Hurricane has announced the resignation of Dr Robert Trice as CEO. Beverley Smith has been appointed as interim CEO and will oversee a thorough review of all available data, which will inform the future activity programme to increase production while maintaining capital discipline. Production from the Lancaster early production system (EPS) is relying on the deliverability of the 205/21a-6 well following Hurricane’s unexpected shut-in of 205/21a-7z in May 2020. Full-year guidance has been suspended, with the 205/21a-6 well presently producing at c 12,000bod. Production from 205/21a-6 will be increased over the coming weeks and months, although the optimal rate will be heavily dependent on the ongoing response of the reservoir. Our risked valuation has decreased to 37.1p/share from 70.4p/share (-47%) as we adjust our Lancaster EPS production profile and timing and capex allocation of future developments. Our core NAV now stands at 13.6p/share (-38%).
Companies: Hurricane Energy
Genel Energy (GENL LN): Production levels at Tawke fall in the absence of infill drilling | Hurricane Energy (HUR LN): Licence commitments at Lincoln extended
Companies: Genel Energy Hurricane Energy
88 Energy (88E LN/AU): Update in Alaska | Echo Energy (ECHO LN): Operation update in Argentina | Subsidies to the oil industry in Argentina | Energean Oil & Gas (ENOG LN): Neptune Energy not acquiring Edison UK and Norway | EnQuest (ENQ LN): 1Q20 update | Equinor (EQNR NO): Dry hole in Norway | Hurricane Energy (HUR LN): Problem with a well at Lancaster in the UK, FY20 production will be “substantially” lower than expected | Lundin Energy (LUP SS): Reduced FY20 production on guidance of Norwegian government curtailment |SDX Energy (SDX LN): 1Q20 results | Total (FP FP): Not buying Ghana from Occidental Petroleum
Companies: 88E AOI ECHO ENOG ENQ EQNR HUR LUPE SDX TLW
In April 2020, Hurricane Energy provided an update on Lancaster early production system (EPS) data gathered since first oil. The company announced that productivity from the two producing wells is over 10.0kbod per well. Aggregate water has been higher than initial expectations; however, this has been identified as being perched water and is expected to stabilise with time. Management expects that a longer period of data gathering will be required before the next stages of development. Given the need for additional data and the current commodity price environment, Hurricane is reviewing its capital allocation for 2020–21. Although the capital markets day did not confirm the next steps required to be able to confirm the upside case for the company's asset base, Hurricane’s balance sheet is strong and the EPS keeps on delivering. Our mid-case risked valuation has slightly decreased to 70.4p/share from 73.0p/share ( 4%) as we adjust our short-term oil price assumptions and our core NAV stands at 21.9p/share, a premium of 99% to the current share price.
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
Diversified Gas & Oil (DGOC LN): Moving to the main board | Echo Energy (ECHO LN): Argentina update | Hurricane Energy (HUR LN): Operating update in the UK | JKX Oil & Gas (JKX LN): 1Q20 update in Ukraine and Russia | Regal Petroleum (RPT LN): Ukraine update | Tethys Oil (TETY SS): Production update in Oman | Update on payments in Kurdistan | Victoria Oil & Gas (VOG LN): 1Q20 update in Cameroon | Zenith Energy (ZEN LN/ZEE CN/ZENA-ME NO): Renegotiate price of Congo acquisition
Companies: DGOC ECHO GENL GKP HUR JKX ENW TETY VOG ZEN
Huricane Energy (HUR LN): Watercut increases, production at Lancaster remains at 20,000bopd | JKX Oil & Gas* (JKX LN): 1Q20 operational update shows 11% yoy increase in production | Union Jack Oil* (UJO LN): Works continue at PEDL 183, in line with government regulations | Echo Energy (ECHO LN): Further cost cutting and focus on high margin gas | Regal Petroleum (RPT LN): Production up 5% yoy, operations continue unaffected | Columbus Energy Resources (CERP LN): Deeps cuts to G&A, Saffron testing results to be announced later this month
Companies: HUR JKX UJO ECHO ENW CERP
Q1 2019 production update
Hurricane Energy recently reported its first year of production and revenues from the sale of oil produced from the Lancaster early production system (EPS). The company reported FY19 revenue of c $170m, in line with our previous estimates. In this note we update our valuation to reflect FY19 results and the current oil and gas industry macroeconomic situation. The coronavirus (COVID-19) and the Russia/Saudi Arabia price war have affected oil and gas global supply and demand and consequently oil prices. Our mid-case risked valuation has decreased to 73.0p/share from 109.9p/share (-34%) as we adjust our short- and long-term oil price assumptions and update our forecasts to reflect Lancaster's accelerated programme, and removal of the Great Warwick Area (GWA) tie-back.
Worker evacuated from Lancaster FPSO
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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
U.S. futures and European stocks dropped on Friday as investors mulled a reported conflict among policy makers over a stimulus package for the single-currency region, as well as political upheaval in France.
The Stoxx 600 Index fell after Bloomberg News reported the European Central Bank is facing a potential rift over how much their emergency bond-purchase program should stay weighted toward weaker countries such as Italy. The euro fluctuated following French President Emmanuel Macron's decision to name a new prime minister after asking his government to resign. Rolls-Royce Holdings Plc slumped after the British jet-engine maker said its exploring options to raise funds to strengthen its balance sheet.
The dollar was slightly down, posting its first weekly drop in a month, while American cash equity and bond markets were shut for Independence Day. President Donald Trump will attend an early July 4 celebration at Mount Rushmore with thousands of guests who won't be required to wear masks, while his U.K. counterpart Boris Johnson urged Britons to act responsibly as pubs prepare to re-open and the government lifts quarantine rules on travel for 60 countries.
The friction at the ECB highlights the risk to markets should promised stimulus measures fall short. Investors continue to weigh policy support and upbeat economic data against relentless new outbreaks of the virus. U.S payrolls figures Thursday fuelled optimism of a V-shaped recovery in the world's biggest economy, even as Florida reported that infections and hospitalizations jumped the most yet, and Houston had a surge in intensive-care patients. Emerging-market stocks posted the biggest weekly gain in a month.
Elsewhere, crude oil dipped but remained on track for a weekly gain.
Companies: TGL JSE IAE ADME BP/ DGOC ENOG NTQ NTOG PMO RBD ROSE RDSA UKOG TRIN
Considering the environment, this sale is positive and marks the completion of the $15bn divestment programme started after the acquisition of the shale assets from BHP in 2018. Overall, BP’s strategy in downstream is to bring stable earnings, to offset volatility in upstream. In this regard, expanding renewables activities would seem appropriate to BP. While, BP has no competitive advantage in this field, exposure to renewables will allow the oil majors to keep their oil & gas activities.
Companies: BP Plc
Acquisitions and creditors update
Companies: Premier Oil
Over the last 18 months, Powerhouse has cemented its relationship with Peel Environmental, which is targeting the development of at least 30 distributed modular generation (DMG) plants across the UK. Each of these will potentially generate £0.5m in annual licence fees for Powerhouse. This roll-out is conditional on shareholders approving the proposed acquisition of former development partner Waste2Tricity (W2T) at the general meeting on 14 July
Companies: Powerhouse Energy Group
Petropavlovsk PLC (LSE: POG) have released their FY2019 results and Q1 trading update this morning. The company had already released production numbers for last year. Overall the numbers reflected a strong operational performance although various financial/other parameters thwarted positive changes below the EBITDA line. Conversely net cash from operations reduced by 43% due to lower cash from prepayment as part of the group’s forward sale facility with the banks, yet net debt came down to $561m. . We show the key figures in Table 1.
Implications of the gold-silver metallurgy at Empire, Idaho
Yesterday, Phoenix Copper published a metallurgical report on the leaching of its gold-bearing mineralisation from the Empire resource area in Idaho. This showed high recoveries for gold and silver using standard cyanide and non-standard Ammonium Thiosulphate leaching (comparable leach times, reagent consumption and recovery). The implications of these tests may be far ranging for Phoenix as it enables it to consider bringing forward precious metals production from the area, with the following benefits: 1) quicker permitting for a non-cyanide process; 2) cheaper reagents; 3) earlier establishment of mine site infrastructure to assist ongoing economic studies and; 4) cash flow in a robust gold price environment. More test work on the gold recovery process remains to be completed to establish the optimum leaching and recovery parameters. We still see fair value at 34p/sh (see research from 12/05/2020 for full details) but note that Phoenix management is actively seeking to bring forward value in its projects. In the meantime, we have drilling results and a (potential) resource upgrade to look forward to shortly from the Red Star lead-silver project as well as a funded resource drilling program to establish a whole resource for Empire – and not just the base metal-rich zones.
Companies: Sirius Real Estate
Enteq Upstream PLC (LON:NTQ) has released full-year (FY) results for the year-end March 2020 with commentary on the ongoing trading environment. The company reported revenues of around US$10.9mln, underlying adjusted EBITDA (earnings before tax interest depreciation and amortisation) of US$3.1mln,
Companies: Enteq Upstream
Rockfire Resources, the gold and copper exploration junior with projects in northern Queensland has recently commenced a major £0.8m drilling programme on Plateau, its most advanced project. Drilling is likely to be followed by a resource update in late 2020 and a scoping study in Q1 2021. We believe that the updated resource estimate could be commercially significant. This reflects the promising drilling results post July 2019’s resource assessment and the potential for the drilling programme to expand the resource base given the analogous Mt Wright mine geology 47 km to the NE. The new drilling programme will include diamond drilling for the first time which will enable deeper higher-grade targets to be targeted. The drilling programme has been underpinned by the recently announced £1m raise. We believe the scope for positive news flow in the coming months is excellent while the gold market backdrop should be supportive for gold exploration as well as production plays over the balance of 2020.
Companies: Rockfire Resources
Warren Buffett once said that as an investor, it is wise to be ‘fearful when others are greedy and greedy when others are fearful’. Fear is not in short supply right now.
Companies: OPM ALU ANCR BLV CONN CRC STU GATC HAT LEK MMH MCB MWE NXR NTBR NOG PAF PEG RFX SRC TEF TEG TPT VTU WYN XLM
Shearwater sells resilience and today's trading update shows us how resilient demand has been for its products and services. The Group has swung to EBITDA profitability and cash flow is well ahead of expectations. The macro themes of cyber security and remote working are supportive of robust demand levels going forward. We are maintaining our forecasts. Buy.
Companies: Shearwater Group
InfraStrata's acquisition of the iconic Harland & Wolff (H&W) shipyards in Northern Ireland has been transformational for the group, and with a carefully planned growth strategy, there is a clear route to cash breakeven in the short term. Over the medium to long term, these facilities could support a c£400m revenue business. With the company trading at a c30% discount to its H1/20A book value and c65% to its Adj NAV, we initiate with a Buy recommendation.
Park and ride – initiating coverage
Empire Metals* (EEE LN) - Munni Munni platinum group metals project acquisition work program | Erris Resources (ERIS LN) – Resumption of Loch Tay exploration | Goldstone Resources (GRL LN) – Reduced loss in 2019 | KEFI Minerals * (KEFI LN) – Tulu Kapi project finance on track for Oct/20 closure and full construction start in Q1/21 | Power Metals Resources* (POW LN) – Interim results | Vast Resources* (VAST LN) – Carlibaba licence granted
Companies: EEE ERIS GRL KEFI POW VAST
Davenport owns three perpetual mining licenses and two exploration licences covering 659km2 in the South Harz potash basin in central Germany. Davenport's experienced European-based management is now focussed on developing Europe's largest potash inventory of 5.3 billion tonnes at 10.8% K2O.
Companies: Davenport Resources Ltd