In this note, we analyze the indebtedness of 35 international E&Ps publicly listed in the UK, Canada, Norway, Sweden and the USA. For each company, we look at (1) cash position, (2) level and nature of debt (including covenants), (3) debt service and principal repayment framework and (4) Brent price required from April to YE20 to meet all the obligations and keep cash positions intact. We also estimate YE20 cash if Brent were to average US$20/bbl from April to YE20. While the oil demand and oil price collapse are of unprecedented historical proportions and the opportunities to cut costs much more limited than in 2014, most companies (with a few exceptions) entered the crisis in much better position than six years ago, with stronger balance sheets and often already extended debt maturities. In addition, this time around, many E&Ps have already been deleveraging for 1-2 years and are not caught in the middle of large developments that cannot be halted. The previous crisis also showed that debt providers could relax debt covenants for a certain period as long as interest and principal repayment obligations were met. This implies that as long as operations are not interrupted and counterparties keep paying their bills (Kurdistan), the storm can be weathered by most for a few quarters.
With (1) Brent price of about US$50/bbl in 1Q20, (2) reduced capex programmes, (3) material hedging programmes covering a large proportion of FY20 production at higher prices and (4) limited principal repayments in 2020, we find that most companies can meet all their costs and obligations in 2020 at Brent prices below US$40/bbl and often below US$35/bbl) from April until YE20 and keep their cash intact, allowing them to remain solvent at much lower prices for some time. In particular, Maha Energy and SDX Energy are cash neutral at about US$20/bbl. When factoring the divestment of Uganda, Tullow needs only US$9/bbl to maintain its YE20 cash equal to YE19. Canacol Energy, Diversified Gas and Oil, Independent Oil & Gas, Orca Exploration, Serica Energy and Wentworth Resources are gas stories not really exposed to oil prices and Africa Oil has hedged 95% of its FY20 production at over US$65/bbl.
Companies: AKERBP AOI CNE CNE DGOC EGY ENOG ENQ GENL GKP GPRK GTE HUR IOG JSE KOS LUPE MAHAA OKEA ORC.B PEN PHAR PMO PTAL PXT RRE SDX SEPL TETY TGL TLW TXP WRL
Panoro Energy (PEN NO)C; target price: NOK20.00: Balance sheet withstanding US$25/bbl | PetroTal (PTAL LN/TAL CN)C: Temporary Shut In of Bretana Oil Field Due to COVID-19 Pipeline Closure | Cairn Energy (CNE LN): Dry hole in Mexico – The Ehecatl-1 exploration well on Block 7 did not encounter hydrocarbons | Diversified Gas and Oil (DGOC LN): 1Q20 trading update and dividend payment | Frontera Energy (FEC CN): 1Q20 update; dividend suspended; FY20 production guidance withdrawn | Maha Energy (MAHA-A SS): Low production in Brazil in April | G3 Exploration (G3E LN): Production suspended by receivers in China | Aker Bp (AKERBP NO): Reducing FY20 capex, cutting dividends | Equinor (EQNR NO): 1Q20 results | Total (FP FP): 1Q20 results, maintaining dividend | Repsol (REP SM): 1Q20 results and discoveries in Mexico | Cadogan Petroleum (CAD LN): FY19 results | DNO (DNO NO): 1Q20 results and well results in Kurdistan | Genel Energy (GENL LN): 1Q20 production update at Tawke |Tethys Oil (TETY SS): 1Q20 results | Aminex (AEX LN): Agreeing to pay CGT in Tanzania to complete farm out
Companies: PEN PTAL DNO GENL AEX CAD TTA EQNR REP TETY AKERBP G3E MAHAA DGOC CNE
Panoro Energy (PEN NO)C: Initiating coverage | 88 Energy (88E LN/AU): Acquisition in Alaska | BP (BP LN): Transaction in Alaska with Hilcorp renegotiated | Columbus Energy Resources (CERP LN): Oil discovery in Trinidad | Premier Oil (PMO LN) and Rockhopper Exploration (RKH LN): Sea Lion farm out (Falklands) exclusivity period extended | BP (BP LN): 1Q20 results | Equinor (EQNR NO): Dry hole in Norway | Getech (GTC LN): Business update | Hurricane Energy (HUR LN): Business update in the UK North Sea |IGas Energy (IGAS LN): Shutting some production in the UK | Lundin Energy (LUP SS): 1Q20 results | OKEA (OKEA NO): 1Q20 update in Norway | OMV (OMV AG): 1Q results | Premier Oil (PMO LN): Court approves schemes of arrangement | Royal Dutch Shell (RDSA/B LN): 1Q20 results and dividend reduction | RockRose Energy (RRE LN): Operational update in the UK | UK Oil & Gas (UKOG LN): £1.275 mm equity raise | Caspian Sunrise (CASP LN): Operating update in Kazakhstan | Exillon Energy (EXI LN): February and March production in Russia | Nostrum Oil & Gas (NOG LN): 1Q20 update in Kazakhstan | PetroNeft (PTR LN): Operations update | Genel Energy (GENL LN): Update in Kurdistan – While negotiations are ongoing the KRG will not exercise the notice of an intention to terminate the Bina Bawi PSC | ShaMaran Petroleum (SNM CN): Business update in Kurdistan | Tethys Oil (TETY SS): Production reduction in Oman | Total (FP FP): Dry hole in Lebanon | Aminex (AEX LN) and Solo Oil (SOLO LN): Licence extension in Tanzania | Far Limited (FAR AU): Update in Senegal | Lekoil (LEK LN): Final payment with Nigerian partner rescheduled | Orca Exploration (ORC.A/B CN): FY19 results | Savannah Energy (SAVE LN): Financial and operating update in Nigeria | San Leon Energy (SLE LN): Special dividend | Seplat Petroleum (SEPL LN): 1Q20 results
Companies: 88E AEX PEN BP/ CASP CERP EQNR EXI FAR TTA HUR GENL GTC IGAS LEK LUPE NOG OKEA OMV ORC.B PMO PTR RKH RDSA RRE SAVE SLE SEPL SNM TETY SOLO UKOG
Diversified Gas & Oil (DGOC LN): Moving to the main board | Echo Energy (ECHO LN): Argentina update | Hurricane Energy (HUR LN): Operating update in the UK | JKX Oil & Gas (JKX LN): 1Q20 update in Ukraine and Russia | Regal Petroleum (RPT LN): Ukraine update | Tethys Oil (TETY SS): Production update in Oman | Update on payments in Kurdistan | Victoria Oil & Gas (VOG LN): 1Q20 update in Cameroon | Zenith Energy (ZEN LN/ZEE CN/ZENA-ME NO): Renegotiate price of Congo acquisition
Companies: DGOC ECHO GENL GKP HUR JKX RPT TETY VOG ZEN
Ascent Resources (AST LN): Entering Cuba | Diversified Gas and Oil (DGOC LN): Acquisition in the US | Phoenix Global Resources (PGR LN): Production shutdown and licence termination in Argentina | Premier Oil (PMO LN): Exiting Area A in Alaska following drilling results | Coro Energy (CORO LN) and Empyrean Energy (EME LN): Resources increase in Indonesia | Falcon Oil & Gas (FOG LN/FO CN): Farm out transaction in Australia | Oil Search (OSH AU): US$700 mm equity raise| Discovery in Norway | Baron Oil (BOIL LN)/Upland Resources (UPL LN): Relinquish UK licence | EnQuest (ENQ LN): FY19 results | IGas Energy (IGAS LN): FY results | Ithaca Energy (Delek): Cutting capex for the North Sea | OMV (OMV AG): 1Q20 trading update | Repsol (REP SM): 1Q20 update | Valeura Energy (VLE CN/VLU LN): Constrained gas sales in Turkey | Block Energy (BLOE LN): Shutting production in Georgia | Regal Petroleum (RPT LN): FY19 results | Chariot Oil & Gas (CHAR LN): Corporate update | Energean Oil & Gas (ENOG LN): Resources increase in Israel | SDX Energy (SDX LN): FY19 results and discovery in Egypt | Tethys Oil (TETY SS): Reduction of extraordinary dividend, capex reduction, FY20 production guidance
maintained | Africa Oil (AOI SS/CN): Tax update in Kenya | Giant gas development projects delayed | Kosmos Energy (KOS LN/US): Cost reduction and RBL redetermination | Vaalco Energy (EGY US/LN): Production update in Gabon
Companies: 88E AOI AST BLOE BOIL CHAR CORO DGOC EGY EME ENOG ENQ IGAS KOS OSH OMV PGR PMO REP RPT SDX TETY UPL VLU
We lower our target in TETY to SEK 85 (95) following a lower assumed oil price for 2020 and 2021. The company again announced growing reserves last year, which has high chances of being repeated going forward based on its inventory of more than 20 prospects, including high-impact exploration and appraisal targets on Block 49 and 56. The company also proposed an 8 SEK/sh dividend for 2020 (~11% yield), which is a long-term sustainable level at USD 60/bbl.
Companies: Tethys Oil Ab
PetroTal (PTAL LN/TAL CN): 3Q19 results | BP (BP LN) (not covered): Acquiring Indonesia assets | Nostrum Oil & Gas (NOG LN)6 ; REDUCE, £0.10: 3Q19 results | Tethys Oil (TETY SS)1,6; BUY, SEK85: October production in Oman | Wentworth Resources (WEN LN) (not covered): Operating update in Tanzania
Companies: PTAL BP/ NOG WRL TETY
Tethys Oil (TETY SS)1,6; BUY, SEK85.00: 3Q19 results | Rosneft Oil (ROSN LN) (not covered): 9M19 operating results
Companies: NK Rosneft' PAO Tethys Oil Ab
3Q19 production was 13,053 bbl/d from Blocks 3&4 in Oman.
The company had cash of US$71.9 mm at the end of 3Q19 (GMP FEe: c. US$72.8 mm) with no debt.
Drilling is ongoing at exploration well Maather-1.
The Yusr-1 well encountered oil shows however experienced some difficulties during drilling making testing inconclusive but Tethys hopes for a successful well test later this year.
i3 Energy (I3E LN)1 ; SPECULATIVE BUY, £1.50: Very good well results at Serenity | OMV (OMV AG) (not covered): 3Q19 results | Total (FP FP) (not covered): 3Q19 results | Block Energy (BLOE LN) (not covered): Gas sales agreement in Georgia | Tethys Oil (TETY)1,6; BUY, SEK85: Farm in transaction in Oman | TransGlobe Energy (TGL LN/CN)1,6; BUY, £2.40: FY19 production guidance at the higher end of the range | Eland Oil & Gas (ELA LN) (not covered): Operating update in Nigeria | Panoro Energy (PEN NO) (not covered): Reserves increase in Gabon | Vaalco Energy (EGY LN/US)1 ; BUY, £2.40: More resources than previously expected in the Dentale reservoir
Companies: I3E OMV BLOE TGL ELA PEN EGY TETY
Tethys Oil is acquiring 20% WI in Block 56, onshore Oman from Biyaq for US$9.5 mm in a combination of cash and carry. To date 11 wells have been drilled on the Block and all but one have encountered oil or oil shows, although none have been determined to be commercial. The initial three-year exploration phase has been extended until December 2020 and the partners have the option to enter into a second exploration phase ending in December 2023.
Bahamas Petroleum Company (BPC LN) (not covered): Equity raise and convertible for Bahamas | Serinus Energy (SEN LN); Speculative Buy, £0.20: Operating update | Regal Petroleum (RPT LN) (not covered): Operating update in Ukraine | Tethys Oil (TETY SS)1,6; BUY, SEK85: September production in Oman | TransGlobe Energy (TGL LN/CN)1,6; BUY, £2.40: Operating update
Companies: BPC SEN RPT TGL TETY
Amerisur (AMER LN) (not covered): 1H19 results | Igas Energy (IGAS LN) (not covered): 1H19 results | Hurricane Energy (HUR LN) (not covered): Well result in the UK | Providence Resources (PVR LN) (not covered): Placing | Energean Oil & Gas (ENOG LN) (not covered): 1H19 results | Tethys Oil (TETY SS)1,6; BUY, SEK85: August production in Oman
Companies: AMER IGAS HUR PVR ENOG TETY
Valeura Energy (VLU LN/VLE CN)1,7 ; BUY, £6.00: Very good flow test results at Inanli | Tethys Oil (TETY SS)1,6; BUY, SEK85.00: 2Q19 results
Companies: Valeura Energy Tethys Oil Ab
The company had cash of US$62 mm at the end of 2Q19 (GMP FEe: c. US$69 mm) with no debt. The Yusr-1 exploration well, drilled in the recently acquired 3D seismic north of Farha South, is in progress. On the exploration side, Tethys continues to mature and high-grade its lead inventory in Blocks 3&4 while awaiting the results from the Yusr-1 well, which is currently in progress. Yusr-1 is the first exploration well to be drilled in the recently acquired 3D seismic area to the north of Farha South.. In addition, at least two more exploration wells are planned for the year in Blocks 3&4. On Block 49, the seismic interpretation and prospect mapping continues with the company now roughly three quarters through the data set that it acquired late last year. The geological work is focused on defining, risking and maturing leads into drillable prospects whilst preparing for exploration drilling.
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Oil fell, paring a weekly gain, as investors weighed improving supply fundamentals against doubts surrounding China's economic growth.
Futures in New York slid 2% Friday but notched a 13% increase for the week. Major producers continue to scale back production. US explorers laid down another 21 oil rigs, bringing the total to the lowest since 2009. Beijing abandoned its economic growth target for this year due to “great uncertainty” over the coronavirus, triggering concerns over a demand recovery.
Yet, output cuts by major producers have helped shrink inventories globally at the same time that OPEC+ works to implement its pledged reductions. The alliance's programme this month is on the way to trimming 9.7 million barrels of daily crude output -- roughly 10% of global supplies and stockpiles at the storage hub at Cushing, Oklahoma, shrank by the most on record last week.
West Texas Intermediate crude for July delivery dropped 67 cents to settle at $33.25 a barrel.
Brent for July settlement fell 93 cents to end the session at $35.13 a barrel on the ICE Futures Europe exchange.
Gasoline futures fell 0.7% to $1.0382 a gallon.
China's oil demand earlier this month was probably at 92% of levels at the same time last year, IHS Markit said, and full-year consumption is likely to be around 8% lower than in 2019.
Companies: FOG PVR 88E DGOC EME TRIN UOG
Anglo Asian Mining is an AIM listed precious and base metals producer running flagship Gedabek operations in western Azerbaijan which include three producing mines and processing facilities. The Company targets 75-80koz GEOs in 2020 with low cost operations providing capital for organic growth opportunities within the highly prospective +1,000km2 land package, with the potential for additional attractive targets outside Azerbaijan as well as 25% of FCF dividend programme.
Companies: Anglo Asian Mining
Falcon is uniquely placed in the current challenging commodity price environment with its strong cash position (US$11.5m at 31 March 2020), fully funded drilling programme and high quality assets. Following the farm down of a 7.5% participating interest to partner Origin Energy in return for an A$150.5m increase in the gross cap carry, we believe Falcon is fully funded through one of the greatest periods of uncertainty the oil and gas industry has ever faced. At a time when many in the industry fight for their very survival, we believe Falcon has managed to secure a fantastic deal for shareholders, which should see the Company through to the potential monetisation of its 22.5% participating interest. We maintain our price target at 40p, a 426% premium to the current share price and reiterate our BUY recommendation.
Companies: Falcon Oil & Gas
Companies: Hurricane Energy
Savannah Energy is an AIM-listed E&P company with two sets of assets: (i) in-production gas and oil fields and a regional monopoly gas distributon network in South East Nigeria (well away from the risky Delta area); and (ii) licenses over 50% of a prolific oil basin in Niger.
Companies: Savannah Energy
Sylvania's share price has fallen 53% since its peaked on the 21st Feb, as the global economy hit the brakes. The short term demand outlook for PGMs is miserable, with supply chains breaking down as both luxury goods and car sales sales collapse.
Companies: Sylvania Platinum
Gold – Robust pricing, improved returns and increased interest
The robust gold price, currently sitting comfortably above $1,700/oz, has been one of the bright spots of the current COVID crisis, although the roots of the price increase were seen well before from mid-2019 on geopolitical and trade concerns. Gold mining companies have been reaping the rewards of the higher price with forecast profits and cash expected to grow significantly. The increase in gold price has been reflected by share price appreciation for most of the gold-mining sector; gold miners, those companies developing gold projects and even gold explorers have all seen an uptick in share prices. Those companies in production should see considerably higher profits and we expect the level of dividends back to shareholders to rise.
The rate of M&A in the sector might also increase, as in previous high price periods, with some companies assuming that these prices can be sustained – however, they will have to be careful as a rash of M&A in previous cycles has shown that there may be a price to pay later on and the industry can ill afford a return to eye-wateringly large write-downs on the other side of this cycle. Gold miners will also have to behave prudently as there will, of course, be a temptation for higher throughput and production, regardless of grade, to generate more cash – a decreasing profit margin perhaps, but a lengthening mine life; as in everything there is a balance to be made to ensure sensible returns.
We are most heartened by a renewed interest in the previously (seemingly) ignored junior explorers which we think is a theme that will develop and continue.
Companies: AURA CMCL CNG GDP JLP ORR
An independent resource audit by Gaffney, Cline & Associates (GCA) has significantly increased the resources at the Mako gas field following the JV's highly successful drilling campaign in Q4/19. GCA have increased the 2C gross recoverable dry gas volumes when compared to its previous resource assessment (in January 2019) by 79% to 495Bcf, slightly ahead of the internal 493Bcf assessment. In the upside case, the 3C resources have increased by 108% to 817Bcf, significantly higher than the 3C internal resource estimate of 666Bcf. Following the GCA resource upgrade, the Mako field has been proven to be one of the largest gas fields ever discovered in the West Natuna Basin and is believed to be the largest undeveloped resource in the region. Located close to existing infrastructure and well established markets, we believe Mako is an attractive proposition, which we currently value at US$18.3m or 3.2p using a US$6/mcf long term gas price.
Companies: Empyrean Energy
April 2020 production payment
Companies: Gulf Keystone Petroleum
Petropavlovsk PLC (LSE: POG) have released their FY2019 results and Q1 trading update this morning. The company had already released production numbers for last year. Overall the numbers reflected a strong operational performance although various financial/other parameters thwarted positive changes below the EBITDA line. Conversely net cash from operations reduced by 43% due to lower cash from prepayment as part of the group’s forward sale facility with the banks, yet net debt came down to $561m. . We show the key figures in Table 1.
An independent resource audit by Gaffney, Cline & Associates (GCA) has significantly increased the resources at the Mako gas field following the JV's highly successful drilling campaign in Q4/19. GCA have increased the 2C gross recoverable dry gas volumes when compared to its previous resource assessment (in January 2019) by 79% to 495Bcf, slightly ahead of the internal 493Bcf assessment. In the upside case, the 3C resources have increased by 108% to 817Bcf, significantly higher than the 3C internal resource estimate of 666Bcf. Following the GCA resource upgrade, the Mako field has been proven to be one of the largest gas fields ever discovered in the West Natuna Basin and is believed to be the largest undeveloped resource in the region. Located close to existing infrastructure and well established markets, we believe Mako is an attractive proposition, which we conservatively value at US$18.3m (risked) or 3.2p using a US$6/mcf long term gas price, unrisked our valuation of Mako increases to US$25.2m or 4.3p per share. We value Empyrean as a whole at 19.0p per share a 280% premium to the share price and reiterate our BUY recommendation.
Valuation – We have updated our Mako model, with gas first in 2023 (previously 2022). Using a long term gas price of US$6/mcf, and a 10% discount factor we value the 42.1Bcf of net 2C resources at US$18.3m (risked) or 3.2p per share. We include a 30% risking to account for any potential commercial risks (including political and fiscal changes), cost risks (associated with potential development cost variations) and timing risks (to allow for any project delays). Unrisked our valuation increases to US$24.7m or 4.3p per share.
A key sensitivity to our valuation is the gas price, at US$8/mcf our valuation of Mako increases to US$31.0m or 5.3p per share (risked), US$44.3m or 7.6p per share (unrisked) and at US$10/mcf our valuation increases to US$40.8m or 7.0p per share (risked), US$58.4m or 10p per share (unrisked).
Combined, we value Empyrean's portfolio at 19p per share, a 280% premium to the share price.
Pure Gold (LSE/TSX: PUR/PGM) have announced a project update for its Red Lake Mine and also its financial results for YE December 2019 today. Importantly the Ontario Government has deemed exploration and mineral extraction an essential business with respect to the COVID-19 pandemic and Red Lake has no known infections at the moment. As such the Project is proceeding as planned with first production due before the end of the year.
Companies: Pure Gold Mining
Companies: Genel Energy
Another impressive year for Iofina, which has reporting a second consecutive year of record iodine production and EBITDA. It also launched its new CDB extraction division, reduced debt through a successful fundraise and delivered the next phase of expansion in its core iodine business with the start-up of IO#8 on time and within budget. Weak oil prices have affected brine water supplies to this plant, causing it to be idled. However, management is optimistic IO#8 will restart in H2 as oil prices recover. We are reinstating estimates that assume a gradual restart from August, and have set a new DCF-based price target of 32p/sh, down from 35p previously.
Bushveld Minerals, is an integrated vanadium mining, processing and technology businesses. The South African group owns 74% of Vametco and 100% of the Vanchem. 26% of Vametco is held by a Black Economic Empowerment group. Bushveld Energy (84%) is developing vanadium redox batteries for grid use in SA.
Companies: Bushveld Minerals