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A mixed set of results across the segments, but overall revenues fared worse annually due to declining contract revenues with a modest quarterly improvement. The upward trend in the multiclient pre-funding sales continues. Another debt facility of a $75m term loan to partly finance the payment due in March 2024 was announced, giving the company some financial flexibility but cash flow generation is still in doubt as the net debt could rise by the year-end.
Companies: PETROLEUM GEO-SERVICES (PGS:STO)PGS ASA (PGS:OSL)
AlphaValue
PGS is enjoying the uptick in global upstream investments with attractive prospects in the medium term. The 44% annual jump in Q4 FY22 revenues and the 38.5% yoy increase in FY22 revenues is a precursor to FY2023. No equity financing on the horizon also bodes well for the stock. The rising operational costs are an important gauge of performance which management will have to keep in check. The cost of refinancing an outstanding loan will be on the market’s radar.
PGS, the integrated player in marine services for oil and gas companies, managed to finish Q3 FY2022 with a healthier balance sheet. The company can now take a deep breath before refinancing in Q3 FY2023. Q2 revenues from MultiClient late sales also bumped up the Q3 cash flow from operating activities. The current macro environment leads the management to remain upbeat about the near and medium term – a period PGS sails into with a healthier level of leverage.
All in all, a positive set of results, especially with the $100m capital increase completed. Management continues to see ” an improving marine seismic market” with the order book up by 15% qoq (and confirming the technical decline in Q1). Gross cash costs are guided at c. $500m vs $485m previously, but this is due to higher project activity. Refinancing is now expected to be done ahead of Q3 23.
Companies: PGS ASA (0MHR:LON)PGS ASA (PGS:OSL)
The stock is down 8% at pixel time, essentially giving back the gains from yesterday after the announcement of the summer contracts with Equinor. While the results were slightly below consensus and explain part of this retreat, we believe the declining order book, for the fifth consecutive quarter, might have sparked some worries. During the call, management explained this was more due to technical reasons, with the order book now stated on an IFRS basis vs adjusted previously.
While the mid-term picture is supportive (i.e. careful spending in the previous cycle tightened the supply and should boost prices and future investments), PGS cannot afford to wait with its upcoming maturities. The stock is down 40% at pixel time, as the company says it is assessing “alternate ways to address upcoming debt maturities”. Obviously not a good signal for equity holders. PGS has $160m of debt due in H2 22, $375m in 2023 and $628m in 2024.
Mixed results with an EBITDA c. 15% below consensus, but positive cash, and due to a release in working capital. On the outlook, gross cash costs are expected to be $400-420m, and down from $425m previously. Contract rates have recovered by 55% in Q3 vs Q1 and Q4 is estimated to be slightly lower. Management commented that it expected to be in a position to repay 2022 debt maturities with cash flow and be able to refinance 2023-24 maturities.
Mixed release with segment revenues improving 15% qoq but already communicated to the markets in the preliminary update, while the segment EBITDA is stable at $84m. The order book is up 10% at $255m with good visibility for the rest of the year. The company guides for gross cash costs of $425m from $400m due to increased activity and higher fuel prices.
After the refinancing, the company now focuses on its operations. The cost-cutting programme is visible with EBITDA up by 4% yoy, while revenues were down 20% yoy. PGS has reactivated one vessel for the summer season and now seems fitted for the level of activity foreseen in 2021 (Q2 is close to fully booked and Q3 is in good progress).
After the disastrous Q2/Q3, revenue bounced back 70% qoq but remains down 40% yoy. With the refinancing almost over, the company continues to focus on costs. The latter are expected below $400m, down $100m from 2020’s initial guidance. While exploration spending will remain low in 2021, PGS will at least benefit from the less competitive environment.
Companies: PGS ASA
The company, currently in default, has entered into a lock-up agreement with lenders. The agreement includes the extension of maturities and postpones debt amortization to September 2022. While not all lenders have signed the agreement (80% in aggregate, but only 50.4% of the lenders of the RCF due in 2020), PGS intends to implement the amendments under an English law scheme, which would require consent from 75% of lenders.
Binding agreement with majority of lenders - positive Reduced dept amortisation of USD 275m from 2020-2022 Q3 EBITDA 88m vs. consensus of USD 72m on lower cost Fundamentals weak – We fear that PGS will burn cash in 2021
Arctic Securities
Q3 revenues 6% below consensus (USD 115m vs. USD 122m) USD 26m in governmental covid aid incl in revenues – adj rev USD 92m We forecast neg FCF in Q3 – not supportive for the ongoing refi Stay away until refinancing is complete – M.cap of EV is now ~10%
Support from: 62% of TLB owners, 81% of RCF holders and 100% of ECF With this, cash outflow from 2020-2022 has been reduced by USD ~275m No maturity before 2024 – except from RCF step down in sept 2022 Clearly positive – fundamentals however continues to worsen
On Friday, PGS faces an RCF stepdown of USD 135m. Without the ability to repay, PGS commenced negotiations with all lenders before the summer. Apart from refusing the USD 600m multi-client offer from TGS, PGS has not updated the market. We believe creditors are in a very challenging situation, new equity will not help (m.cap 13% of EV) and another “amend and extend” appears to be the likely solution. Sell case has largely played out – up to Hold.
Research Tree provides access to ongoing research coverage, media content and regulatory news on PGS ASA. We currently have 28 research reports from 3 professional analysts.
Jubilee today reports its Q3 and third quarter operational results from its expanding operations in Zambia (copper) and South Africa (chrome and PGM). South Africa is on a growth trajectory with record chrome production of 409kt in the quarter (Q2 FY2024 381kt) and a monthly record in March of 145kt and production YTD of 1.13Mt (0.94Mt). Jubilee is well underway to its annual target capacity of 2,1Mt/yr especially with the new 300kt/yr chrome plant at Thutse expected to be operational in August
Companies: Jubilee Metals Group PLC
WHIreland
Trinity has announced a c28% reduction to its 2P reserves following a YE23 review. Despite the decrease in the Company’s 2P reserves, Trinity’s core business remains robust, with a reserves/production ratio of >12.5 years at YE23. Whilst there is significant potential for growth within the current portfolio, this will be difficult to unlock from the current balance sheet and we believe further financing will be required. We update our target price to 76p (from 202p), a c85% premium to the curren
Companies: Trinity Exploration & Production Plc
Cavendish
Companies: BILN ELCO NXQ CUSN ATG
• The Nong Yao-13 exploration well in the new Nong Yao D area that was targeting multiple zones has encountered >30 feet of new oil play across several new shallow intervals which have not been produced elsewhere on the concession. These reservoirs are believed to be recurring across the Nong Yao D area. • The drilling result confirms that oil has successfully migrated into this area of the block (a factor that was seen to be a risk in the Nong Yao D area) and open the opportunity for further a
Companies: Valeura Energy Inc.
Auctus Advisors
I3 has announced the sale of the majority of its royalty interests in Canada, for US$24.8m cash. This allows the company to fully repay amounts drawn on its debt facility and create a working capital surplus, giving I3 significant additional funding flexibility going forward
Companies: i3 Energy Plc
Zeus Capital
NextSource is uniquely positioned to build a leading vertically integrated position, ex China, in the supply of Lithium-ion battery anode material which is essential for the Energy Transition. The company is commissioning phase 1 of its world-class Molo graphite mine in Madagascar and is in the final permitting process for its first Battery Anode Facility (BAF) to be located in Mauritius. The company is backed by Vision Blue, established by Sir Mick Davis, former CEO of Xstrata. On our calculat
Companies: NextSource Materials Inc
Capital Access Group
Companies: 88E RNO TRIN KRM EXR BOOM
DEC reported FY23 results which were in line with expectations and announced the acquisition of joint venture assets from Oaktree along with an updated capital allocation framework.
Companies: Diversified Energy Company PLC
Dowgate Capital
Chariot, Energean, Touchstone Exploration, Longboat Energy, Hartshead Resources, BP, Helix Exploration, PetroTal, Pantheon Resources, Caspian Sunrise, Petrofac, DNO ASA, Valeura Energy, Aker BP, Var Energi Source: FactSet, weekly change 08/04/24-12/04/24 Oil rose as Israel braced for a possible attack from Iran, a development that would threaten major disruptions in a region that accounts for a third of the world’s crude output. An assault is expected to come as soon as the next 48 hours, which
Companies: HHR TXP LBE CHAR
Union Jack has released an update on its Wressle asset, reporting maturing production from Wressle-1, alongside progress for significant further development activities on the field going forward.
Companies: Union Jack Oil Plc
Companies: PLL TLG HZM SAV KAV KP2 SVML
SP Angel
Pharos Energy reported FY23 results on 27 March. Group net production of 6,508 boepd (FY22: 7,166 boepd) was in line with guidance, assisted by successful development drilling in Vietnam and exploration successes in Egypt. Pharos’s strong cash generation resulted in a stronger balance sheet, with net debt reduced to US$6.6m (from US$28.9m at the end of 2022) and cash balances totalling US$32.6m. This left the group free to return more cash to shareholders, including a 10% increase in dividends,
Companies: Pharos Energy PLC
Progressive Equity Research
Shore Capital
Hunting has released its Q1 trading statement, reporting a strong period for OCTG and Subsea, steady growth in Advanced Manufacturing, and a softening in Perforating Systems.
Companies: Hunting PLC
Union Jack announced an operational update on its onshore UK Wressle field and confirmed plans to announce the payment of a cash dividend to shareholders along with the FY23 results in May. Wressle continues to deliver material revenues to the Company, generating positive cash flow and providing it with sufficient cash resources to fund shareholder returns and invest in new development projects.
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