OFS weekly news wrap

Mozambique LNG progress, MDR leading NFPS contest, Azule Energy issues subsea tenders With the release of a detailed humanitarian report this week, TotalEnergies moved a step closer to the restart of physical activities on its Mozambique LNG project though did not disclose a precise timeline or the status of negotiations with the supply chain on costs where a Saipem consortium is lead onshore contractor. In Angola, Azule Energy has issued new subsea tenders for its Block 31 PAJ FPSO project as w

OFS weekly news wrap

Saipem selected for major Marjan workscope, Tecnimont frontrunner for Amiral work Upstream reports this week that Saipem has been selected for a c$1bn offshore contract relating to Aramco''s Marjan oilfield, while the Saudi Arabian National Oil Company has pushed back the deadline for bid submissions until mid-July on up to $10bn of offshore contracts to further develop the giant Safaniyah oilfield. Middle East media suggest up to $5bn of EPC contracts will be awarded within 2Q23 for the plann

A 2022 story of negative divergence

Unlike peers that have enjoyed the upside momentum in the upstream investment cycle, CGG’s revenue growth stalled in the Q3, negatively affecting the company’s liquidity and increasing the leverage ratio whereas companies elsewhere in the sector made impressive progress on deleveraging. While the downward guidance revision is discouraging, the FY 2023 is expected to improve as projects have been shifted into next year

Q2 : Strong after sales

Good results with gains in DDE, thanks to very strong after sales ($88m vs $20m in Q2-21) and explaining the profitability, while Sensing & Monitoring was down 4% yoy at $46m. After sales were driven by transfer fees and sales in Latin America. All in all, the release confirmed the management’s positive outlook, seeing a favourable multi-year upcycle in capex spending.

Q1: miss but positive outlook remains intact

The Q1 results were below consensus with segment revenue of $153m, showing a 24% decline yoy, particularly due to low activity in Sensing and Monitoring, with revenue down 70% yoy. However, note that the 2022 outlook has been maintained. This is supported by the increasing level of commercial activity and management is expecting an acceleration in client decision-making during H2.

Q4: positive guidance

Positive results, confirming the trading update published in January. The recovery is a progressive one but the guidance for FY22 is above our estimates (EBITDA guided at c. $480m vs $450m in our estimates). Capital discipline remains in the sector but the group seems confident for FY22 as it is increasing its spending (Multi-Client spending at $200m vs $165m in FY21).

Q3: confirming the positive outlook

Positive release with EBITDA rebounding after the weak Q2. Management sees a solid Q4 in all businesses and therefore confirms the guidance for FY21. Management said that International Oil Companies are spending “well below” their allocated budgets this year. While some of this will ultimately go to the shareholders, we believe this, together with a strong oil price, supports a good Q4/H1 22.

Q2: weak H1, guiding for a stronger H2

Revenues were down 26% qoq with a pick-up in GGR sales (+10% qoq), more than offset by a decline in Equipment (-58% qoq). As International Oil Companies maintain a strong capital discipline, the outlook is revised with FY21 revenue to be flat yoy (vs low single-digit growth) and EBITDA at around $310m. This compares to an EBITDA of $78m for H1, and implies a strong ramp-up in H2.

Q1: weak quarter, outlook remains positive

Management hinted at a soft Q1 and this proved to be right. Segment revenues are down 21% yoy and EBITDA by 71% as equipment take a large share of the mix (53% vs 28% in Q1 20) with very low GGR revenues. At least CGG managed its working capital and spending to generate $28m of cash. Management is optimistic about H2 as it has seen commercial activity increasing since March on the back of higher oil.

Q4: capital discipline to prevail

EBITDA is up 48% qoq, slightly above consensus, but cash shows another working capital build. Liquidity is down 35% yoy, which might cause concern. The outlook guides for a small revenue increase, and stable EBITDA on a different sales mix. The environment remains challenging and CGG is cutting investments to focus on cash generation. No surprise, as there will not be a dramatic increase in spending this year, although a higher oil helps visibility.

Q3: revenues stabilise, more is needed

A mixed bag with revenues down 48% yoy but stable qoq, while the adjusted EBITDA improve by 18% qoq. However, the segment free cash flow deteriorated ($-59m), with a working capital build ($38m). Multi-client after-sales picked up, partly offset by lower pre-funding. Meanwhile, the activity weakened in geoscience and equipment. Cost reductions help the group in coping with this crisis, but the activity will need to rebound soon, as liquidity is down $159m since Q1.

Q2: mixed results

Revenues and segment EBITDA were in line with consensus, but non-recurring charges amounted to $94m in the quarter mainly on goodwill and asset impairment, leading to a net loss of $147m. Net cash flow was at $-77m (-$60m for H1 20). The guidance remains vague, which unfortunately will not help in understanding when the activity will restart.

Q1: capex cut before the inevitable slowdown

Most of the positive news from this release was already announced in the trading update. On the outlook, as the 25-30% cut in exploration investments will undoubtedly impact CGG’s turnover (particularly in multi-client after sales), the group focuses on delivering its backlog and reducing its own spending. Lastly, during the conference call, management said it has not received any cancellation of committed orders, which somehow validates the $256m backlog.

Q4: uncertain outlook blurs the performance

During the call, management discussed the possible reintroduction of the dividend in 2021. In our view, this reflects CGG’s remarkable turnover since the announcement of the strategic plan. Indeed, in 2019, the cash generation and operational performance have been improving, with good progress towards the 2021 targets. Yet, the lower oil price is weighing on the outlook. Even in an asset-light form, CGG will not be immune to lower spending from E&P companies, a likely outcome with oil at $50.

Q3: strong Multi-Client sales lift EBITDA

The release follows a positive trading update, which saw an increase in guidance. The quarter saw strong Multi-Client sales, even excluding exceptional one-offs and accelerated sales. Furthermore, the group is making good progress in its strategic partnership with Shearwater and is in advanced discussions for the sale of the multi-physics business.

Fully funded for range of activities - operational and key third party evaluations

Initial Equity Trading Comments - 15 May 2023

Andrada Mining: Lithium driving value after “numerous unsolicited approaches” to accelerate Uis development

Andrada Mining (“ATM”) has announced several unsolicited approaches from international entities to accelerate production from its lithium portfolio through a potential strategic partnership in its Uis project in Namibia. A global investment bank has been appointed to provide a structured assessment of potential partners based on financial and technical merits. After the expansion of the Phase 1 tin operation in 2022, Uis achieved record quarterly tin concentrate output for the three months to Fe

Touchstone Exploration+ (TXP, House Stock at 58p) - US$7m revolving loan facility

Jersey Oil and Gas (JOG LN) - Full year 2022 results

JOG has released its full year 2022 results. These report a net cash holding of £6.6m which, alongside upcoming payments under the GBA farm out deal with NEO Energy, gives JOG a very strong funding base. The statement also reiterates the company’s focus on progressing its GBA project, including approval and closure of the farm out, progression of the Buchan development plan, likely a second farm out, and then FID in H1 2024. We expect this to represent a series of catalysts over the coming month

Pantheon Resources (PANR) – Corporate – Successful $22m Placing

Pantheon Resources announced the closing of a $22m significantly oversubscribed placing and subscription priced at 17p. The use of proceeds will include: i) funding the flow testing of the Alkaid#2 well from the SMD horizon, ii) funding a competent person report to be prepared by Netherland Sewell and Associates covering the Theta West and Alkaid oil discoveries, iii) funding the preparation of dynamic models and field development models to be prepared by SLB (formerly Schlumberger) and iv) fund

Cenkos: Diversified Energy Company Plc -- 54% Cash Margin & 37% Annualised FCF Yield

Despite the challenging commodity price environment, Diversified has announced a strong set of Q1/23 results. Cash margins and annualised free cash flow yield increased to c54% and c37% respectively, as a result of lower per-unit expenses and the Company's robust hedging portfolio. Diversified's hedging strategy continues to advantageously position the Company, with remaining 2023 average natural gas hedge floors of US$3.79/Mcf at a 35% premium to current strip pricing, and a 55% premium to the

The time has come!

In the next six months, Aminex (AEX) will embark on a development programme that will see the company become a producer and free cash flow (FCF) generator. Between drilling the new Chikumbi-1 well (CH-1), re-entering the existing two wells, processing of the new 3D seismic, signing a GSA, and reaching first gas, there will be plenty of milestones in 2023 to, in our view, gradually “guide” the market towards recognising a full value for the targeted initial 60mmscf/d gross production in late 2023

LIBERUM: Caledonia Mining* - The worst should be behind us; onwards and upwards from here

LIBERUM: Helium One* - >60% increase in Helium resource

Hybridan Small Cap Feast - 23 Feb 23

23rd May 2023 @HybridanLLP Status of this Note and Disclaimer This document has been issued to you by Hybridan LLP for information purposes only and should not be construed in any circumstances as an offer to sell or solicitation of any offer to buy any security or other financial instrument, nor shall it, or the fact of its distribution, form the basis of, or be relied upon in connection with, any contract relating to such action. This document has no regard for the specific investment objectiv

Hybridan Research: Sector Review: Critical minerals for UK - mining and battery recycling: 09-05-2023

Virgin mining: Energy security and decarbonisation are driving the race in the sourcing of critical minerals from the natural world. This has contributed to the revival of exploration activities in the US, Europe and to a lesser degree the UK. For example, the global identified lithium resources increased from 40m tonnes in 2015 (the Paris Agreement year) to 97m tonnes in 2023, at a CAGR of 12%, according to the U.S. Geological Survey data. For example, there was no identified lithium resources

Reserves at Shell: Shooting itself in the foot?

Hangover from the noughties debacle still seems to weigh Is Shell''s seeming conservatism on SEC reserves accounting effectively shooting itself in the foot? After two weeks of talking with investors, several of whom expressed concern that Shell''s lowly reserves life would require it to spend beyond guidance to sustain its hydrocarbon business, our impression is, most likely, yes. Push into the details and time and time again, all too apparent in our view is that when it comes to reserves accou

Anglo Asian Mining* - FY22 reflect lower gold production, FY23 guidance reiterated and 8c dividend maintained

Morning Note – 24 May 2023