Market Update: 24 February 2023
Wentworth Resources PLC (AIM:WEN) & Maurel & Prom (MAU PA) - Shareholders vote in favour of deal
Invictus Energy Ltd (ASX:IVZ) - Mukuyu appraisal selected
Energy News
Brent Oil US$82.9/bbl vs US80.7/bbl yesterday
WTI Oil US$76.3/bbl vs US$74.2/bbl yesterday
Henry Hub Gas US$2.35/mmBtu vs US$2.20/mmBtu yesterday
UK NBP Futures 130p/therm vs 124p/therm yesterday
TTF Dutch Futures €52/MWh vs €50/MWh yesterday
- On the anniversary of Russia’s invasion of Ukraine, energy prices are surprisingly lower one year on as the West has somewhat adjusted to a significant global dislocation in both oil and natural gas markets, given Russia produced ~10% of the world’s crude oil and supplied ~40% of Europe’s gas in 2021.
- The EIA reported a 7.6mb US crude inventory build last week, as well as a 2.7mb distillate product build, with refinery utilisation falling 0.6% to 85.9%. EOG reported that it expects well costs to increase by 10% in 2023, following a 7% rise last year, and forecasts its FY23 crude oil production to grow 3% and total volumes by 9%
- The US EIA storage report detailed a draw of 71bcf to 2,195bcf last week, with storage levels up 21.9% y/y and 15.2% vs the 5-year average. Both Chesapeake and Comstock outlined plans to shrink capital in 2023 by pulling out rigs from their US unconventional gas portfolios due to oversupply depressing gas prices.
Company News
Wentworth Resources PLC (AIM:WEN) 31.5p, Market Cap £56m: Shareholders vote in favour of deal
- Wentworth announced that the requisite majority of shareholders at yesterday’s general meeting approved the proposed ~$75m sale (32.5p/sh cash offer) to Maurel & Prom (MAU PA).
- The Company reported that 75.26% of the votes cast were in favour of the scheme, thereby passing the required 75% threshold. Completion of the acquisition is expected in 1H23.
- Wentworth’s sole assets are a non-operated 31.94% (direct and indirect) interest in the Mnazi Bay gas production asset in Tanzania, for which M&P (48.06%) is the existing operator, together with c.$30m in cash.
Well, that couldn’t have been much closer! However, apart from Insiders (23%) voting in favour and Fidelity (11.9%) voting against, the shareholder votes were cast decidedly 8:1 in favour of the deal and the shares closed up 11.5% to narrow the prior discount to the sales price. The strong rational for the majority-partner of Wentworth’s non-operated stake in the Mnazi Bay field to acquire the Company was likely a deterrent to other interested parties. Wentworth said it had looked at a number of potential growth opportunities to put its growing cash pile to use, but considered M&P’s offer provided shareholders with an immediate upfront realisation of value in cash for their holding at a c.30% premium to the market price. We think the last year has seen the E&P sector move towards consolidation and shareholder capital returns as companies look to squeeze costs and return excess cash to investors in the absence of wider M&A. Whilst production assets remain in favour, we think there is growing evidence to suggest that cashed-up E&Ps are looking to deploy part of their discretionary capital and M&A budgets towards exploration, appraisal and development assets.
Invictus Energy Ltd (ASX:IVZ) A$0.14, Market Cap A$124m: Mukuyu appraisal selected
- Invictus announced that it plans to commence drilling in 3Q23 on the Mukuyu-2 appraisal well on licence SG 4571 (80% WI) in Zimbabwe’s onshore Cabora Bassa Basin, rather than on the Baobab-1 exploration prospect.
- The Company’s post well analysis of pressure data from Mukuyu-1 indicates potential for significant gas columns in the Pebbly Arkose and Upper Angwa reservoir target formations.
- Invictus said it would apply the learnings from the Mukuyu-1 exploration well to optimise the well design for the drilling conditions encountered and the ability to evaluate the multiple hydrocarbon bearing zones intercepted.
The Company is also planning an infill 2D seismic survey from 2Q23 in EPO 1848/49 to mature multiple leads into drillable prospects both along the Mukuyu trend and on the highly prospective Basin Margin play.
In our view, Invictus has wisely chosen to next prioritise appraisal drilling on the 20Tcf Mukuyu prospect to confirm a gas condensate discovery, rather than to drill a higher risk exploration well on the Baobab margin play. The Mukuyu-2 well will be specifically designed to target the multiple gas condensate bearing intervals detected drilling the Mukuyu-1/ST1 well in the Upper Angwa and Pebbly Arkose formations, as well as testing the deeper Lower Angwa target. The CEO has previously informed investors that a future drilling campaign would require either a capital raise or success from a farm-down process to progress; the Company now says it has received interest from potential industry partners and we wait to see if a farm-out can be secured on good terms. Following last year’s run-up in the share price on very high expectations, the market has better adjusted to the reality of early-stage wildcat exploration in frontier areas, where the Company has only drilled the first well in one of the last untested large frontier rift basins in onshore Africa.
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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