Market Update: 27 January 2023
Nostrum Oil & Gas Plc (LSE:NOG) - Restructuring nears completion
Tlou Energy Ltd (AIM:TLOU, ASX:TOU, BSE:TLOU) - Work update on Lesedi project
Energy Prices
Brent Oil US$88.3/bbl vs US$86.9/bbl yesterday
WTI Oil US$82.1/bbl vs US$80.9/bbl yesterday
Henry Hub Gas US$2.92/mmBtu vs US$2.87/mmBtu yesterday
UK NBP Futures 135p/therm vs 149p/therm yesterday
TTF Dutch Futures €53/MWh vs €58/MWh yesterday
- Crude oil prices edged higher ahead of meetings next week by OPEC+ to review crude production levels and the US Fed to determine interest rates.
- The US EIA storage report detailed a draw of 91bcf to 2,729bcf last week, mainly from the East and Midwest regions, with storage now 4.9% above its 5-year average.
- The EIA reported that natural gas has displaced most coal-fired power generation in Pennsylvania, which fell from 57% of the electricity generated in 2001 to 12% in 2021, while gas increased from 2% to 52% in the state.
- Vestas expects profitability in the wind power industry to be negatively impacted in 2023 by high inflation levels throughout the supply chain and reduced installations, driven by slow permitting processes in Europe and moderated activity levels in the USA ahead of the IRA-driven ramp-up in 2024.
Research
Nostrum Oil & Gas Plc (LSE:NOG) 2.9p, Market Cap: £5.3m: Restructuring nears completion
- Nostrum announced average FY22 production down 22% y/y to 13.2kboe/d from the Chinarevskoye field (100% WI) in Kazakhstan generating $199m revenues and $68m free cash flow to end FY22 with $233m cash.
- The Company has initiated a $5m tie-back project that will allow for the first ever third-party feedstock from Ural Oil & Gas (private) to be received for treatment in the Group's facilities that is expected to start in 4Q23.
- Nostrum has updated its off-take agreements, which should help to reduce the large Urals discount applied to its liquids in FY22 and thereby strengthen FY23 operational netbacks.
- The Company continued to execute its well and reservoir management strategy through well workovers and rigless well intervention in 2022 and also plans to settle its 2016-2021 tax audit with payments of $25m.
While Nostrum’s corporate restructuring nears completion (still expected in 1Q23), the Company is also making good progress on plans to maximise the value from its under-utilised processing facilities through the supply of third-party gas. We look forward to hearing more about the Company’s growth plans at a capital markets day to be scheduled soon after closing the restructuring.
Tlou Energy Ltd (AIM:TLOU, ASX:TOU, BSE:TLOU) 2.0p, Market Cap £15m: Work update on Lesedi project
- Tlou reported that progress on the 100km Lesedi transmission line is 33% complete as at YE22 and is expected to be finished around mid-2023.
- Work is continuing on a purpose-built operations facility for the initial 10MW Lesedi power project in Botswana, which is expected to complete during 1Q23.
- The Lesedi 6 production well is also expected to spud in 1Q23, with a work programme that includes the drilling of a core-hole to assess coal depth followed by the vertical production well and two lateral wells.
- The Company reported A$6.1m cash on hand at end-FY22, which was subsequently boosted by the ~A$3m placement announced earlier this month.
Tlou is working hard to bring on the Lesedi 10MW CBM gas to power project into production as quickly as possible and, subject to available funding, the Company plans to rapidly expand to 25MW and beyond. We expect interest on the project timeline to remain high, as well as updates on the improving gas production rates from dewatering wells at Lesedi and a funding solution to complete its proposed development.
Research
David Mirzai – David.Mirzai@spangel.co.uk – 0203 470 0473
Sales
Richard Parlons – Richard.Parlons@spangel.co.uk - 0203 470 0472
Grant Barker – Grant.Barker@spangel.co.uk – 0203 470 0471
Rob Rees – Rob.Rees@spangel.co.uk - 0203 470 0535
Abigail Wayne – Abigail.Wayne@spangel.co.uk - 0203 470 0534
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Sources of commodity prices
Oil Brent - ICE
Natural Gas - NYMEX
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