Market Update: 13 February 2023
5WH:SGX - January production shows promise
IOG PLC (AIM:IOG) - Blythe well sanctioned
Energy News
Brent Oil US$85.6/bbl vs US85.8/bbl last Friday
WTI Oil US$78.8/bbl vs US$79.1/bbl last Friday
Henry Hub Gas US$2.54/mmBtu vs US$2.44/mmBtu last Friday
UK NBP Futures 131p/therm vs 135p/therm last Friday
TTF Dutch Futures €52/MWh vs €54/MWh last Friday
- Crude oil prices settled back over the weekend following Russia’s announcement that it would reduce production levels by 0.5mb/d from March in retaliation for Western sanctions.
- The US Baker Hughes rig count was up 2 to 761 rigs last week (+20% y/y), with oil rigs up 10 to 609 units and gas rigs down 8 to 150 units, as a looming oversupply environment continues to weigh on gas producers.
- The EIA currently forecasts average FY23 US crude production to grow 5% y/y from 11.9mb/d to 12.5mb/d and for gas production to increase 2.2% y/y from 98.1bcf/d to 100.3bcf/d in 2023.
- Ineos announced it has raised €3.5bn financing from commercial banks and government agencies to support the construction and operation of an ethylene cracker in Antwerp with the lowest carbon footprint in Europe.
- Galp announced plans to sell its upstream assets in Angola, which produced 10.4kb/d last year, for $655m on completion and up to a further $175m in contingent payments due in 2024 and 2025 dependent on Brent prices.
Company News
5WH:SGX S$0.215 Market Cap S$280m: January production shows promise
- Rex reported January production up 20% m/m to ~5.66kb/d gross on the Yumna Field in Block 50 offshore Oman, as reported by Masirah Oil (91.81% subsidiary).
- The Company also reported average January production net to Lime Petroleum (91.65% subsidiary) of 2.06kboe/d on the Brage field (33.84% WI) and 1.61kb/d on the Yme field (10% WI), offshore Norway.
- Norwegian production volumes were impacted by an unplanned shutdown due to a software upgrade on the Brage field and by the clean-up of new production wells on the Yme field.
- Separately, Lime announced a minor oil discovery on the PL867 Gjegnalunden well (20% WI), which has also derisked the prospectivity on the Orkja prospect in the neighbouring PL818 licence (30% WI).
The recent drilling campaign in Oman has yielded positive results and, together with the maintenance and infrastructure operations carried out over the Summer, will likely go some way to restoring production volumes from last year’s lows. The Company is also planning an active drilling programme in Norway over the next 12M, which should boost volumes further on both the Brage and Yme fields. In our view, Rex needs to restore investor confidence in the production base this year as it focuses on paying a regular quarterly dividend and sets a near-term production target of 20kboe/d.
*SP Angel acts as Corporate Broker to Rex International Holding
IOG PLC (AIM:IOG) 4.8p, Market Cap £25m: Blythe well sanctioned
- IOG announced plans to next drill the Blythe H2 development well, which has a lower risk profile, lower cost and can be brought into production more quickly than the Southwark A1 completion plan.
- The Blythe H2 well is expected to significantly enhance production to double current gross volumes to the 30-40mmcf/d range, reduce water production into the pipeline and minimise associated opex.
- The Company also announced that it was reviewing its 2023 capital expenditure programme, which includes rig options to drill two appraisal wells at Goddard and Kelham North/Central.
Shareholders have endured a torrid 12M from the trials and tribulations at its flagship Saturn Banks development (50% WI) in the UK Southern North Sea. Underperformance from the existing production base and on the Southwark field development wells will reduce the revenues that were expected to underpin further investment in the portfolio, such that management is now looking at different options to optimise its cash flow. IOG still has some way to go to rebuild shareholder confidence in both its operational capabilities and the asset base.
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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+SP Angel employees may have previously held, or currently hold, shares in the companies mentioned in this note.
Sources of commodity prices
Oil Brent - ICE
Natural Gas - NYMEX
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