Cairn Energy (CNE LN): Sale of Senegal interests take another step forward | Pantheon Resources (PANR LN): Talitha Production Unit extension secured | Chariot Oil & Gas (CHAR LN): Material resource upgrade, offshore Morocco
Companies: CNE PANR CHAR
PetroTal (PTAL LN)C; Target price £0.45: Pipeline allowed to restart this week, Bretana to be back on line by the end of August – There were no surprises in the 2Q20 financials. As at August 17, 2020, PetroTal had cash resources of US$13.5 mm, with accounts payable and accrued liabilities of ~ US$37 mm (a reduction of US$12 mm from the end of June). Of this amount, only US$28 mm is due in 2020. Importantly, PetroTal indicated that favourable discussions between the Government of Peru and the communities has resulted in the protestors allowing operations at the export pipeline to restart this week. The Company expects that it will be able to recommence oil production at Bretana by the end of August 2020. Our Core NAV for the company at Brent price of US$45/bbl (flat, no escalation) and 12.1 mbbl/d production in 2021 (declining thereafter) is £0.23 per share, representing ~100% upside to the current level. At US$50/bbl for Brent, our Core NAV would be £0.35 per share (x3 current level).
IN OTHER NEWS
Premier Oil (PMO LN): 1H20 results and refinancing
FORMER SOVIET UNION
Nostrum Oil & Gas (NOG LN): 1H20 results
MIDDLE EAST AND NORTH AFRICA
SDX Energy (SDX LN): 1H20 results
Cairn Energy (CNE LN): Woodside Petroleum pre-empt sales of Senegal asset
EVENTS TO WATCH NEXT WEEK
26/08/2020: Pharos Energy (PHAR LN) – 2Q20 results
27/08/2020: BW Energy (BWE NO) – 2Q20 results
27/08/2020: Panoro Energy (PEN NO) – 2Q20 results
Companies: NOG PMO CNE TAL 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
Positive deal for Cairn which will pay a special dividend and look for potential acquisitions. While the intention to farm down Senegal was clear, selling the assets in such an early state is interesting for Cairn, which de-risks its portfolio substantially.
Companies: Cairn Energy Plc
Cairn Energy (CNE LN): Resolution of Cairn India proceedings could take place this year | JKX Oil & Gas* (JKX LN): 20-year extension granted at the Zaplavska field, Ukraine | Deltic Energy (DELT LN): Deltic board receives backing from largest shareholder | Reabold Resources (RBD LN): IMIC-1 well update, well requires acidization
Companies: CNE JKX DELT RBD
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 LUNE MAHAA OKEA ORC/B PEN PHAR PMO TAL 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 TAL DNO GENL AEX CAD FP EQNR REP TETY AKERBP G3E MAHAA DGOC CNE
Cairn Energy (CNE LN): Disappointment offshore Mexico
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
Cairn Energy (CNE LN): Production and development expenditure reduced; exploration deferred | Parkmead Group (PMG LN): LNG oversupply hits cash flows | Bowleven (BLVN LN): Interim results, sufficiently funded to reach FID at Etinde
Companies: CNE PMG BLVN
Oil posted the biggest weekly plunge since 2008, capping its most dramatic week in recent memory as major producers prepare to drench the market with supply just as the coronavirus crushes demand. But prices jumped following the close, after President Donald Trump said the U.S. would fill the nation's strategic reserve. Losses for the week totalled 23% after the collapse of talks between members of the OPEC+ group triggered the biggest crash in a generation. Instead of reaching a deal to cut output to mitigate the fallout from the virus, producers led by Saudi Arabia and Russia embarked on a war for market share and pledged to pump more.
Companies: TGL TXP VLE EGY GTE CNE DGOC ENQ SQZ UKOG TRIN TLW PHAR
PetroTal (PTAL LN/TAL CN US)C : Corporate Update | Gran Tierra Energy (GTE LN/CN): Revised FY20 programme | President Energy (PPC LN): Update in Argentina | Touchstone Exploration (TXP LN): Another strong flow test in Trinidad | Cairn Energy (CNE LN): FY19 results | Premier Oil (PMO LN): Trading update | Valeura Energy (VLU LN/VLE CN) : 4Q19 results | JKX Oil & Gas (JKX LN): Divesting Hungary | Pharos Energy (PHAR LN): FY19 results | TransGlobe Energy (TGL LN/CN): Corporate update and FY19 results | Africa Oil (AOI SS/CN): Reiterate 2020 guidance | Tower Resources (TRP LN): Resources update in Cameroon | Tullow Oil (TLW LN): FY19 results | Vaalco Energy (EGY LN/US): FY19 results | Wentworth Resources (WEN LN): Operational update in Tanzania
Companies: TAL GTE PPC TXP CNE PMO VLE JKX PHAR TGL AOI TRP TLW EGY WRL
Production reached the higher end of guidance at 23kbpd and CFO is above our expectations at $406m. Yet, capex for 2020, which was already high at $595m (i.e. the Sangomar development), is revised upwards from the last update to $615m. This will be partly offset by the proceeds from the sale of Capricorn Norge ($108m), but announcing an increase in spending today is ill-timed.
Cairn Energy (CNE LN): Oil discovery offshore Mexico | Tullow Oil (TLW LN): Dry well offshore Peru | Lansdowne Oil & Gas* (LOGP LN): Placing and loan conversion strengthens balance sheet | Baron Oil* (BOIL LN): Fully funded ahead of El Barco-3x well in Peru
Companies: CNE TLW LOGP BOIL
Union Jack Oil* (UJO LN), STRONG BUY – 0.70p TP: Wressle Development Granted Planning Consent on Appeal | Gulf Keystone Petroleum (GKP LN): 30% increase in 2020 production guidance | Cairn Energy (CNE LN): Operational update, active 2020 drilling programmes | PetroTal (PTAL LN): Tripling Average Oil Production in 2020 to 13,500bopd, targeting to exit at 20,000bopd
Companies: UJO GKP CNE TAL
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Trinity has announced a strong set of interim results during a highly volatile period, with production increasing by 9% year-on-year to 3,282bopd (H1/19 3,007bopd). Operating break-even's post hedging in H1/20 reduced to US$22.3/bbl, a 15% year-on-year reduction and a 65% reduction since 2014. Similarly, a relentless drive to improve efficiencies and reduce costs has seen G&A and opex fall by 67% and 65% respectively since 2014. Despite the dramatic fall in oil prices, Trinity's strong production performance combined with its receipt of VAT receivables via a VAT Bond sale and the drawdown of a small working capital facility facilitated cash balances increasing by 43% to US$19.7m from YE2019. Trinity is well positioned to grow both organically and inorganically, with Trinity signing MoU's and submitting EOI's (in consortium with Cairn Energy Plc) to pursue new opportunities of scale. We set our price target a 31p/share, a 248% premium to the current share price and reiterate our BUY recommendation.
Companies: Trinity Exploration & Production Plc
Central Asia Metals (CAML LN) announced robust Q2 2020 operating statistics which highlight that there were no COVID-19 related interruptions, in part due to stringent measures put in place by the company. Q2 2020 copper output of 3.4kt was down 6% YoY, up 6% QoQ, however, H1 2020 total production was flat at 6.6kt indicating the company is on track for our 13.4kt 2020F target. Q2 Lead and zinc production of 7.5kt and 6.1kt were up 3% and 5% YoY although both were down 1% QoQ respectively. For H1 2020 12.2kt of zinc and 15.1kt of lead were up 5% and 6% which was primarily due to higher throughput.
Companies: Central Asia Metals Plc
Oil posted its first back-to-back weekly loss since April's rout with the end of the summer driving season and concern about OPEC's production compliance weighing on prices.
Futures in New York edged up on Friday, but prices fell 6.1% this week coinciding with a retreat in U.S. equities. Traders are also examining data indicating the United Arab Emirates since July has been regularly exceeding its quota under a deal between the Organization of Petroleum Exporting Countries and its allies.
The uncertainty over how much supply OPEC+ is returning to the market adds another wrench in the recovery for oil prices still reeling from the pandemic-driven blow to consumption. While U.S. supplies had grown tighter in past months and producers were expected to restrain production amid a weak financial backdrop, stockpiles rose again last week for the first time since mid-July.
Companies: XOM HES KOS JSE 88E ADV CAD CHAR ECHO ENOG EME I3E PMG RBD SQZ SOU TLW VGAS WTE PHAR
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. With the financial support of Waha Capital, a large Middle East fund and a >19% shareholder in SDX, the company is looking to make accretive acquisitions.
Morocco: capturing growing demand with very profitable supply
SDX holds 75% WI in five Gharb basin licences onshore with ~6 mmcf/d gross production. WI 2P reserves are only ~6 bcf over multiple small pools but gas is sold at U$10-11/mcf and costs US$7 mm. Gas demand in the area is growing but it is still constraining potential production. Recent drilling success opened up >40 bcf of additional WI resources, which could allow SDX to capture new customers in new markets and materially grow production and cash flow.
Egypt: >110 bcf in production. Growing inventory of low risk prospects. High capital efficiency
The key asset is the South Disouq licence (SDX WI: 55%) onshore Nile Delta. SDX is chasing four different proven plays. SDX has already discovered >110 bcf with 1H20 production of ~53 mmcf/d (gross). ~100 bcf gross prospective resources have been mapped across five prospects with typical chance of success (CoS) of ~40-50%. The prospective resources volumes are expected to grow materially with the ongoing mapping of additional targets. Although realized prices are fixed at ~US$2.85/mcf, a typical 20 bcf discovery costs only US$0.35/mcf to drill and tie back. NPV15 for a gas discovery is ~US$0.6 mm/bcf (US$0.6/mcf), implying ~70% return on risked exploration capex.
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.
Companies: SDX Energy Plc
Discussions on alternative transactions
Companies: Premier Oil 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
The COVID-19 pandemic has had a significant impact globally in many areas. While primarily a health issue, it has had wide-ranging implications for stock markets, which have now rallied after the plunge in share prices in mid-March when the full severity of the emerging pandemic became more widely appreciated. Nonetheless, the FTSE 100 Index remains almost 20% off its late February 2020 figure.
Companies: AVO ARBB ARIX CLIG DNL GDR ICGT NSF PCA PIN PXC PHP RECI STX SCE TRX SHED VTA YEW
Shanta Gold (AIM: SHG), the East Africa-focused gold producer has today announced a summary of historic exploration drilling carried out at its recently acquired West Kenyan project. We have included the significant drill intercepts that the company highlighted in the announcement.
Companies: Shanta Gold Ltd.
Salt Lake released an update on the Lake Way project which is now 60% complete on an earned value basis. Construction of the process plant is on-schedule with practical completion and first SOP production planned for the March quarter 2021. Major vendor procurement packages are over 90% committed with fixed costs. At the process plant site concrete foundations are more than 80% complete, installation of structural steel supplied has commenced and first carbon steel tanks have been installed. Long lead procurement items have commenced arriving on site including the crystallisers with associated components and tanks, and transformers. Vendor packages currently in transit to site include lump breaker, attritioners, wet screens and centrifuges. All permanent buildings are now on site and installed and 4G communications has been installed across site.
Companies: Salt Lake Potash Ltd.
Technical review update; H1 2020 results
Companies: Hurricane Energy Plc
Phoenix today provides a further update from its summer drilling program in Idaho. Results in from the Empire deposit continue to show promise in extending the resource, with the targeted zones all at shallow depths and several high-grade intercepts. The inclusion of a recognised high-grade gold zone and additional zones of copper mineralisation will, in all likelihood, lead to an increase in the size and grade of the mineral resource and the overall metal inventory in our opinion. A new resource calculation and updated PEA are expected in Q4 2020; Phoenix are continuing their fast track study on the deposit.
Companies: Phoenix Copper Ltd. (United Kingdom)
Placing raising £7m; H1 2020 results
Companies: Union Jack Oil Plc
Against a challenging sector backdrop, Union Jack successfully navigated the first six months of 2020, progressing its core asset portfolio in addition to securing additional interests in key projects (Wressle and Biscathorpe). The remainder of the year promises to be a transformational period for the Company, with first commercial oil production at Wressle in addition to the imminent drilling of the West Newton B-1 well and an Extended Well Test at the West Newton A-2 appraisal discovery. We therefore retain our rating and 0.82p/share TP.
Shanta Gold (AIM: SHG), the East Africa-focused gold producer, has announced drill results from the New Luika Gold Mine (NLGM) and Black Tree Hill Deposit as well as a new reserves and resources statement for the combined group. We have included a summary of the new inventory below.
Possible all-share offer for Deltic Energy
Companies: Independent Oil & Gas Plc