Deltic Energy’s recent operational update, importantly, confirms the commitment of its JV partner, Shell, to drill the promising Pensacola and Selene prospects in the SNS (Southern North Sea) gas basin. Drilling the former now appears likely in the second half of 2021 and will be followed by Selene in mid-2022. Significantly, we expect major news flow over the next three months or so. This will relate to the results of the 3-D seismic shot on Pensacola by Shell in August 2019, a possible well decision and the awards of acreage under the 32nd North Sea Licencing Round. As noted in our May note, the marked contango in North Sea forward prices is more significant for investment than the currently depressed spot prices. Deltic’s share of Pensacola and Selene well costs plus G&A through mid-2022 is well underpinned by the sizeable cash position.
Companies: Cluff Natural Resources
Cluff Natural Resources (CLNR LN): Shell remains committed to drill two wells next year, fully funded | UK Oil & Gas (UKOG LN): £4.2m placing leaves the Company debt free | Angus Energy (ANGS LN): Pipeline extension application submitted
Companies: CLNR UKOG ANGS
Not surprisingly, CLNR as a North Sea exploration junior has been unable to escape the growing malaise in oil and gas markets over the past three months and the sharp cutbacks in oil gas industry capital spending. We believe, however, there is a case for considering the contrary position. This reflects the sharp contango (futures prices higher than spot) in oil and gas futures prices and the continuing commitment of Shell, CLNR’s joint-venture partner, in pursuing exploration work on the promising Selene and Pensacola projects in the SNS (Southern North Sea) gas basin. Furthermore, CLNR has a healthy balance sheet and operates with low fixed overheads. As normality returns we continue to see scope for positive news flow in 2020 primarily reflecting a Selene drilling decision, the results of last August’s seismic shoot on the Pensacola prospect followed by well investment decision, a possible farm out of the Dewar oil prospect and the potential award of additional licenses in the latest UK licensing round.
Reabold Resources (RBD LN): Activity ramps up in Romania this year | Cluff Natural Resources (CLNR LN): FY19 Results, transformational year
Companies: Reabold Resources Cluff Natural Resources
CLNR has the potential for extremely influential news flow in 2020 which will likely be a prelude to near-term drilling on the two Shell joint ventures. In the first half we believe a drilling decision is likely on the Selene prospect in the heart of the Southern North Sea (SNS) gas basin. We continue to believe Selene will ultimately be drilled in Q4 2020 or Q1 2021. There is also the real possibility in the coming months of a farm-out on the highly promising Dewar liquids prospect in the Central North Sea (CNS). Additionally, CLNR expects a drilling decision on the Pensacola prospect near the northern margin of the SNS by November 2020. A scheduled significant item of news flow in Q2 concerns the 32nd Offshore licence awards. CLNR has stated that the blocks applied for in the SNS and CNS are highly prospective and will significantly enhance resource potential. Importantly, CLNR has a pre-eminent farm-in partner for P2437 and P2252 in the SNS and has underpinned its financing needs through 2021.
CLNR’s recent operational update points to significant progress in advancing to drilling its two leading prospects, Pensacola and Selene, in the Southern North Sea (SNS) Basin. We believe Selene is likely to be drilled in Q4 2020 or Q1 2021 and Pensacola in Q4 2021. Shell, the operator of Pensacola, is likely to make a well decision on the prospect by end November 2020. The reported ONE-Dyas hydrocarbons discovery at its Darach Central-1 well has positive implications for Pensacola about 40 km to the west. Seismic evaluation is underway at Selene. We believe a drilling decision here is likely in the coming months. The highly promising Dewar liquids-focussed prospect in the Central North Sea (CNS) has attracted significant potential farm-in interest. CLNR is expecting such interest to gather pace in the coming months now that the 32nd Licencing Round is complete and given the approaching finalisation of the Dewar farmout process. We continue to see excellent potential for news flow in the months ahead and believe that CLNR is at a transformational stage of development.
Cluff Natural Resources (CLNR LN): Multiple applications submitted in the 32 nd UK Offshore Licence Round | PetroTal (PTAL LN) – Another upgrade to production guidance | Mosman Oil & Gas* (MSMN LN) – 16% increase in production at Stanley
Companies: CLNR PTAL MSMN
CLNR has made impressive progress in 2019 technically, strategically and financially in advancing the commercialisation of its Southern (SNS) and Central North Sea (CNS) asset portfolio. The key developments have been the farm-outs to Shell of P2252 and P2437 in the SNS, the initiation of the P2352 farm-out process in the CNS and the recent £15m gross raise that secures development funding through 2021. CLNR is at a potentially transformational stage in its development. Over the coming months we see the potential for major items of news flow. The key ones are a firm drilling commitment on the highly prospective Selene prospect and a farm-out of the promising liquids-focussed Dewar prospect on P2352. We believe there is a possibility of drilling Selene in late 2020 or early 2021. The Dewar prospect could also be drilled in late 2020 with Pensacola following perhaps in Q3 2021. CLNR will also apply for additional licences in the 32nd UK Offshore Licencing Round with awards made in Q2 2020. This could significantly expand the asset portfolio.
Brickability - The br icks supplier , w hich a lso ha s a hea ting a nd plumbing business a s w ell a s a roofing division, expects to join the junior market at the end of this month with a market cap of circa £150m
Companies: SYM TEK TMT TLOU ALS SPDI RBD FOG SIM CLNR
Premier Oil (PMO): H1 Results | Rockhopper (RKH): Operational Update | 88 Energy (88E): Conventional Farmout | SDX Energy (SDX): H1 Results | Reabold Resources (RBD): Increased Investment | i3 Energy (I3E): Liberator Well Spud | Cluff Natural Resources (CLNR): Completion of Seismic
Companies: PMO RKH 88E SDX RBD I3E CLNR
Union Jack Oil* (UJO)/Reabold Resources (RBD): West Newton Update | Mosman Oil & Gas* (MSMN): Stanley-3 Update | Cluff Natural Resources (CLNR): Completion of Farmout | Lansdowne Oil & Gas* (LOGP)/Providence Resources (PVR): Barryroe Funding Delays
Companies: RBD MSMN CLNR LOGP
SDIC Power Holdings China’s state-backed energy firm has received government approval to issue 10% of its share capital as Global Depositary Receipts (GDRs) on the London Stock Exchange
Companies: ETX AFN HYR EUA BGO ESYS BOOM STAR CLNR IOF
Hurricane Energy (HUR): Exploration Well Dry | Kosmos Energy (KOS): Exploration Success | San Leon Energy (SLE): Extension to Nigerian licence | Lekoil (LEK): MOU Signed for Otakikpo | Cluff | Natural Resources (CLNR): Dewar Feasibility Study | Mosman Oil & Gas* (MSMN): Sale of Strawn
Companies: HUR KOS SLE LEK CLNR LOGP
CLNR has announced the commencement of the farm-out process for its 100%-owned CNS (Central North Sea) licence P2352 containing the promising Dewar oil prospect. This follows the farm-outs to Shell of the SNS (Southern North Sea) gas-focused licences, P2252 and P2437, earlier in 2019. The commencement of the P2352 farm-out process is on schedule and follows the completion of a geophysical study and a review of the commercial development options. CLNR considers the Dewar prospect to be drill-ready and is now seeking one or more partners to provide funding for the exploration of P2352. A farm-out would be expected to include a commitment for a Dewar exploration well. We would expect the farm-out process to be conducted over the next six months or so. On this basis and allowing for the lead time for well design, rig mobilisation and OCTG procurement the earliest that Dewar could be drilled is probably Q4 2020. Arguably, however, 2021 is more likely. CLNR remains cautiously rated vis-àvis our risked valuation of £116m or 8.3p/share.
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A number of REITs have the ability to thrive in current market conditions and thereafter. Not only do they hold assets that will remain in strong demand, but they have focus and transparency. The leases and underlying rents are structured in a manner to provide long visibility, growth and security. Hardman & Co defined an investment universe of REITs that we considered provided security and “safer harbours”. We introduced this universe with our report published in March 2019: “Secure income” REITs – Safe Harbour Available. Here, we take forward the investment case and story. We point to six REITs, in particular, where we believe the risk/reward is the most attractive.
Companies: AGY ARBB ARIX BUR CMH CLIG DNL HAYD NSF PCA PIN PXC PHP RE/ RECI SCE SHED VTA
Accelerating activity in to FY21
Companies: Manolete Partners
With a new CEO, Amanda Blanc, Aviva’s shareholders could dream of a possible change in the group’s strategy, with a more focused insurance business. The new Chief has an opportunity to take painful decisions in a year where no one will require a high operating performance.
Companies: Aviva Plc
Trading Well in Tough Market
Companies: Palace Capital
Record delivered full year results matching expectations with assets under management equivalent (AUME) slightly ahead as positive inflows more than offset the impact of market moves and fee margins were broadly stable. The group also demonstrated its operational resilience and expertise to clients during the onset of COVID-19 and accompanying volatility. Looking ahead, the group has a fresh focus on growth and to support this is investing in a measured way in IT and its staff.
Equals' FY19A results confirm another year of strong, double-digit revenue and adj EBITDA growth. The move to a B2B focused offering continues to progress and looks well timed in view of Covid-19's impact on overseas travel. While the pandemic impacted Q2/20E trading early on, we note June KPI's indicate a positive rebound. Given the continued uncertainty as to Covid's full impact upon FY20E trading, we refrain from reissuing forecasts and thus leave our recommendation under review.
Companies: Equals Group
Ground Rents Income Fund (GRIO) has today released its interim results for the period ending 31 March 2020. The fully diluted NAV is 110.1p down marginally from previous NAV of 111.3p as at 30 September 2019 year-end. This valuation included a material valuation uncertainty clause as a result of the COVID-19 pandemic, which has subsequently been removed since the period end for long dated ground rent valuations given the defensive nature of the income streams and continued market/transactional activity. The latest valuation represented a decrease on a like for like basis of £0.36 million or -0.3%. Two Interim dividends were paid during the six-month period ending 31 March totalling 1.98p, and a further dividend of 0.99p has been declared today (ex 16 July / payable 10 August). Dividend cover excluding the non-recurring litigation costs on Beetham Tower was 90%. Assuming a full year dividend of c4p this puts the shares on a flat yield of 4.9% and a discount of 26%.
Companies: Ground Rents Income Fund
The covid-19 pandemic has had a devastating effect on the share price of property companies, with 31% wiped off the value of their total market capitalisation during the first quarter of 2020.
Companies: AEWU CREI CSH BOOT INL HLCL THRL SUPR RESI RGL DIGS GR1T SOHO PHP BOXE ASLI UTG AGR UAI BLND UANC CAL SHED CWD WHR EPIC WKP GRI YEW HMSO PCA INTU NRR
Hipgnosis Songs Fund (SONG LN) has today announced a trading update for the full year ending 31 March 2020. The unaudited NAV has risen 13% YoY to 116.7p, up 14.3% since the last published NAV of 102.2p as at 10 January 2020. This represents a like for like valuation uplift of 11.4%. All equity has been fully deployed and shareholder approval has been sought to increase net debt from 20% to 30%. Revenue is strong with £64.7m generating an EPS of 10.7p (more than 2x the annual 5p dividend target). NAV growth has been driven by revenue statements which were up 2%, and an increase in streaming growth rate assumptions by the independent valuers. The portfolio comprises 54 catalogues, with 13,291 individual songs, now valued at £757m which was acquired at purchase price of £697m on an acquisition multiple of 13.9x – now valued on 15.0x historical earnings.
Companies: Hipgnosis Songs Fund Ld
ICGT, the 39-year listed private equity (PE) investor, has delivered a total NAV return of 178% over 10 years (comparable FTSE All Share return 61%). Since Intermediate Capital became the manager in 2016, ICGT has earned mid-teen p.a. underlying returns every year. This has been achieved by leveraging the attractive PE market with incremental manager synergies. It has a concentrated portfolio of “high-conviction” investments (19% p.a. average returns over five years, 42% of portfolio, defensive growth focus) and a diversified third-party PE funds book. ICGT manages over-commitment tightly. The 33% discount to NAV is above peers.
Companies: ICG Enterprise Trust
Numis’ update for Q320 was positive, reflecting both the need for equity funding in the market and the strength of the group’s franchise as well as its ability to deal with current operating constraints. Subject to the market background in its final quarter, we now expect Numis to achieve a full-year result in line with or ahead of the high end of our previous scenario range.
Companies: Numis Corporation
Tatton passed the March 2020 market-crash stress-test with flying colours. Financial advisers continued to trust it with their clients’ money – net fund inflows were £86m in March (just under the FY20 average of £94m pm) – at a time when many funds saw record outflows. Over FY20 Tatton recorded £1.1bn of inflows, and despite the market bottom nearly coinciding with the 31-Mar year-end, AUM closed 10% above FY19 on £6.7bn. Revenue grew 22% to £21.4m; adjusted operating profit was up 24% to £9.1m; PAT jumped 72% from £4.9m to £8.4m; and full-year dividend increased 14% from 8.4p to 9.6p, a yield of 3.3%. Tatton remains debt-free with £12.8m of net cash.
Companies: Tatton Asset Management
Wirecard UK’s suspension by the FCA has been lifted, allowing U Account business through Shelby Holdings and Morses Club to resume as normal, permitting customers full access to cash, which was previously frozen, albeit ring-fenced in a safe Barclays UK account. Morses Club has offered its U Account customers free use of the previously affected U Account accounts in July as compensation for the issue, helping to mitigate any negative impact and ensuring the relationship with customers remains strong.
Companies: Morses Club
The group’s final results were broadly in line with our forecasts, with an 11% increase in revenue, marginally lower than expected profitability, and an 11% increase in the proposed dividend.
Hot on the heels of the Architas acquisition – announced 1st July, Liontrust has issued in line final results (£38.1m adj. PBT vs £38.3m consensus, 24p second interim dividend). An accompanying trading update also confirms that AuM bounced back in Q1 as markets recovered and net inflows were sustained at a record £971m for the quarter. The Architas acquisition – once completed later this year – stands to drive Liontrust through the £25bn AuM mark and bolster the existing multi-asset product offering and wider appeal to the current client base. As joint corporate broker, we have withdrawn forecasts pending the approval of the acquisition at the forthcoming general meeting.
Companies: Liontrust Asset Management