Market Update: 22 February 2023
Rex International Holding* - Issues profit warning
Panoro Energy (OTC:PESAF, OSL:PEN) - Maiden dividend declared
Gran Tierra Energy Inc (TSX:GTE, LSE:GTE, NYSE-A:GTE, ETR:G1P) - Solid FY22 results
Impact Oil & Gas (private): Commences multi-well Namibian programme
Energy News
Brent Oil US$82.2/bbl vs US83.1/bbl yesterday
WTI Oil US$75.7/bbl vs US$76.8/bbl yesterday
Henry Hub Gas US$1.98/mmBtu vs US$2.25/mmBtu yesterday
UK NBP Futures 125p/therm vs 122p/therm yesterday
TTF Dutch Futures €50/MWh vs €49/MWh yesterday
- US Henry Hub natural gas prices fell below $2/mmBtu for the first time since 2020 as weather forecasts have shifted milder since last week, denting sentiment for a late Winter freeze to boost heating demand.
- The Freeport LNG facility in Texas said that regulators have allowed it to restart commercial operations, but that it would take several weeks for the terminal to return to its full 2.1bcf/d export capacity.
- Carbon permit prices in the EU’s Emissions Trading System rose above €100 for the first time, as falling natural gas prices are expected to revitalise industrial production that was curbed by last year’s elevated energy costs.
Company News
Rex International Holding* (REXI SP) S$0.188 Market Cap S$245m: Issues profit warning
- Rex announced that the Group expects to report a FY22 net loss, offset somewhat by expectations for a strong positive EBITDA, positive cash flow and a strong cash position.
- The Company said the losses were mainly due to a decline in oil sales in Oman and Norway as a result of planned and unplanned production stoppages in 2022, as well as the relinquishment of licences in Norway.
- Rex commented that it is still finalising its FY22 results and will provide further details of the Group’s performance when it releases the unaudited consolidated financial results on or before 1 March 2023.
The stock closed down 6% following this update as the Company gives investors forewarning of a FY22 net loss, which reflects operational issues in June and November 2022 in both Oman and Norway. Nonetheless, the recent drilling campaign in Oman has yielded positive results and, together with the maintenance and infrastructure operations carried out in 2022, will 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
Panoro Energy (OTC:PESAF, OSL:PEN) NOK28.7, Market Cap NOK3.3bn: Maiden dividend declared
- Panoro reported average FY22 net production of 7.5kboe/d generating $187m revenues and $98m operating cash flow to end the year with $47m net debt ($80m gross debt).
- The Company reiterated 9-11kboe/d FY23 production guidance, with the range being dependent on timing of the start-up of each of the new production wells at Dussafu Marin and revenues weighted to 2H23.
- Panoro declared a maiden quarterly dividend of $3m and expects to pay out $20m in 2023 (implied ~6% yield) subject to an $80/bbl oil price, with a framework for further capital returns subject to higher realised oil prices.
Panoro has entered a phase of continual drilling activity that should deliver a step-change in production and increase its exposure to the current high oil price environment. In addition to this year’s planned $75m capex programme and scheduled $20m debt repayment, the Company has also declared an inaugural quarterly dividend and set out a framework for shareholder returns that will boost the $20m intended cash return subject to higher post-hedge realisations through buybacks and/or special dividends.
Gran Tierra Energy Inc (TSX:GTE, LSE:GTE, NYSE-A:GTE, ETR:G1P) C$1.13, Market Cap C$417m: Solid FY22 results
- Gran Tierra announced average FY22 net production up 16% y/y to 30.75kb/d generating $711m revenues, $490m EBITDA and $129m free cash flow to end the year with $88m net debt.
- The Company reiterated 32-34kb/d FY23 production guidance, a small improvement on current 32.3kb/d production levels, based on a $210-250m capex budget that includes plans to drill 18-23 development wells.
- Gran Tierra reported strong reserves replacement ratios well above 100% and grew its estimated YE22 1P NAV to $2.53 per share, reflecting the Company’s reserves growth and a strong recovery in oil prices.
- The Company commented that it remains focused on generating strong free cash flow, ongoing net debt reduction via bond buybacks and shareholder returns via share buybacks.
In the current high price environment, we think that Gran Tierra will continue to display robust operations and we expect the Company to focus on asset optimisation, maintaining a low operating cost structure and increasing oil recovery factors across its extensive portfolio. We expect this afternoon’s FY22 results webcast to highlights the Company’s ongoing capital allocations policy of using excess cash to buy back debt and shares, whilst at the same time pursuing accretive growth opportunities as it continues to look to strengthen its portfolio.
Impact Oil & Gas (private): Commences multi-well Namibian programme
- Impact announced that a Total-operated two rig drilling programme offshore Namibia is due to commence before the end of February, targeting up to four exploration and appraisal wells near the Venus discovery.
- The drilling campaign includes the re-entry of the Venus-1X discovery well and an appraisal well on the structure, plus flow testing, as well as investigating a potential westerly extension of Venus with an exploration well on the Nara prospect on Block 2912, plus a potential follow-up appraisal well on success.
- Africa Oil Corp (TSX:AOI) holds a 30.9% shareholding in Impact.
Exploration budgets have recovered post the ‘lower-for-longer’ and Covid-19 pandemic periods, with the higher commodity price environment and cash flows driving an exploration push into strategically ‘advantaged’ barrels that are both low cost and have low CO2 emissions intensity, as well as providing scalability for companies looking to rationalise their portfolios. The Venus discovery, which according to Wood Mackenzie was the world's largest oil discovery in 2022, has opened up the Orange Basin as a world-class petroleum province and an exploration hotspot for the E&P industry. This multi-well 2023 work programme is aimed at proving the flow potential of the Venus reservoir, and to investigate a potentially material extension into the adjacent licence. If successful, the partners believe this will result in two potentially fully appraised early production centres, one on Block 2913B and the second on Block 2912.
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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