Panoro Energy (PEN NO)C; Target price NOK23.00 per share: Boosting returns in Gabon, gearing for exploration - BW Energy, the operator of the Dussafu licence is reviewing the development concept of Hibiscus and Ruche with a jack-up conversion instead of a new build wellhead platform. Overall, this could reduce the break-even of the project from US$30/bbl to US$25/bbl, reflecting the current low cost of barges. The operator now estimates that the project would achieve an IRR of 15% at US$30/bbl (US$35/bbl previously). Pending more visibility on the new development plan, gross capex could be 20% lower than the previously anticipated US$400 mm. The development is expected to restart in 4Q20. Net to Panoro’s 7.5% WI, the potential net savings would represent ~US$6 mm, almost ~8% of the current market cap. Given Panoro’s high cost of capital, this could be material as Panoro could redeploy the freed-up capital on other initiatives. Panoro shares trade in line with our 2P NAV of ~NOK10 per share that does not factor in the potential lower capex in Gabon. In addition, Panoro continues to offer near term diversified and high impact exploration upside with an aggregate unrisked value for the programme of almost NOK30 per share (~3x the current share price). An enhanced balance sheet with lower development cost in Gabon provides additional fire power to the exploration drilling activities. The Salloum West appraisal well (unrisked NAV of >NOK3 per share) is expected to be drilled in 1Q21. Subject to completion of farm-out transactions with Africa Energy, the company will then drill a very high impact exploration well drilled in South Africa (unrisked NAV of NOK15 per share). Drilling the upside at the Greater Hibiscus area later in 2021 has an unrisked value of NOK10 per share.
SDX Energy (SDX LN)C; Target price £0.40 per share: Initiating Coverage - SDX Energy is a £35 mm market cap full cycle exploration and production company with low cost (6 mboe/d) and reserves (>10 mmboe) in Egypt and Morocco. In contrast to most peers, SDX’s business is insulated from oil price moves with ~90% of the production being fixed-price gas on LT contracts. Recent drilling successes have opened up additional low risk/low cost/short cycle exploration and development upside in both countries. SDX will soon embark on a multi-year exploration programme. With infrastructure already in place, any discovery will be highly accretive and can be developed from SDX’s own source of funds. SDX shares trade at EV/DACF multiples of ~1.3x in 2020. Our 2P NAV is £0.27 per share, representing 70% upside. The prospective resources already identified have an unrisked NAV of £0.12 per share for Egypt (+75%) and £1.03 per share for Morocco (+600%). The main exploration drilling programme is restarting in 2021 but the company should test the LMS-2 well in Morocco in 4Q20, should COVID-19 restrictions be lifted. A success would derisk ~5 bcf WI resources at LMS-2 (+£0.13 per share) and a further ~20 bcf WI resources in the wider La Mimouna area (+£0.50 per share). Our target price of £0.40 per share (~ our ReNAV) represents ~150% upside.
IN OTHER NEWS
Trinity Exploration and Production (TRIN LN): 1H20 results – 1H20 production in Trinidad was 3,282 bbl/d. FY20 production is still expected to be in the range of 3,100 - 3,300 bbl/d. Trinity held US$19.7 mm in cash as at 30 June 2020.
ADX Energy (ADX AU) and Reabold Resources (RBD LN): Flow test results in Romania below expectations – Following acidisation, the flow rate of the Iecea Mica-1 well was below expectations.
BP (BP LN) and ENI (ENI IM): Discovery in Egypt - The Nidoco NW-1 exploratory well discovered gas-bearing sands for a total thickness of 100 m, of which 50 m is within the Pliocene sands of the Kafr-El-Sheik formations and 50 m within the Messinian age sandstone of the Abu Madi formations. The Great Nooros Area gas in place is now be estimated > 4 tcf.
Deltic Energy (DELT LN): Resources update – The Cadence, Cordova, Bathurst and Basset prospects hold 597 bcf, 124 bcf, 275 bcf and 128 bcf prospective resources (P50) respectively. These licences were recently offered to Deltic and are located in the Southern North Sea.
IGas Energy (IGAS LN): Acquiring Geothermal business – IGas is acquiring GT Energy, a developer of deep geothermal heat projects onshore UK. GT Energy's principal project is a 14 MW deep geothermal project in the Etruria Valley, Stoke-on-Trent. IGas will make an initial payment of £500,000 to be satisfied by the issue of 2,222,223 IGas ordinary shares. There could be further payments according to milestones associated with progress at GT Energy’s project. The maximum payable consideration is £12 mm with new ordinary shares of IGas not exceeding 29.9% of the share capital of IGas. GT Energy has entered into a term sheet with Gravis Capital Management to fund a significant proportion of the ~£20 mm project through a limited-recourse debt facility.
Independent Oil & Gas (IOG LN): Potential offer to acquire Deltic Energy (DELT LN) – Independent Oil & Gas is considering a possible all-share offer for the Deltic.
Premier Oil (PMO LN): Considering transaction with Chrysaor – Premier Oil is in discussions with Chrysaor as a potential alternative to the proposed equity raise. The preferred route remains the re-financing announced previously.
Union Jack Oil (UJO LN): Equity raise – Union Jack is raising £7 mm of new equity at a price of £0.16 per share. The proceeds of the fundraising will be used to (1) pay the deferred cash consideration due on first oil production at the Wressle development in 4Q20, (2) drill a side-track well at the Biscathorpe discovery in 2021 and (3) ongoing investment in the other conventional onshore drill-ready projects including a proposed low-cost, side-track well at the producing Keddington oilfield and a proposed conventional well at North Kelsey.
FORMER SOVIET UNION
Caspian Sunrise (CASP LN): 1H20 results – 1H20 production in Kazakhstan was 1,494 boe/d with production of 1,643 boe/d at the end of June. The company held US$0.2 mm in cash at the end of June.
MIDDLE EAST AND NORTH AFRICA
Energean (ENOG LN): New gas contract in Israel– Energean has signed two new Gas Sales and Purchase Agreements which, combined, represent quantities of gas of up to 1.4 bcm/y and increase total firm contracted gas sales from the Karish project to approximately 7.0 bcm/y on plateau.
Global Petroleum (GBP LN/AU): Raising £1.4 mm of new equity – Global is raising £1.4 mm of new equity priced at 0.75p per share. Subscribers are also being issued 1 warrant per share with a strike price of 1.5p.
Companies: BP/ CASP ENOG ENI PEN PMO RBD SDX
PetroTal (PTAL LN)C; Target price £0.45: Production at Bretana restarts – In anticipation of the re-opening of the ONP, Bretana oil production recommenced on July 15, 2020 and achieved over 12,000 bbl/d when all seven wells were online. Oil deliveries have also already commenced to the Iquitos refinery and approximately 40,000 bbl are expected be delivered during July 2020. Oil is being barged to the Saramuro Pump Station and will be delivered into the ONP immediately after it reopens , now expected in early August 2020. To manage the company’s inventory and barge storage capacity, Bretana production has been reduced to approximately 8,000 bbl/d pending the restart of the pipeline. While the share price has already increased 30% over the last three weeks, we continue to see PetroTal as a value and growth stock. The company’s value based on its 2P reserves only (2P NAV of £0.28 per share) represents 2x the current share price and our Core NAV is 3x current levels. Assuming production of ~12 mbbl/d in 2021 (i.e. the level achieved when the field was restarted) PetroTal’s share price implies EV/DACF multiples of 1.7x in 2021 and 0.2x in 2022. On a production/capex low case, we estimate that PetroTal generates aggregate Free Cash Flow over 2021-2022 equal to the company’s market cap.
IN OTHER NEWS
ExxonMobil (XOM US): Further volumes discovered in Guayana | Karoon Energy: Softening terms for acquisition of Brazilian asset | President Energy (PPC LN): Operational update in Argentina | Total (FP FP): Significant discovery in Suriname
Jadestone Energy (JSE LN): 2Q20 update | Repsol (REP SM): Compensation in Vietnam | ENI (ENI IM): Large volume confirmed in Vietnam
ADX Energy (ADX AU): Operational update in Austria and Romania | ENI (ENI IM): 2Q20 results, lower capex | EnQuest (ENQ LN): UK Acquisition | Equinor (EQNR NO): Dry hole in Norway | Hurricane Energy (HUR LN): Operational update in the UK | Lundin Energy (LUNE SS): 2Q20 results | OMV (OMV AG): 2Q20 results/dividend reduction/Volumes discovered at Hades (Norway) reduced | Royal Dutch Shell (RDSA/B LN): 2Q20 results | Total (FP FP): 2Q20 results, Dividend distributions maintained | Zenith Energy (ZEN LN): Acquisition of Italian assets terminated
FORMER SOVIET UNION
Enwell Energy (ENW LN): Negative licence update | Nostrum Oil & Gas (NOG LN): 1H20 trading update in Kazakhstan
MIDDLE EAST AND NORTH AFRICA
BP (BP LN), ENI (ENI IM), Total (FP FP): Discovery in Egypt | DNO (DNO NO): 2Q20 results | ShaMaran Petroleum (SNM CN), Gulf Keystone Petroleum (GKP LN) and Genel Energy (GENL LN): Payment in Kurdistan | Sound Energy (SOU LN)C: Raising up to £4.5 mm of new equity
Angola lowering tax | Cairn Energy (CNE LN): Divesting Senegal and returning cash to shareholders | Total (FP FP): Divesting mature assets in Gabon | Savannah Energy (SAVE LN): FY20 results and update in Nigeria | Seplat Petroleum (SEPL LN): 1H20 results | Tullow Oil (TLW LN): 1H20 update | Victoria Oil & Gas (VOG LN): 2Q20 update in Cameroon
EVENTS TO WATCH NEXT WEEK
04/08/2020: BP (BP LN) – 2Q20 results
04/08/2020: GeoPark (GPRK US) – 2Q20 results
04/08/2020: Gran Tierra Energy (GTE LN/CN) – 2Q20 results
05/08/2020: Parex Resources (PXT CN) – 2Q20 results
07/08/2020: Frontera Energy (FEC CN) – 2Q20 results
Companies: XOM KAR BP/ CNE DNO ENI ENQ EQNR GENL HUR JSE LUNE NOG OMV TAL REP RDSA SAVE SEPL SOU FP TLW VOG
As expected the company cut its dividend. It is also adopting a different remuneration policy and now intends to distribute a minimum dividend of €0.36/share (vs €0.89) and increase this with oil ranging from $45 to $60/bbl. Above $60/bbl, a €400m share buy back is planned, rising to €800m with oil above $65/bbl. Considering Eni’s strong sensitivity to oil prices this makes sense although it will irk investors looking for a more predictable payout.
Companies: Eni SpA
PetroTal (PTAL LN/TAL CN)C; Target price £0.45: 1Q20 results/Bretaña expected to restart in July – 1Q20 financials are in line with expectations and 1Q20 production had been reported previously. At the end of 1Q20, current trade and other payables had been reduced to ~US$45 mm compared to ~US$55 mm at YE19. Most importantly. PetroTal continues to expect the Bretaña field to be re-opened this month. The contingent liability with Petroperu is estimated at US$25 mm at the current oil price and the company has entered into a financial swap for 0.46 mmbbl of oil with an ICE Brent reference price of US $40.58/bbl to cover the upcoming sale by Petroperu at the Bayovar port. This is a recovery story that we continue to like. It offers a combination of value, production and cash flow growth and reserves upside. We anticipate that the imminent reopening of the field with be an important catalyst to the share price.
i3 Energy (I3E LN): Reveals takeover target in Canada | Maha Energy (MAHA-A SS): Production update | Aker BB (AKERBP NO): 2Q20 update in Norway | Energy (RRE LN): Recommended offer by Viaro Energy | Spirit Energy: Dry hole in Norway | Enwell Energy (ENW LN): Ukraine update | JKX Oil & Gas (JKX LN): 2Q20 update in Ukraine and Russia | Pharos Energy (PHAR LN): Operating update in Egypt and Vietnam | Sound Energy (SOU LN)C: Terms of Moroccan licence renegotiated | Tethys Oil (TETY SS): June production in Oman | Victoria Oil & Gas (VOG LN): Gas sales contract with ENEO in Cameroon terminated
EVENTS TO WATCH NEXT WEEK
14/07/2020: Aker BP (AKERBP NO) – 2Q20 results
15/07/2020: Premier Oil (PMO LN) – 1H20 update
13-17/07/2020: GeoPark (GPRK US) – 2Q20 update
Companies: I3E MAHAA JKX PHAR EQNR AKERBP ENI HUR TAL REP RRE SOU TPL VOG OMV
It is difficult to get a clear message from management, but we believe it is saying that Eni can withstand the current turmoil and let the leverage increase in order to fulfill the dividend as long as a recovery is foreseeable in H2. Q2 will be critical as the lockdown exit will dictate further steps.
GeoPark (GPRK US)C; Target price US$20: Delivering on plan; boosting balance sheet | PetroTal (PTAL LN/TAL CN)C: Operation update | 88 Energy (88E AU/LN): Update in Alaska | Trinity Exploration and Production (TRIN LN) | Empyrean Energy (EME LN): Equity raise cancelled, launching open offer | Jadestone Energy (JSE LN): FY19 results | Aker BP (AKERBP NO): 1Q20 update in Norway |Dry hole in Norway |ENI (ENI IM): 1Q20 results | Equinor (EQNR NO): Reducing dividend | i3 Energy (I3E LN): Need to negotiate with noteholders |Serica Energy (SQZ LN): FY19 results | Gulf Keystone Petroleum (GKP LN): FY19 results and update in Kurdistan | SDX Energy (SDX LN): Flow rate results at exploration well in Egypt | ShaMaran Petroleum (SNM CN): Update on payments in Kurdistan | Sound Energy (SOU LN): Update in Morocco and FY19 results | Zenith Energy (ZEN LN/ZEE CN/ZENA-ME NO): Acquisition in Tunisia | Tullow Oil (TLW LN): Selling Uganda | Wentworth Resources (WEN LN): FY19 results
Companies: 88E AKERBP ENI EQNR GKP GPRK I3E JSE TAL SDX SNM SOU SQZ TLW TRIN WRL ZEN
Bahamas Petroleum Corporation (BPC LN): Delaying exploration activities in the Bahamas | i3 Energy (I3E LN): Canadian acquisition | Touchstone Exploration (TXP LN/CN): FY19 results | Cairn Energy (CNE LN): FY20 capex reduced but production guidance maintained | ENI (ENI IM): Capex reduction and new production guidance | Equinor (EQNR NO): Reducing spending | IGas Energy (IGAS LN): Update in the UK | Independent Oil & Gas (IOG LN): FY19 results | Lundin Petroleum (LUP SS): Reducing dividends, increased plateau at Johan Sverdrup | OMV (OMV AG): Reducing costs | Repsol (REP SM): Corporate update | RockRose Energy (RRE LN): Corporate update, maintaining dividends | Serinus Energy (SEN LN): FY19 results | Block Energy (BLOE LN): Acquiring Georgian assets from Schlumberger | Regal Petroleum (RPT LN): Acquisition in Ukraine | Gulf Keystone Petroleum (GPRK LN): Operating update in Kurdistan | Africa Oil (AOI SS/CN): Reserves update | Vaalco Energy (EGY US/LN): Operating update in Gabon
Companies: BPC I3E TXP CNE ENI EQNR IGAS IOG LUNE OMV REP RRE SEN BLOE ENW GKP AOI EGY
The Q4 results were below consensus but the focus is on the long-term strategy update. 2020 has brought a lot of updates in the ESG segment and each company is outbidding each other. Eni is now taking a serious commitment by announcing that oil production will decline after 2025. While the expansion into green assets will bring stability to the group, it also means that Eni’s exploration pedigree is becoming less relevant for the long-term valuation.
Busy quarter for the Italian producer, which closed the ADNOC transaction as well as the acquisition of Exxon’s assets in Norway. The 5% qoq decline in adjusted operating profit was only slightly better than the consensus estimate though, as Q2 was rather weak, and was mainly due to production increasing above expectations in Egypt.
Coro Energy (CORO LN) (not covered) & Empyrean Energy (EME LN) (not covered): Operational update in Indonesia | Eni (ENI IM) (not covered): 3Q19 results | SDX Energy (SDX LN)1,6; BUY, £0.65: Operating update in Morocco
Companies: CORO ENI SDX
Jadestone Energy (JSE LN): HOLD, £0.60; Dividend Policy | Eni (ENI IM) (not covered): Will acquire ExxonMobil’s (XOM US) (not covered) upstream assets in Norway | Lekoil (LEK LN) (not covered): 1H19 results
Companies: JSE ENI LEK
President Energy (PPC LN) (not covered): Argentina update | Gulf Keystone (GKP LN) (not covered): KRG Payment | ENI (ENI IM (not covered): Discovery in Nigeria
Companies: PPC GKP ENI
GeoPark (GPRK US); BUY, US$26.00: Initiating coverage: Not only about Block 34 | Eni (ENI IM) (not covered): Sale of 20% stake offshore Indonesia | Victoria Oil & Gas (VOG LN)1,6; Speculative Buy, £0.35: Major new gas to power deal
Companies: GPRK ENI VOG
Range Resources (RRL LN/RRS AU) (not covered): China transaction update | Eni (ENI IM) (not covered): 2Q19 results | Equinor (EQNR NO) (not covered) & Lundin Petroleum (LUPE SS) (not covered): Small oil discovery at the Utsira High | Independent Oil & Gas (IOG LN)1 ; BUY, £0.50: Game changing farm out of assets to a company of Warren Buffet | Block Energy (BLOE LN) (not covered): Production resumption in Georgia | Orca Exploration (ORC.A/B CN) (not covered): Review of strategic alternatives
Companies: RRL ENI IOG BLOE ORC/B
The operating cash flow is down 6% qoq (excluding working capital changes), as the group is impacted by the low gas prices in Europe and Asia (LNG) as well as seasonal effects. Good progress has been made on the exploration front with the group expecting to exceed its 600mmboe target for FY19.
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Jersey Oil & Gas has announced that it has selected a greenfield four-legged platform to develop the Greater Buchan Area which will utilise existing export pipeline infrastructure. We see near-term scope to increase materially our fair value estimate from 268p. We believe that today's news is price material and that it sets the scene for a near-term catalyst rich outlook for the company. It is an opportune time, in our opinion, to gain exposure to the Jersey Oil & Gas investment opportunity.
Companies: Jersey Oil & Gas Plc
In H1, 2020 and the period directly following (Q3, 2020), EQTEC has made substantial operational progress, significantly boosting its project pipeline and strengthening its balance sheet with an over-subscribed £10m fund raising in July 2020. Revenue generation in H1, 2020, however, was constrained due to the impacts of Covid-19 and severe fires in California. We now forecast revenue of €2.4m in 2020E, compared with our previous forecast of €7.0m. Importantly, no projects have been cancelled. Delayed revenue is expected to flow into 2021E. Select new projects, having been secured in 2020, are expected to reach financial close in 2021E and 2022E, in addition to those existing projects under development in those years. As a result, we are increasing our 2021E and 2022E forecasts.
Companies: EQTEC Plc
H1 2020 results; progress on concept selection
Central Asia Metals (CAML LN) reported robust interim results in the context of the H1 2020 backdrop; solid production and the company’s fundamentally low cost base meant that CAML remained profitable despite the sharp pullback in commodity prices during the period which led to a 17% YoY decline in revenue to US$70.8m. Consequently, EBITDA was down 25% YoY to US$42.5m despite a decline in unit costs of 6% YoY at Kounrad and 9% YoY at Sasa to US$0.48/lb and US$0.43/lb respectively which cushioned the impact of the weaker the top line. With no significant one offs in the period, EPS of US$0.10/sh. was 33% lower YoY.
Companies: Central Asia Metals Plc
Talitha Shelf Margin Deltaic LKA resource report
Companies: Pantheon Resources Plc
The stock was up 12% on Friday, 25/09, sparked by the positive outcome on Vodafone’s dispute with the Indian tax authorities. This is encouraging for Cairn, but note that both cases differ. While the tax authorities simply erased Vodafone’s tax bill, they owe up to $1.4bn to Cairn, and could offer more resistance.
Companies: Cairn Energy Plc
Another set of record results from Iofina, with H1 2020 benefiting from improved iodine pricing, solid cost controls and robust operational performance. Some of the shine will be taken off by the cautionary tone over the impact of COVID-19 on current iodine demand and pricing. Nevertheless, these results on top of the recent debt refinancing again demonstrate the continued improvements Iofina is delivering both operational and financially. It now has a solid platform of diversified low cost iodine production from five plants, a range of iodine and non-iodine specialty chemicals products, an improved balance sheet and a new lending partner with which to deliver its ‘prudent growth’ ambition.
Companies: Iofina Plc
H1/20 has been a highly successful period for United Oil & Gas, during which time it has successfully transformed into a full-cycle E&P company. Key to this success has been the Abu Sennan acquisition, with net production increasing to 2,700boepd at the end of June. The significant production and reserve additions delivered as part of the 2019-20 drilling campaign emphasises the considerable upside that still remains in the block. Post period, United were granted a 100% operated working interest and an 18-month extension to the Walton-Morant licence, offshore Jamaica. At 229mmbbls, the Walton-Morant licence has the potential to have a major impact on United, which we value at US$724.3m or 76.8p/share unrisked. We update our valuation, increasing our price target to 19.1p/share, a 549% premium to the current share price and reiterate our BUY recommendation.
Companies: United Oil & Gas Plc
Adriatic Metals* (ADT1 LN) – Annual results and review of exploration | AfriTin (ATM LN) –– H1 report highlights production ramp-up at the Uis mine | Ariana Resources* (AAU LN) – US$30m partial disposal of Turkish Assets | Anglo Asian Mining* (AAZ LN) – BUY – Gedabek continue unaffected by the Nagorno-Karabakh conflict | Cornish Lithium (Private) - Cornish Lithium looking to bring the EV supply chain closer to home | IronRidge Resources* (IRR LN) – FY20 results: well positioned to continue de-risking portfolio projects with A$7.3m in the bank | Kavango Resources (KAV LN) – Resuming field exploration of the Kalahari Copper Belt, Botswana | Power Metal Resources (POW LN) – Exploration gets underway on Botswana joint-venture | Rambler Metals and Mining* (RMM LN) – Interims and refinancing of debt and planned restoration of mine production at higher copper grade | Renascor Resources (RNU AU) – Offtake agreement with Chinese anode manufacturer highlights China’s dominance of supply chain | Trans-Siberian Gold (TSG LN) – 8c interim dividend declared reflecting robust FCF and strong outlook | Versarien* (VRS LN) – New Advisory Panel brings together global leaders in graphene within Versarien
Companies: ADT1 ATM AAU AAZ IRR KAV POW RMM RNU TSG VRS
EQTEC announced (last Friday afternoon) an extension of the exclusivity period of the Billingham MOU until 22 November 2020. The extension of the MOU exclusivity period is with the aim of finishing the preparation of a legally binding option agreement with Scot Bros. which, if agreed, will grant EQTEC and its partners the right, but not the obligation, to purchase the entire issued share capital of Billingham EFW Limited (the project SPV) from Scott Bros. subject to an agreement on consideration and other terms.
West Newton B-1 drilling update
Companies: Union Jack Oil Plc
Chariot’s interims represent something of a line in the sand for the new management team, with historic oil-focussed deepwater exploration spend written-off, demonstrating its recent corporate and strategic ‘reboot’, which has ushered in a more entrepreneurial approach. Strategy has shifted away from higher-risk frontier exploration in favour of opportunities that better fit the energy transition. With the annual cash burn cut 45% to US$2.5m, no remaining work commitments and period-end cash of US$5.8m, management has a clear path ahead to deliver on its ambitions.
Companies: Chariot Oil & Gas Ltd.
Hargreaves’ FY20 results are very solid indeed. As previously reported, the only noticeable impact from COVID was in the slippage of Blindwells’ land sales, which were due to conclude during the lockdown period. Site activity has resumed and sales remain on track to conclude in the current year. A final dividend of 4.5p has been declared and the outlook statement is measured but confident. We reintroduce forecasts today, effectively reinstating our pre-COVID expectations. Hargreaves is well positioned to deliver a period of significant, renewed growth with the prospect of a double digit dividend yield from FY22 as HRMS profits are distributed.
Companies: Hargreaves Services Plc
Ready to steppe it up – initiating coverage
Companies: Enwell Energy Plc
Three day CMD to detail how BP will redeploy hydrocarbons’ capital into renewables. The latter are expected to grow by 12% CAGR by 2030, which surely is more exciting than oil. Returns do not compare though, but BP intends to make good use of its trading division to bridge part of the gap. Lowering the dividend took care of the rest. Overall, BP diversifies its risks early, which might prove right if oil stays under $50.
Companies: BP Plc