prices in what continues to be an extremely challenging operating environment for Small cap companies.
Yoho reported fiscal 2Q16 results (calendar 1Q16) that came in largely as expected as the Company continues to sit tight with little to no activity taking place until commodity prices recover.
Impact - neutral with results in line with expectations
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
Impact: Neutral as the financial results were largely in line with our thinking and viewed largely as a non-
event in the wake of the Company's recent Duvernay sale
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
Incorporating the updated reserves into our NAV methodology coupled with a review of our Montney and Duvernay type curves and booked versus unbooked inventory, we arrive at a revised RENAV of $0.83 per diluted share on our price deck (Atax, 10%), or alternatively, $0.09 per diluted share on the current strip (Atax, 10%). With continued weakness anticipated in commodity prices and a lack of available capital, we have elected to maintain our Market Perform ranking along with our $0.25 per share target price.
Impact: Neutral as the results are largely irrelevant in the context of the Company's recent Duvernay disposition while 2016e guidance is in line with our thinking Yoho has reported its fiscal 4Q15 (calendar 3Q15) financial results with average production of 1,739 boe/d (32% oil and liquids) which was in line with our estimate of 1,700 boe/d (37% oil and liquids). Corresponding funds flow was slightly below our forecast at $0.6 mm or $0.01 per diluted share (FCC was $0.7 mm or $0.01 per diluted share).
“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
Given a stretched balance sheet and challenging commodity price environment, Yoho has announced the sale of ~75% of its Duvernay acreage for $50 mm in cash, which alleviates the Company’s immediate balance sheet constraints while retaining upside in the Duvernay as well as the liquids-rich Montney at Inga within an improving commodity price environment.
Impact: Positive. Proceeds from Yoho's sale of ~75% of its Duvernay acreage for $50 mm in cash will alleviate the Company's immediate balance sheet constraints while retaining upside in the Duvernay as well as the liquids-rich Montney at Inga within an improving commodity price environment.
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
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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
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
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
• 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.
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)
Pantheon announced that is has contracted a rig to drill the Talitha well and that drilling operations are expected to commence in January 2021. The well will target four independent reservoirs, in three separate trapping sequences, which the company estimates has the potential to contain in the region of a billion barrels of recoverable oil, although ongoing work is required to formally delineate the full potential of the targets.
Companies: Pantheon Resources 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
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
Jersey Oil & Gas announced today that is has entered into an agreement to acquire the entire share capital of CIECO V&C (UK) Limited, which is currently owned by two international entities headquartered in Japan. The acquisition secures an additional 12% working interest in Licence P2170 (Blocks 20/5b & 21/1d), which provides Jersey Oil & Gas with 100% of the licence. The licence contains the majority of the Verbier oil discovery in addition to three drill ready prospects: Verbier Deep, Wengen and Cortina. The acquired entity has approximately £15M of tax losses which will provide value to Jersey Oil & Gas. Consideration will consist of £150k in cash and contingent payments of i) £1.5M upon field development plan approval of Verbier within P2170 (as already discovered) by the OGA ii) £1.0M upon the 1st anniversary of attainment of first oil. The acquisition is conditional on OGA approval amongst other technicalities, which we do not anticipate will be problematic. The acquired entity will be free of debts.
Companies: Jersey Oil & Gas PLC
Oil rose to the highest in nearly three months with positive Covid-19 vaccine developments paving the way for a more sustained recovery in oil demand.
Futures rose 5% in New York this week for a third straight weekly gain as Pfizer Inc and BioNTech SE requested emergency authorisation of their Covid vaccine Friday. Moderna Inc also released positive interim results from a final-stage trial and said it is close to seeking emergency authorisation. Still, further gains were limited by broader market declines amid a dispute between the White House and the Federal Reserve over emergency lending programmes.
Even with vaccines on the horizon, a recovery in oil demand faces obstacles with governments under pressure to tighten restrictions and curb the spread of the virus. UK Prime Minister, Boris Johnson's officials are considering tougher pandemic rules placed on broader regions of England next month after a national lockdown is set to end and the country returns to its tiered system. Meanwhile, the shift toward working from home may have a lasting chill on gasoline demand, according to Federal Reserve Bank of Kansas City President Esther George.
The recent climb in headline prices has been accompanied by significant moves in timespreads, where traders bet on the price of oil in different months. The spread between West Texas Intermediate for December 2021 delivery and the following month moved to backwardation, while the closely watched gap between December 2021 and 2022 WTI contracts is close to also flipping.
West Texas Intermediate for December delivery, which expired Friday, rose 41 cents to settle at $42.15 a barrel.
The January contract rose 52 cents to end the session at $42.42 a barrel.
Brent for January settlement gained 76 cents to $44.96 a barrel. The contract rose 5.1% this week.
Pfizer and BioNTech's vaccine could be the first to be cleared for use, but first it must undergo a thorough vetting. The filing could enable its use by the middle to the end of December, the companies said in a statement. Yet, it could take at least three weeks for a US Food and Drug Administration decision.
Companies: FOG PVR 88E DGOC EME TRIN UOG
Acquisition of CIECO P2170 interest
Companies: JOG JYOGF TPC1
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
Trifast has reported FY21 interim results that highlight the tough operating conditions with material falls in revenue, and operating leverage driving sharp reductions in profitability. The c.£16m equity raise helped to cushion the financial impact and the ongoing recovery exiting the first half provides some optimism for the Group heading in to FY22. We reinstate our buy recommendation.
Companies: Trifast plc (TRI:LON)Trifast plc (25D:BER)
Today's news & views, plus announcements from KGF, MRO, UU, BAB, BRW, FUTR, GNS, HICL, LIO, AEXG, FUL, KWS
Companies: AEX GNS HICL
While a three-year plan would have been more than enough, the new CEO delivered a roadmap for the next ten years. The idea is to show how Tullow’s existing assets can generate sufficient cash for the next decade. Discipline is key, with deleveraging as top priority. Spending is on a tight budget ($2.7bn for the next ten years) with 90% of it going to develop the West African assets. The quest to regain investors’ trust continues.
Companies: Tullow Oil plc