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: 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
Royal Dutch Shell (RDSB LN): Dividend cut for the first time since the Second World War | Rockhopper Exploration (RKH LN): Navitas remains committed to farm-in, terms extended | RockRose Energy (RRE LN): Trading update, production remains strong, well hedged this year | Ascent Resources* (AST LN): Further expansion into Cuba
Companies: RDSB RKH RRE AST
RockRose Energy (RRE LN): FY19 results underline year of significant growth | Columbus Energy Resources (CERP LN): Goudron IPSC extended to June 2020
Companies: Rockrose Energy Columbus Energy Resources
88 Energy (88 LN/AU)/Premier Oil (PMO LN): Drilling update in Alaska | Eco (Atlantic) Oil & Gas (ECO LN/EOG CN): Update in Guyana | Maha Energy (MAHA-A SS): Acquisition in USA and production update | Parex Resources (PXT CN): Low capex programme and production update in Colombia | Total (FP FP): Significant discovery in Suriname | Aker BP (AKERBP NO): Small discovery on Norway | BP (BP LN): 1Q20 update and capex reduction | Providence Resources (PVR LN): US$3 mm equity raise | RockRose Energy (RRE LN): FY19 results, guidance revision | Royal Dutch Shell (RDSA/B LN): 1Q20 update | Valeura Energy (VLE CN/VLU LN) : Update in Turkey | Caspian Sunrise (CASP LN): Production update in Kazakhstan | JKX Oil & Gas (JKX LN): FY19 results | Nostrum Oil & Gas (NOG LN): Corporate update in Kazakhstan | Energean Oil & Gas (ENEOG LN): Progress at Edison E&P acquisition | Payment from Kurdistan received | TransGlobe Energy (TGL LN/CN): Operating update in Egypt | United Oil & Gas (UOG LN): Update in Egypt | Aker Energy: Postponing development in Ghana | Canadian Overseas Petroleum (COPL LN/XOP CN): US$63 mm legal claims by Essar against ShoreCan | Tullow Oil (TLW LN): RBL redetermination in line, no further principal repayment until 2021 and further capex reduction
Companies: 88E AKERBP BP/ CASP COPL DNO ENOG GENL GKP JKX MAHAA NOG PMO PXT PVR RDSA RRE TGL TLW UOG VLU
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 LUPE OMV REP RRE SENX BLOE RPT GKP AOI EGY
RockRose Energy (RRE LN): FY20 capex reduced by 25% | Touchstone Exploration (TXP LN): FY19 results, 6% increase in average production | Block Energy (BLOE LN): Acquisition of producing Block XIB (615 km2 ) and exploration Block IX (1,925 km2 ) | Upland Resources (UPL LN): Steady, if unexciting progress
Companies: RRE TXP BLOE UPL
Rockrose Energy (RRE LN): Drilling campaign on schedule | Cairn Energy (CNE LN): FY19 results, Cairn swings into profit | SDX Energy (SDX LN): Rabul-3 encounters 116ft of net pay, Egypt
Companies: RRE RRE SDX
Premier Oil (PMO LN): Proposed UK North Sea Acquisitions, Financing and Extension of Credit Facilities | SDX Energy (SDX LN): 35% reserves upgrade at South Disouq | RockRose Energy (RRE LN): Year End Trading Update | Rockhopper Exploration (RKH LNP): Heads of Terms with Navitas Petroleum to farm-in to the Sea Lion
Companies: PMO SDX RRE RKH
Rockrose Energy (RRE LN): Seven wells planned by the end of 2020 | Savannah Petroleum (SAVP LN): CPR confirms 2P reserves of 99.6MMboe (gross)
Companies: Rockrose Energy Savannah Energy
Alvopetro (ALV CN) (not covered): Development financing in Brazil | GeoPark (GPRK US) 1 : BUY, US$26.00: New oil discovery in Llanos 34 Block opens-up 20-40 mmbbl gross potential | Getech (GTC LN) (not covered): 1H19 results | RockRose Energy (RRE LN) (not covered): 1H19 results | Serica Energy (SQZ LN) (not covered): 1H19 results | Total (FP FP) (not covered): Dividend growth acceleration | Vaalco Energy (EGY US)1 ; BUY, US$3.00: Reserves and resources update
Companies: ALV GPRK GTC RRE SQZ EGY
Hurricane Energy (HUR) – Warwick West spuds today | RockRose Energy (RRE) – Strong financial results, 60p interim dividend proposed | Serica Energy (SQZ): Half Year Report, material cash flows in 2020 | Aminex (AEX): Ruvuma Farm-Out Update and Acceleration of Drilling Operations
Companies: HUR RRE SQZ AEX
Tullow Oil (TLW): H1 Results | Diversified Gas & Oil (DGOC): Trading Statement | Independent Oil & Gas (IOG): TRF Acquisition & Well Spud | RockRose (RRE): Re-admission | Exillon Energy (EXI): Production Report
Companies: TLW DGOC IOG RRE EXI
Ahead of RockRose’s readmission to trading at 8am on Wednesday 24th July, we update our model for RockRose’s most recent acquisition resulting in a significant value uplift to our RENAV, which increases from 1820p to 3679p. We reiterate our BUY recommendation and expect the shares to come back significantly higher than the 815p pre suspension price.
Companies: Rockrose Energy
President Energy (PPC LN) (not covered): Offer for subscription for up to £6.5 mm | i3 Energy (I3ELN)1; Speculative Buy, £2.50: Important milestone to fund 2019 drilling | Independent Oil & Gas (IOG LN); BUY, £0.70: Project update in the UK | Lundin Petroleum (LUPE SS) (not covered): Dry well in the southern Barents Sea | RockRose Energy (RRE LN) (not covered): SPA to Acquire Marathon Oil’s UK Assets | United Oil & Gas (UOG LN) (not covered): Colter appraisal well results onshore UK | Kosmos Energy (KOS LN/US) (not covered): Capital Markets Day
Companies: PPC I3E IOG LUPE RRE UOG KOS
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Ramsdens has reported a strong set of trading results in the last twelve months to March 2020. COVID lockdown has led to store closures, which will lead to weaker trading over the following months. However, Ramsdens has a very solid balance sheet, is diversified and is well positioned to re-open stores and continue its growth. We use an 8x multiple on last 12 months to March 2020 earnings as a reflection of a normalised earnings base which reduces our target price to 162p from 180p. At this target price Ramsdens would trade on a CY20 P/B of 1.5x. This target price offers 15% upside and we re-iterate BUY.
ULR’s finals were in line with on EPRA NAV and earnings a little better than expected. Valuations remain stable and full rent collection has been achieved for the current quarter. We see fundamental quality and resilience in the (now expanded) portfolio – ULR has already invested nearly £100m in the first two months of the new year following the £136m equity raise. We make no material changes to forecasts. Current valuation points to an 7%+ annualised return, with upside remaining from deployment of funding headroom, active management and potential for valuations to improve.
Companies: Urban Logistics REIT
Aside from its FY 19 earnings presentation, British Land has adopted a more cautious anticipation about Offices in the City of London. We share this pessimism and have been surprised by the recent share’s bump. The latter is the opportunity to turn negative, again, and update our divestment case.
Companies: British Land Company
The Merchants Trust (MRCH) is managed by Simon Gergel at Allianz Global Investors (AllianzGI). Aiming to continue to provide a high and growing level of income, he is adjusting the trust's portfolio in the wake of dividend cuts sparked by the negative economic effects of COVID-19. If there is an income shortfall in this financial year, MRCH is well positioned to maintain its dividend, with revenue reserves of more than 1x the last annual payment. It has not been an easy period for value managers over the last decade as growth stocks have led the charge; however, Gergel has outperformed the UK market over this period in both NAV and share price terms. The board reduced MRCH's gearing in late January 2020, which was opportune timing ahead of the recent significant stock market weakness.
Companies: Merchants Trust
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: AGR CSH ESP DIGS IHR LXI PHP RESI SIR SUPR THRL SOHO BBOX SHED WHR
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
In the past month the group has made significant progress in pivoting its business away from its traditional face-to-face model. Although lending levels remain appropriately subdued, it has achieved an impressive collections performance, with its largest business running at about 90% of pre-lockdown levels. This, combined with the group’s high risk-adjusted margins has enabled it to generate £3m of FCF in the first three weeks of April, taking its net cash position to £38.7m as of 21 April. This strong financial position, combined with the group’s innovative approach to product development puts it in an extremely strong position to serve its clients and win share when the current government restrictions are eventually lifted. Reflecting this positive outlook we reiterate our BUY rating.
Companies: Non-Standard Finance
Today's news & views, plus announcements from VOD, POLY, SMDS, BLND, BYG, WEIR, DC, SNR, SHI, INTU, IHR, CNC, ARE, INCE
Companies: INTU SHI INCE
Companies: AVO AGY ARBB ARIX BUR CMH CLIG DNL GDR HAYD PCA PIN PHP RE/ RECI RMDL STX SHED VTA
U+I’s post-close trading update confirms c. £16m of development and trading gains for FY20, which includes Harwell. This is broadly in line with our revised expectations. Proactive steps are being taken to preserve liquidity in the short-term, including suspending the final dividend and stopping all non-essential spend. Positively, benefits of the cost saving programme will now be realised 12 months early. The balance sheet is strong, with ample liquidity; covenant levels are a long way off. Management’s time is being spent repositioning teams to be ready when restrictions are lifted, when there will be a renewed focus on the short-to-medium term value gain opportunities, of which there are plenty. The shares currently trade at 59% spot discount to our updated NAV forecasts, vs the UK sector at a 9% discount. We leave our recently lowered 180p target price unchanged and continue to see upside from here.
Companies: U&I Group
Recent news: On 21 April CLIG’s 3Q trading update to 31 March 2020, revealed:
27% fall in Funds Under Management (“FUM”) from US$6.0bn to US$4.4bn
- with weaker Sterling, FUM in £ fell 20% from £4.5bn to £3.6bn.
In 3Q, while Diversification CEF strategies (Opportunistic Value and Developed funds) had net inflows of US$25m, the Group’s Emerging Market Funds had net outflows US$68m
The Group has an active pipeline across all its major CEF offerings with increased interest in the Diversification CEF strategies
Post COVID-19, income to FuM remains unchanged at c. 75 bps of FuM
Companies: City Of London Investment Group
Smaller companies are usually a problematic area to invest in during significant downturns or recessions; and the sharp fall in 2020 hasn’t been an exception. In this article we assess the performance of smaller companies trusts throughout the pandemic, while identifying the factors that have differentiated the winners from the losers. This includes the impact that cash, market cap exposure, sector allocation, revenue exposure and growth or value biases have had, with some surprising results. We also ask whether now is an attractive time to invest in smaller companies, highlighting the trusts which stand out to us…
Companies: THRG GHE MINI RMMC ASIT ASL MTE TRG BRSC DSM
We wrote on 7 May, about the shape of the music global industry following the publication of the IFPI 2019 report. Taking a deeper dive into this report we examine the prospects of further growth in streaming numbers as the nonwestern markets come online.
Companies: Hipgnosis Songs Fund
Seneca Global Income & Growth Trust (SIGT) is managed by a four-strong team at Seneca Investment Managers, seeking undervalued securities across multiple asset classes in order to diversify the trust’s risk and return drivers. Its UK equity portfolio was particularly negatively affected by the coronavirus-led market sell-off in March, given its focus on domestic, mid-cap value stocks, which performed relatively poorly. However, these holdings could stand SIGT in good stead during an economic recovery. The trust’s board has committed to continue paying quarterly dividends, using reserves where necessary if income falls short, which seems likely given the number of dividend cuts announced by corporates in response to the global pandemic.
Companies: Seneca Global Income & Growth Trust
Randall & Quilter has undergone a transformation over the last two years; simplifying its operating model, releasing cash, and developing an exciting Live (Program Management) business which promises to provide a key balance for its core Legacy business in terms of earnings visibility, capital use, and cash generation. The company's interim results reported several key milestones in both areas, notably the largest ever Legacy acquisition and significant future Gross Written Premiums for Program Management. An announcement which exuded optimism highlighted the potential for current year profitability to be strong and, possibly, ahead of expectations. Longer term growth is likely to come from a more balanced combination of Legacy and Program Management earnings with the potential for greater cash generation. Accordingly, consensus forecasts for adjusted 2018 EPS have increased by over 30.0% while both distribution and Net Tangible Assets per share moved higher.
Companies: Randall & Quilter Investment