Looking to advance GBA development in 2021
Companies: Jersey Oil & Gas PLC
On 14 December 2020 we put our fair value estimate of 268p for Jersey Oil & Gas under review pending a material uplift to reflect i) progress made in respect of the concept select phase of the Greater Buchan Area and ii) increased confidence in the deliverability of the Greater Buchan Area as a comprehensive multi-field development. For these reasons, we are increasing the scope of our valuation to include, not only the Buchan field (81.2mmb), but core satellite discoveries, namely, Verbier (28mmb), J2 (14mmb) and Buchan Andrew (3mmb). We have also increased the amount of the full success case value included in our target price to 12.5% from 10% to reflect: i) increased subsurface resource definition, ii) increased project definition and iii) a significantly improving sector context. As a result, we now see fair value at 378p for Jersey Oil & Gas.
Pineapple Power, a special purpose acquisition company to seek and acquire businesses in the clean energy sector, has Joined the Main Market (Standard) raising gross proceeds of £1,316,010 (PNPL.L)
Vector Capital (VCAP.L) has joined AIM, a commercial lending Group that offers secured loans primarily to businesses located in the UK. Substantially all of the Group's loans are secured by a first legal charge against real estate. The Group's customers typically borrow for general working capital purposes, bridging, land development and acquisition. As of 30 September 2020, the Group had a loan book of £34.7m, with an average loan size of approximately £0.57m. Raised £3.1m at 38p. Mkt Cap on admission £16m.
Reverse take-over under rule 14 by MelodyVR (AIM:MVR) Group of Rhapsody International, trading as Napster. Napster is now a wholly-owned subsidiary of MelodyVR Group. The enlarged group will combine the service offerings of MelodyVR and Napster, offering music fans a consolidation of music artist's repertoires including recorded music, short form video content, long form video content, digitally ticketed live streams, educational videos and immersive AR/VR content, into one premium subscription product. Raising $10.1m. Market cap £92.4m at 3.75p.
Eddie Stobart Logistics (ESL.L) has converted to an AIM investing company. Name change to Logistics Development Group. Focus sectors: logistics, transport, warehousing and e-fulfilment assets. £9m raised via a placing and subscription and up to £7m via open offer. Market cap c.£35.1m.
Horizon Discovery has cancelled its AIM listing.
Formation Group has left the Aquis Stock Exchange.
Companies: ZPHR MSMN NCCL IDE CIC GFM SRE GWMO JOG GDP
IGas Energy (IGAS LN): RBL determination concluded, material financial headroom available Jersey Oil & Gas (JOG LN): Financial settlement reached with TGS Mosman Oil & Gas* (MSMN LN): Successful sale of Welch Project, Texas Zephyr Energy (ZPHR LN): State 16-2 well update and 2021 business aim
Companies: IGAS JOG MSMN ZPHR
Bahamas Petroleum Company (BPC LN)C; Target: 6.7p: Further funding secures the 2021 programme - BPC is raising US$10 mm of new equity immediately with a fund managed by Lombard Odier. The placing comprises 375 mm new shares at 2.0p per share. The investor is also issued warrants to subscribe for 93.75 mm shares at 3.0p and 93.75 mm shares at 4.0p over a period of one year. If all of these warrants were to be exercised, BPC would raise a further US$8.7 mm. BPC has also the option to raise up to a further US$5 mm on the same terms within 10 days of spudding Perseverance #1 in The Bahamas. The investor has the option to double that amount to US$10 mm. If the investor has not made an aggregate return of 115% of the placing price by the earlier of (i) 60 days after the date of spudding of BPC's Perseverance #1 well or (ii) YE21, BPC would have to make a cash payment so that the Investor's aggregate return from those new ordinary shares reach 115% of the subscription price. This new funding boosts BPC’s cash position to a minimum US$27.5 mm. This is important because it means that even if Perseverance#1 cannot immediately be drilled, the company has now enough cash resources to fund its development, appraisal and exploration program in Trinidad and Suriname. Our new Core NAV and ReNAV incorporating the US$10 mm placing are respectively 2.0-2.3p and 6.7-7.1p based on a NPV10-12.5%. Importantly even excluding the Bahamas, our Unrisked NAV for the company based on the 2021 base case activity programme in Trinidad and Suriname in 2021 is 4.6-5.1p per share.
Pharos Energy (PHAR LN)C; Target £0.35: Readthrough from TransGlobe’s deal in Egypt - TransGlobe Energy has negotiated new fiscal terms in Egypt with a better cost recovery limit and higher profit share. In return TransGlobe is paying US$16 mm in cash on completion plus US$10 mm per year for five years. Since the announcement about a week ago, TransGlobe’s share price has appreciated by ~100%. While we understand that Pharos is also negotiating new terms with the Egyptian authorities for the El Fayum licence, the share price has barely moved since TransGlobe’s announcement. The situation at TransGlobe is different as it involves the restructuring of an entire portfolio of licences. The new terms that Pharos is aiming to secure are therefore likely to be different. Pending further details on the outcome of Pharos’ discussions, we are exploring the impact on Pharos valuation if, hypothetically, El Fayum’s terms were amended to match those secured by TransGlobe. Increasing cost recovery limits from 30% to a hypothetical 40% of revenue and contractor profit sharing from 15-18% to 30%, while paying the same cash amounts as TransGlobe, would boost our Core NAV for Pharos with only two rigs in Egypt by ~50% from £0.19-0.24 per share to £0.29-0.36 per share (NPV12.5-15%) and our ReNAV by ~30% from £0.35-0.41 per share to £0.48-0.55 per share. Importantly, even the one rig case in Egypt becomes attractive. Assuming four rigs in Egypt, our Core NAV under the TransGlobe terms would be almost £0.50-0.57 per share.
PetroTal (PTAL LN/TAL CN)C; Target: £0.45: Gran Tierra (GTE LN/CN) selling large stake in the company – Gran Tierra is selling 218,012,500 shares in PetroTal (26.7% of PetroTal’s share capital) to Remus Horizons for £21.7 mm (~£0.10 per share). Upon closing the Transaction, Gran Tierra will own 28,087,500 PetroTal Shares, representing approximately 3.44% of the issued and outstanding PetroTal Shares.
Tethys Oil (TETY SS)C; Target £0.35: Changing gear - Tethys is operator on Blocks 49, 56 and 58 in Oman. We anticipate more activities on all these Blocks in 2021. The results of the Thameen well on Block 49 (our estimates: ~15 mmbbl gross resources – Unrisked NAV of SEK9 per share) are expected in 1Q21. The involvement of EOG Resources as 50% partner on Block 49 highlights the quality and the materiality of the asset. EOG is a major player in unconventionals. Their interest in exploring the potential presence of such a play on the licence adds a further material dimension to the Tethys story. Block 56 straddles the eastern flank of the South Oman Salt Basin and the Tertiary Basin. Multiple leads associated with the proven play on the adjacent Block 6 have already been identified on 2D seismic. At Block 58, which straddles the western flank of the South Oman Salt Basin and the Western Deformation Front, a number of undrilled leads have already been identified based on Tethys’ work. The firm is to launch a share buy back programme for up to US$5 mm until early February. Thereafter the programme could be extended. We read this as a positive sign for further shareholder distributions. The current share price represents EV/DACF multiples of only 2.3x for 2021 and 1.0x for 2022 and the core dividend implies >4% yield.
Canadian Overseas Petroleum (COPL LN): Acquiring US assets – Canadian Overseas is acquiring Atomic Oil & Gas for a consideration of US$54 mm consisting of assumed debt, cash and shares. Atomic's assets are located in the Powder River Basin in the State of Wyoming, where it holds operated interests in 52,258 acres (gross) of contiguous leasehold including the Barron Flats Shannon Miscible Flood Unit (57.7% WI) and the Cole Creek Unit (66.7%) that are producing light oil and hold 24.7 mmboe of net 2P reserves. Current gross production of 1,400 bbl/d is expected to rise to 5,000 bbl/d in 2022 and ~7,000 bbl/d in 2026. The consideration includes (1) US$1 mm deposit, (2) US$8 mm (debt financed) for 15% WI in Atomic’s leasehold interests, (3) US$26 mm of assumed debt on closing, (4) US$15 mm of additional debt and cash on closing and (5) US$4 mm in shares. The 2P case assumes US$40 mm development costs in 2021, ~US$27 mm in 2022 and ~US$41 mm in 2023.
Maha Energy (MAHA-A SS): Disappointing well results and production guidance downgrade in Brazil – The Tartaruga Maha-1 well test results indicate a lower than expected oil production rate. Two zones were tight and did not flow while a third zone only flowed limited amount of oil. The last zone flowed fluid with a very high water cut. Covid-19 is also causing delays in the company’s 4Q20 Brazilian well completions programme. Therefore, the Company expects the FY20 average production to be ~3,250 boe/d (previous guidance of 3,700 - 4,000 boe/d).
Advance Energy (ADV LN): Acquiring assets in Timor-Leste – Advance Energy is acquiring up to 50% WI in the Buffalo oil field offshore Timor-Leste from Carnarvon Energy for a consideration of up to US$20 mm in cash. Buffalo has produced 21 mmbbl over 5 years in the early 2000s. The cash consideration will be applied to funding the drilling of the B-10 appraisal well and to appraise the contingent oil resource of 31.1 mmbbl with the intention for drilling to take place in late 2021. In the event Advance raises less than US$20 mm, but more than US$10m, Advance will acquire a lower interest in Buffalo. Advance’s equity level is 2.5% per US$1 mm contributed to the project.
ADX Energy (ADX AU)C: Raising new equity – ADX is raising A$1.3 mm of new equity priced at A$0.006 per share. In addition, new investors are offered an option for every two placement shares to acquire an additional share in the company at a strike price of A$0.008 per share (expiry date of 15/06/2021). ADX is also offering a share purchase plan for up to A$1.0 mm allowing shareholders to invest on the same terms as the placement.
Hurricane Energy (HUR LN): Operational update in the UK North Sea - The 205/21a-6 well is currently producing at ~12,300 bbl/d on artificial lift with a ~23% water cut. In early November 2020, the Company decided to limit production to approximately 12,000 bbl/d for reservoir evaluation and management purposes and aims to maintain production around this level in the near-term. Hurricane could re-enter and side-track the existing 205/21a-7z well to boost production capacity in 2021. Development costs are currently estimated at ~US$60 mm. Water injection is also considered for 2022 with an estimated cost of US$75 mm for the programme. At as the end of November Hurricane held US$87 mm in net free cash. The company has appointed advisors to discuss funding options with parties including the holders of its convertible bonds.
Jersey Oil & Gas (JOG LN): Update on prospectivity in the UK – Jersey has matured four prospects to drill-ready status: Verbier Deep, Cortina NE (J64), Wengen (P2170) and Zermatt (P2497) with aggregate P50 prospective resources of 222 mmboe. Individual probabilities of geological success range from 16 to 30%. Subject to funding, a drilling campaign is planned from 2022.
OKEA (OKEA NO): Acquiring Norway assets – OKEA is acquiring 40% WI in the PL972 licence including the Vette oil discovery (30-50 mmboe) from Repsol.
Premier Oil (PMO LN): Operations and Corporate update – Chrysaor’s 2P reserves and 2C contingent resources have been respectively estimated at 491 mmboe and 388 mmboe. Premier’s production averaged 61.2 mboe/d from January to November and Premier reiterated it FY20 guidance of 61‐64 mboe/d. Premier expects FY21 production to be in the range of 61-66 mboe/d as new production from Tolmount (due on-stream in 2Q21) offsets natural decline and maintenance shutdowns deferred from 2020. Catcher oil production has been restored to rates >60 mbbl/d following a seven day unplanned outage in mid-November. In early December, production from the Solan field was shut in following the failure of the emergency generator. FY21 capex is estimated at ~US$275 mm. Net debt at the end of November was US$2.06 bn. Chrysaor’s production averaged 174 mboe/d from January to November and Chrysaor forecasts FY20 production of 174 mboe/d with 140-155 mboe/d in 2021. Capex in 2020 and 2021 is estimated at respectively US$718 mm and US$750-850 mm.
Serica Energy (SQZ LN): Operations update in the UK North Sea – During the most recent three-month period, net production from Bruce, Keith and Rhum and Erskine has averaged 26,300 boe/d. Offshore operations on the R3 Intervention Project have been slower than had been anticipated due to poor weather conditions and a technical problem with rig equipment. As a result, rig operations will not be completed before late January 2021.
FORMER SOVIET UNION
Equinor (EQNR NO): Acquiring oil projects in Russia – Equinor is acquiring a 49% stake in Krasgeonats from Rosneft for US$550 mm. Krasgeonats holds 12 exploration and production licenses for areas with conventional resources located in Eastern Siberia.
MIDDLE EAST AND NORTH AFRICA
Chariot Oil & Gas (CHAR LN): Licence award in Morocco – Chariot has been awarded a 75% interest in the Rissana licence. Rissana (approximate area 8,476km2) will completely surround the offshore boundaries of Chariot’s existing Lixus Offshore Licence (approximate area 2,390km2), which contains the Anchois Gas Discovery, as well as covering the most prospective northern areas of the previously held Mohammedia Offshore Licence and Kenitra Offshore Licence.
Gulf Keystone Petroleum (GKP LN): Operational update in Kurdistan – The PF-1 is now operating at its current maximum processing capacity of ~27.5 mbbl/d. Debottlenecking activities at PF-1 remain on-track to further increase production capacity to >30 mbbl/d during 1Q21. Gross Shaikan production is currently at ~42,000 bbl/d, ~20% above the November 2020 average rate. FY20 gross production is expected to be at, or slightly above, 36 mbbl/d, the top end of the guidance range. As at 14 December 2020, the company had a cash balance of US$142 mm.
Africa Oil (AOI SS/CN): Dividend from Prime – Africa Oil has received a net dividend payment from Prime (Nigeria) of US$37.5 mm.
Cairn Energy (CNE LN): Completing divestment of Senegal – Cairn has received US$525 mm in cash for the divestment of its assets in Senegal to Woodside Petroleum. As indicated previously the company will return US$250 mm to its shareholders through a £0.32 per share special dividend.
FAR (FAR AU): Non-binding offer to buy the company – FAR has received a conditional non-binding indicative proposal from Remus Horizons to acquire the company for A$0.021 per share in cash.
LEKOIL (LEK LN): Operational update in Nigeria - Gross production at Otakikpo for July to November was 4,519 bbl/d with FY20 guidance of 5,150 bbl/d. Production is 20% lower than during 1H20 due to bad weather, maintenance works and OPEC restrictions. As at 30 November, LEKOIL has an outstanding balance of external interest-bearing loans and borrowings of approximately US$15.7 mm and a total cash balance of US$1.6 mm. Trade and other payables stood at US$28.4 mm. The company has also extended the duration of a US$1.9 mm loan to its CEO by one year to December 2021.
Companies: SQZ PMO AOI BPC CNE XOP GTE HUR JOG MAHAA TAL PHAR TETY TETY
Jersey Oil & Gas announced today that it has completed a comprehensive subsurface
the company's existing prospectivity and identified a significant new prospect named Wengen. All in, the company now has four drill ready prospects within the Greater Buchan Area which have a combined P50 recoverable resource potential of 222 million
presents the Greater Buchan Area as a picture-perfect developmental project with substantive scale in the core low-risk Buchan field, additional discovered oil in satellite fields and, now, drill-ready exploration targets. Our 268p/sh fair value estimate had been premised, not on the full 140 million boe of discovered recoverable resource in the Greater Buchan Area, but rather only on the 81.2 million barrel recoverable oil estimate for the Buchan oilfield (best estimate 2C resource). Given the subsurface work and associated project select work undertaken by the company, we believe that the Greater Buchan Area will farmout successfully as a comprehensive multi-asset project. As such, we are putting our fair value estimate under review pending a material uplift.
Greater Buchan Area exploration update
GeoPark (GPRK US)C; Target price of US$20.00: Divesting non-core asset in Brazil - GeoPark is selling its 10% non-operated working interest in the Manati gas field in Brazil to Gas Bridge for US$27 mm. We do not see much upside to the Brazilian asset (in terms of growing reserves or through exploration opportunities) and this divestment may allow GeoPark to reallocate resources to its core operations. We would rather see management remaining focused on deploying capital on higher return assets such as Colombia and Ecuador. Even after this week’s share price appreciation, our Core NAV continues to be 60% above the current share price. Our unrisked NAV for the 2021 drilling programme is ~US$9.00 per share, which represents ~90% of the current share price.
Panoro Energy (PEN NO)c; Target price of NOK23.00: 2021 will be a transformational year - 2020 has been a difficult year for the oil and gas industry and 2021 is a turning point for Panoro. In Gabon, development activities at Ruche are expected to return to normal with gross production set to grow to 20 mbbl/d. The company will also appraise Hibiscus to test the 155 mmbbl upside case (=2x existing 2P reserves). The development of Hibiscus is expected to be sanctioned. Importantly, while the existing FPSO has a nominal oil processing capacity of 45-45 mbbl/d, processing expansion is possible which allows for a potential oil production plateau of 70 mbbl/d. We estimate the value of Panoro’s reserves in Dussafu at NOK10.40 per share. Derisking the contingent resources in Gabon could add ~NOK3 per share. We estimate that the upside at Hibiscus has a further unrisked NAV of ~NOK10 per share for a total unrisked NAV of NOK23 per share for the discovered and “to be appraised” volumes in Gabon. Overall, including Nigeria, South Africa and Tunisia, we estimate the unrisked value of the 2021 activities at NOK30 per share; which represents 2.3x the share price. Our target price of NOK23 per share has been set close to our ReNAV.
Pharos Energy (PHAR LN)c; Target price of £0.35: Low cost. Quickly scalable. High impact, quality exploration – Pharos is a £ mm market cap, ~12 mboe/d oil producer that acquired the Egyptian assets of Merlon in 2019. Under the stewardship of a blue-chip management team that turned Cairn Energy from a micro-cap into a successful E&P that returned US$4.5 bn to shareholders, Pharos has undergone a multi-faceted transformation, enhancing governance and rebalancing its asset portfolio. Given the recent macro challenges, this process appears to have gone unnoticed by many investors. Pharos now holds ~50 mmboe 2P reserves in Egypt and Vietnam. Vietnam provides stable cash flows even at low oil prices. Egypt production can be increased rapidly (up to x2.5 to 13 mbbl/d) with additional investment. Pharos also holds world class exploration assets in Israel, Egypt and Vietnam. With a healthy balance sheet (cash: ~US$38 mm, net debt:~US$36 mm), Pharos’ shares trade at EV/DACF multiples of 5,000 bbl/d, increasing production from the Shaikan field by~15%. FY20 gross production is expected to be at the upper end of the 35,000 – 36,000 bbl/d production guidance, with the field currently producing at ~39,000 bbl/d.
LEKOIL (LEK LN): Requisition from large shareholder to change the board of the company - LEKOIL has received a letter from Metallon, holding 15.4% of the company, requisitioning an extraordinary general meeting to vote on the replacement of the Chairman and the appointment of Michael Ajukwu, Thomas Richardson and George Maxwell as directors of the company.
Orca Exploration (ORC.A/B CN): 3Q20 results - 3Q20 WI production in Tanzania was 60.9 mmcf/d. At the end of September, Orca held US$79.2 mmm in working capital including US$98.5 mm in cash and long-term debt
of US$54.2 mm.
Tullow Oil (TLW LN): Capital Market Day – 2020 production to date averages 75 mbbl/d with FY20 production guidance of 73-77 mbbl/d. Assuming an oil price of US$45/bbl in 2021 and US$55/bbl flat nominal from 2022 onwards, Tullow expects to generate US$7 bn of operating cashflow over the next 10 years with capex of US$2.7 bn. The first phase of investment will start in 2Q21 with the commencement of a multi-well drilling programme in Ghana. In Suriname, the prospective Goliathberg-Voltzberg North-1 well will spud in 1Q21.
Victoria Oil & Gas (VOG LN): Positive licence update in Cameroon – The duration of the onshore Matanda licence has been extended by one year to December 2021. The gross unrisked prospective resources are now estimated at 1,196 bcf, up from 903 bcf previously. 19 gas prospects haven identified in shallower Tertiary-aged reservoirs, plus 7 prospects in deeper, Cretaceous-aged prospects. The Company believes the largest of these prospects has mean unrisked Prospective Resources of >65 bcf, with geological Chance of Success estimated at >40%.
Companies: VOG BPC ENQ GPRK JOG MAHAA PEN PHAR RBD REP SEN TLW
Genel Energy (GENL LN): First oil at Sarta confirmed | Union Jack Oil* (UJO LN): Final commissioning of Wressle in January 2021, £1m loan to Egdon, Director share purchase | President Energy (PPC LN): Positive testing results at LB-01 | Jersey Oil & Gas (JOG LN): Conditional SPA signed, likely portfolio expansion
Companies: GENL UJO PPC JOG
Acquisition of CIECO P2170 interest
Jersey Oil & Gas announced today that is has entered into an agreement to acquire the entire share capital of CIECO V&C (UK) Limited, which is currently owned by two international entities headquartered in Japan. The acquisition secures an additional 12% working interest in Licence P2170 (Blocks 20/5b & 21/1d), which provides Jersey Oil & Gas with 100% of the licence. The licence contains the majority of the Verbier oil discovery in addition to three drill ready prospects: Verbier Deep, Wengen and Cortina. The acquired entity has approximately £15M of tax losses which will provide value to Jersey Oil & Gas. Consideration will consist of £150k in cash and contingent payments of i) £1.5M upon field development plan approval of Verbier within P2170 (as already discovered) by the OGA ii) £1.0M upon the 1st anniversary of attainment of first oil. The acquisition is conditional on OGA approval amongst other technicalities, which we do not anticipate will be problematic. The acquired entity will be free of debts.
Jersey Oil & Gas has provided a technical presentation and video which summarises much of the subsurface and developmental analysis undertaken by the company as part of the concept select stage. These materials have been made available on the company's website and we encourage investors and potential investors to watch the 5 minute video. We will review the material and comment in due course. The video is available at: https://www.jerseyoilandgas.com/media/videos/
Cairn Energy (CNE LN): Interim results, FY 2020 production guidance narrowed to 21,000-23,000bopd | Echo Energy (ECHO LN): Initial assessment of the Monte Aymond gas project confirms commercial viability | Jersey Oil & Gas (JOG LN): Interim results, JOG continues to finalise development plan for GBA
Companies: CNE ECHO JOG
Research Tree provides access to ongoing research coverage, media content and regulatory news on Jersey Oil & Gas PLC.
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Central Asia Metals (CAML LN) has reported Q4 2020 production with 3,365t of copper taking full year output to 13,855 in line with our forecast of 13.9kt and at the top end of guidance. Q4 lead output was 7,442t meaning 29,741t over the full year, up 2% YoY and in line with our forecast of 30kt while zinc output of 5,848t took full year output to 23,815t again in line with our forecast of 24kt and up 2% YoY despite the disruption at Sasa which CAML has overcome rapidly as we expected.
Companies: Central Asia Metals Plc
Jubilee put out an intraday press release yesterday updating on the performance in the first half (ending Dec 2020) of the FY 2021. Once again Jubilee delivers; significantly increased revenues and profits from its chrome and PGM division in South Africa and a small, but important, contribution from Zambia. Notably this improvement isn't just from commodity price performance; rather increased production, productivity, throughput, renegotiated contracts and all set alongside the strong performance of commodity prices –rhodium, palladium and platinum. We see this as still only the start for Jubilee as we look forward to the first copper oxide concentrates from the Roan project in Zambia to the Sable Refinery – where the Roan plant is currently under construction. Once again we are struck by the speed at which Jubilee moves to advance its projects and, with its South African cash engine showing no signs of slowing down. Jubilee can choose to move its wider ambitions in Zambia forward from internally generated cash flow. On the back of the strong performance we put our forecasts under review.
Companies: Jubilee Metals Group PLC
Anglesey Mining (AYM LN) – Mineral resources and PEA for Parys Mountain
Castillo Copper (CCZ LN) – Further assay results from drilling at the Big One project in Queensland
Central Asia Metals (CAML LN) – Stable production reported in 2020 with final dividend to be announced in March
IronRidge Resources* (IRR LN) – Sale of non-core gold project
Keras Resources* (KRS LN) – Keras increase stake in the Daiamond Creek organic phosphate mine to 51%
Power Metal Resources* (POW LN) – Molopo Farms drilling highlights nickel and PGM potential
Tertiary Minerals* (TYM LN) – Progress of Nevada exploration
Companies: POW AYM CAML KRS TYM CCZ IRR
The revised threshold for the imposition of Supplemental Petroleum Tax (SPT) has now been implemented, with the threshold at which SPT is due increasing from US$50/bbl to US$75/bbl for the financial years 2021 and 2022. As a result, we expect Trinity to be exempt from SPT across all of its onshore licences below US$75/bbl. Using the forward WTI oil price curve as the basis for our model, we currently forecast Trinity paying no SPT during 2021 and 2022. We estimate that at the current forward price curve (2021: US$52/bbl) cUS$3.6m of SPT would have previously been payable by Trinity in 2021. As such, these SPT reforms represent a considerable boost to potential cash flow generation from Trinity's onshore licences should realisations average above US$50.01/bbl for any calendar quarter during 2021 and 2022. We update our model, increasing our price target to 32p (from 31p) a 160% premium to the current share price and reiterate our BUY recommendation.
Companies: Trinity Exploration & Production Plc
Companies: Hurricane Energy Plc
Union Jack Oil (UJO) has announced that the workover rig, associated services and equipment were mobilised to the Wressle oilfield development site during the week commencing 4 January 2021. The company, which holds a 40% economic interest in Wressle, expects that operations to enable the primary Ashover Grit reservoir to be flowed will be completed prior to the end of January 2021. With the field expected to commence production at a constrained rate of 500 bopd, UJO’s net production will be boosted by an additional 200 bopd providing valuable cash flow to the company in 2021.
Companies: Union Jack Oil Plc
We put forward a fair value estimate to 82.8p for Pantheon Resources from “under review for an upward revision” as from 25 November 2020 and from 75p as per our initiation note dated 11 November 2020.
Companies: Pantheon Resources plc
Arc Minerals* (ARCM LN) – Arc Minerals extends exclusivity agreement with Anglo for a further 180 days
Cornish Metals* (CUSN CN) – Intention to float on AIM market
Greatland Gold (GGP LN) – Newcrest approves A4146m for preparatory mining work at Havieron
IronRidge Resources* (IRR LN) – Drilling defines multiple targets at Ewoyaa Lithium Project
Kenmare Resources (KMR LN) – 2020 production and 2021 guidance
Sunrise Resources (SRES LN) – Progress report on projects
Zamare Minerals* (Private) - Zamare announce agreement with First Quantum Minerals over the Ntambu exploration license in Zambia
Companies: CUSN ARCM GGP KMR SRES IRR
Bahamas Petroleum Company (BPC LN)C; Target Price: 6.70p: Funding update – BPC has exercised a put option to raise £3.75 mm priced at 2p per share.
PetroTal (PTAL LN/TAL CN)C: Target Price increased from £0.45 to £0.50: US$100 mm bond to accelerate activities and grow production - PetroTal is launching a bond issue to raise US$100 mm. This would allow the firm to accelerate drilling and development activities at Bretana (~US$40 mm), clean up its balance sheet, put in place a hedging programme and allow the firm to consider regional acquisitions. Assuming the extra funding is put in place, we are increasing our capex programme for 2021 from US$40 mm to US$90 mm. We are also increasing our production forecast for 2021 from ~11 mbbl/d to ~15 mbbl/d that we maintain broadly flat in 2023 as we assume PetroTal will drill additional wells before production starts to decline from 2024. We note that the 3P case only assumes five additional wells (~US$70 mm) compared to the 2P case. With more production, we are now forecasting operating cashflow of ~US$170 mm in 2022 and ~US$155 mm in 2023. We are also increasing our Core NAV from £0.43 per share to £0.52 per share. The additional funding would also allow the company to drill exploration wells such as the 70 mmbbl Constitucion prospect (£0.40 per share Unrisked).
Pharos Energy (PHAR LN)C; Increasing our target price from £0.35 to £0.40 per share on reserves uplift – The highlight of Pharos’ operational update is the ~40% increase in 2P reserves in Egypt expected as at YE20 (YE19 28.5 mmbbl). This reflects improved waterflood performance based on recent field data, and a new drilling and workover plan for 2021 onwards. Drilling is expected to recommence in Vietnam in 3Q21, a quarter earlier than previously announced. We have increased our target price from £0.35 per share to £0.40 per share to factor in the expected increase in reserves in Egypt. We estimate the value of Pharos based on Vietnam only at £0.23-0.27 per share. This is 15-35% above the current share price. Securing a partner to fund a development programme with four rigs in Egypt would increase the value of the ~ 40 mmbbl 2P reserves in Eqypt and unlock the contingent and 108 mmbbl prospective resources. Our incremental unrisked value for the four rig programme is £0.17-0.19 per share (~85% upside to the current share price). Successfully negotiating new terms with EGPC could lead to an improvement of up to US$6/bbl in the breakeven price. We have previously estimated that securing similar terms to TransGlobe would boost our Core NAV by £0.10-0.12 per share and ReNAV by £0.13-0.15 per share. TransGlobe Energy’s share price has tripled since the new terms on its licences were announced.
Tethys Oil (TETY SS)C; Target Price: SEK75.00: Production update in Oman – Production at Block 3&4 in December was 11,481 bbl/d.
Vaalco Energy (EGY LN/US)C; Target Price: £4.00: Initiating Coverage - VAALCO is a US and UK listed ~£75 mm market cap, ~10 mbbl/d oil producer (pro-forma) with West African assets. VAALCO has an excellent track record as an operator having grown a 30 mmbbl discovery in Gabon to a field that has produced >118 mmbbl so far with an additional 37 mmbbl remaining 2P reserves plus ~80 mmbbl upside at YE19. The shares have suffered in the past from (1) a lack of materiality as VAALCO held only ~31% of its main asset, with G&A viewed as representing a disproportionate amount of cash flow and (2) lack of visibility on how the significant amount of cash on the balance sheet would be deployed. The US$44 mm acquisition of an additional ~28% WI in Etame announced in November, thereby almost doubling production, reserves and resources overnight, has addressed these issues. The story is now about continuing to grow reserves at the producing Gabonese field and to replicate this success elsewhere. With estimated net cash of >US$25 mm at the end of 1Q21, VAALCO’ s shares trade at less than half our 2P NAV of ~£2.70 per share. The current share price discounts an EV/DACF multiple of 1.2x in 2021. Low risk infill drilling of contingent resources could add ~£0.45 per share (30% of share price) with an overall unrisked value for the upside at the producing asset of £4.80 per share (~4x the current share price). Finalizing the farm out of its asset in Equatorial Guinea could start unlocking a further £4.20 of unrisked value. Our target price of £4.00 per share (~ our ReNAV) represents ~230% upside.
Wentworth Resources (WEN LN)C; Target Price: £0.40: >100 mmcf/d reached in December - FY20 gross production was 65.36 mmcf/d (in the middle of the 60-70 mmcf/d guidance) with ~83 mmcf/d on average during the month of December. Repairs to the MB-2 flowline were completed on 9 December, increasing the capacity of the field to over 100 mmcf/d. Production reached 103 mmcf/d for five days during that month. Gross production guidance for FY21 is 65-75 mmcf/d, below the 80 mmcf/d we were carrying as production growth is pushed back by a year. Cash on hand of ~US$18 mm is in line with our expectations. With 70 mmcf/d gross production in 2021 and almost no capex, we forecast FY21 Free Cash Flow of ~US$10 mm. With FY20 dividends of only US$3.2 mm and ~US$18 mm in cash, we believe there is scope to increase the dividend. At the current share price, the FY20 dividend represents a yield of ~6%. Even after the recent share price appreciation, the shares continue to trade at EV/DACF multiples of 2.9x in 2021 and 2.2x in 2022. This compares with 3.8x for 2020, suggesting there is room for multiple expansion given the stable nature of the business.
IN OTHER NEWS
88 Energy (88E LN/AU): Acquisition in Alaska – 88 Energy is acquiring the Umiat Oil Field, located on the North Slope of Alaska. The proceeds consist of a 4% overriding royalty interest and the assumption of the abandonment liability of two historic wells (at an estimated cost of ~US$1 mm). Umiat is an historic oil discovery, made in 1945 in shallow Brookian (Nanushuk) sandstones, located immediately adjacent to southern boundary of Project Peregrine. The Umiat-23H well was flow tested at a sustained rate of 200 bbl/d with no water in 2014. Gross 2P reserves were estimated at 123.7 mmbbl on 1 December 2015.
Equinor (EQNR NO): Farming down Argentinian offshore exploration to Shell - Equinor and YPF farm-down 30% interests in the CAN 100 block, located in the North Argentinian Basin to Shell.
Pantheon Resources (PANR LN): Dispute in East Texas and acquisition of new acreage - Kinder Morgan has filed a petition against Pantheon, seeking payment of ~US$3.35mm with respect to the early termination of a Gas Treating Agreement between Kinder Morgan and Vision Operating Company. In a separate statement, the company indicated it has acquired 100% interest in ~66,000 acres in the State of Alaska's North Slope Areawide Lease Sale. The new leases are positioned in two areas contiguous to the company’s current acreage.
Parex Resources (PXT CN): Operation update in Colombia – 4Q20 production was 46,550 boe/d compared to Parex’ guidance of 45,500-47,500 boe/d. 1Q21 production is expected to average 46,500-47,500 boe/d. The Brent/Vasconia differential is currently ~US$2/bbl. Parex estimates a cash position of US$325 mm at YE20.
Total (FP FP): Discovery in Suriname - The Keskesi East-1 well, in Block 58, encountered a total of 63 meters net pay of hydrocarbons, comprised of 58 meters net black oil, volatile oil, and gas pay in good quality Campano-Maastrichtian reservoirs, along with 5 meters of net volatile oil pay in Santonian reservoirs.
Independent Oil & Gas (IOG LN): Operating update in the UK – Phase 1 remains on schedule for First Gas in 3Q21. Drilling is expected to start in early 2Q21.
Hurricane Energy (HUR LN): Operating update in the UK North Sea - Production for the final four months of 2020 averaged 12,500 bbl/d. Current water cut is 25%. YE20 net free cash was US$106 mm, compared to US$87 mm at 30 November 2020.
Lundin Energy (LUNE SS): Resources increase in Norway – YE20 2P reserves are 670.9 mmboe (+ 39.3 mmboe versus YE19). The YE20 2C resources are 275.5 mmboe (+90.2 mmboe et YE19).
OMV (OMV AG): Trading update – 4Q20 production was 472 mboe/d including 290 mboe/d of natural gas.
FORMER SOVIET UNION
Enwell Energy (ENW LN): Operating update in the Ukraine – 4Q20 production was 4,444 boe/d. At YE20, the company held US$61 mm in cash.
Petroneft (PTR LN): Potential acquisition in Russia – Petroneft is looking to acquire an additional 40% interest in Licence 67 from Belgrave Naftogas for US$2.9 mm including US$1.2 mm in shares and the balance in cash.
MIDDLE EAST AND NORTH AFRICA
Gulf Keystone Petroleum (GKP LN): Operating update in Kurdistan – FY20 gross production at Shaikan was 36,625 bbl/d with current production of 44,000 bbl/d. As at 12 January 2021, the Company had a cash balance of US$147 mm. FY21 gross production guidance has been set at 40,000 to 44,000 bbl/d with US$15 to $20 mm net capex and US$2.5 to US$2.9/bbl opex.
ShaMaran Petroleum (SNM CN): Terms update for bonds – ShaMaran is looking to use free cash in excess of US$15 mm to buy back its Bonds in the market to satisfy the cash sweep redemption requirements.
United Oil & Gas (UOG LN): Production update in Egypt – 2H20 WI production was 2,340 boe/d in line with guidance for the period of 2,300 boe/d.
BW Energy (NEW NO): Farm-in transaction in Namibia – BW Energy is acquiring 39% WI in the Kudu offshore licence from the National Petroleum Corporation of Namibia (NAMCOR). BW will pay US$4 mm in cash and carry NAMCOR’s share of development costs until first gas. NAMCOR will also have the opportunity to acquire an additional 5% working interest post first gas.
Orca Energy (ORC.A/B CN): Update in Tanzania – FY20 sales volumes were 57.7 mmcf/d. Cash and short-term investments totalled US$103.8 mm at YE20. As at YE20 there were no current receivables due from TANESCO. The TANESCO long-term trade receivable was US$27.6 mm.
EVENTS TO WATCH NEXT WEEK
18/01/2021: Repsol (REP SM) – Trading update
19/01/2021: Genel Energy (GENL LN) – 4Q20 trading update
20/01/2021: Cairn Energy (CNE LN): Trading update
Companies: 88E BPC EQNR HUR LUNE PXT PHAR SNM TETY TETY FP EGY WEN
European Metals has recently enjoyed a long overdue share price re-rating. The shares have
increased ten-fold from Covid lows in April 2020 on the back of a marked improvement in
lithium sector sentiment. EMH’s market cap is now £127m. Covid has in many ways accelerated
the push towards EVs and the low carbon agenda. Europe is now the battleground for Electric
Vehicles (“EVs”) where material sources, security of supply and the entire value chain is coming
under ever increasing scrutiny. The DFS at EMH’s Cinovec project is due for completion by the
end of 2021.The time has come for EMH and over the next 12 months we should see with more clarity how
Cinovec fits into Europe’s growing EV and battery industry. We see no other project better
placed to dovetail into the European battery market and supply battery-grade lithium at scale.
Companies: European Metals Holdings Limited
Central Asia Metals (CAML LN) is our top pick for exposure to copper and following the recent operational and financial normalisation the shares have jumped, up 16% since our last note. Our copper price forecast assumptions implied that during Q4 2020 the price, at that point up 47% from March lows would pause. This has not come to pass, now up 60% to eight year highs of US$7,688/t, indicating a higher starting point in 2021F and we have upgraded our forecasts accordingly.
Oil posted the biggest weekly gain since late September as Saudi Arabia's plan to slice output spurred a surge in physical crude buying.
Futures in New York advanced $3.72 this week and Brent oil topped $55 a barrel for the first time since February. Saudi Arabia's pledge earlier this week to cut production by 1 million barrels a day in February and March has made for a tighter supply outlook sooner than anticipated. Meanwhile, prospects for additional stimulus under a Biden administration spurred broader market gains.
Saudi Arabia's surprise cut appears to have caught some Asian buyers by surprise and demand for US crude for export to Asia has gained this week. Unipec, the trading arm of China's largest refiner, bought its eighth cargo of North Sea crude in a pricing window run by S&P Global Platts this week and was seeking more in what may be the heaviest buying of its kind on record.
Brent's move above $55 a barrel caps a stellar few months for the oil market, with crude emerging as a favoured play to bet on coronavirus vaccines and global reflation. Saudi Arabia's pledge has led analysts to rethink their projections for crude's price recovery. Citigroup Inc boosted its price forecasts on Friday, saying the kingdom's actions should accelerate stockpile draws.
Meanwhile, annual commodity index rebalancing may provide another tailwind, with as much as $9 billion of oil contracts possibly being bought over the five days of activity that start Friday, Citigroup said.
Brent for March settlement advanced $1.61 to end the session at $55.99 a barrel.
West Texas Intermediate for February delivery rose $1.41 to settle at $52.24 a barrel.
Both benchmarks are at the highest since late February.
The kingdom's shock move has rippled across the oil market this week, with the difference between the price of oil for different months firming markedly in recent sessions. WTI's nearest contract traded at a premium to the following month for the first time since May, while the closely watched spread between the nearest two December contracts is at its strongest intraday level since last January.
Companies: FO PRP 88E DGOC EME TRIN UOG
• PetroTal is launching a bond issue to raise US$100 mm. This would allow the firm to accelerate drilling and development activities at Bretana (~US$40 mm), put in place a hedging programme and allow the firm to consider regional acquisitions.
• Some of the proceeds of the bond issue will be used to repay the US$16.6 mm derivative liabilities to Petroperu that was formalized in November. However, with the recent upwards shift of the forward curve, the potential derivative liabilities is now an asset and Petroperu is expected to owe PetroTal ~US$8 mm. Under the current forward curve, PetroTal should therefore now receive a total of ~US$25 mm (=US$16.6 mm + US$8 mm) from Petroperu from the settled oil profits during 1Q21.
• Assuming the extra funding is put in place, we are increasing our capex programme for 2021 from US$40 mm to US$90 mm. We are also increasing our production forecast for 2021 from ~11 mbbl/d to ~15 mbbl/d that we maintain broadly flat in 2023 as we assume PetroTal will drill additional wells before starting to decline from 2024. We note that the 3P case only assumes five additional wells (~US$70 mm) compared to the 2P case.
• Current production has now increased from 9.5 mbbl/d last week to 10 mbbl/d.
• PetroTal has now also signed an agreement for a second pilot shipment through Brazil in February 2021, of up to 220,000 barrels of oil.
Positive impact on cash flow and NAV
With more production, we are now forecasting operating cashflow of ~US$170 mm in 2022 and ~US$155 mm in 2023. We are also increasing our Core NAV from £0.43 per share to £0.52 per share. The additional funding would also allow the company to drill exploration wells such as the 70 mmbbl Constitucion prospect (£0.40 per share Unrisked).
We are increasing our target price from £0.45 per share to £0.50 per share in line with our new Core NAV. Our target price represents over 3x the current share price.
Companies: PetroTal Corp.
Further media reports that Dr Martens, the British Boot brand is planning an IPO on the LSE. It is currently owned by PE group, Permira who is expected to sell down its stake at the IPO. March 2020 YE the group had revenues of £672m and EBITDA of £184m. Deal size TBC. Upon Admission to AIM, Nightcap will acquire The London Cocktail Club Limited (the "London Cocktail Club"), which is an award winning independent operator of ten individually themed cocktail bars in nine London locations and one location in Bristol. Offer TBC Due mid Jan. HSS Hire Group, HSS.L transfer from Main to Aim. Mkt Cap c. £70m. Recently raised £52.6m. Leading supplier of tool and equipment for hire in the United Kingdom and Ireland and has provided equipment hire services in the United Kingdom for more than 60 years, primarily focusing on the B2B market. Due 14 Jan. VH Global Sustainable Energy Opportunities plc, a closed-ended investment Company focused on making sustainable energy infrastructure investments, today announces intends to launch an initial public offering of shares on the Official List (Premium) of the Main Market of the London Stock Exchange. Due by Early Feb.
Companies: IUG CBP KAT APP RST DIS NICL BOKU CNIC HE1