Market Update: 27 February 2023
Touchstone Exploration Inc (AIM:TXP, TSX:TXP, OTC:PBEGF) - 3M delay to Cascadura start-up
Synergia Energy Ltd (AIM:SYN) - Cambay farm-out talks continue
Eco (Atlantic) Oil & Gas Ltd (AIM:ECO, TSX-V:EOG) - Exploration farm-out talks continue
i3 Energy PLC (AIM:I3E, TSX:ITE, OTC:ITEEF) - Positive start to FY23 capex programme
Capricorn Energy PLC (LSE:CNE, OTC:CRNZF) - Strategic review by April
Energy News
Brent Oil US$82.9/bbl vs US82.9/bbl last Friday
WTI Oil US$76.5/bbl vs US$76.3/bbl last Friday
Henry Hub Gas US$2.58/mmBtu vs US$2.35/mmBtu last Friday
UK NBP Futures 124p/therm vs 130p/therm last Friday
TTF Dutch Futures €49/MWh vs €52/MWh last Friday
- The US Baker Hughes rig count was down 7 to 753 rigs last week, with oil rigs down 7 to 600 units and gas rigs unchanged at 151 units, contributing to the largest monthly fall (-18) in the rig count since June 2020.
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Company News
Touchstone Exploration Inc (AIM:TXP, TSX:TXP, OTC:PBEGF) 59.5p, Market Cap £139m: 3M delay to Cascadura start-up
- Touchstone announced that the National Gas Company of Trinidad and Tobago Limited (NGC) now expects to be ready to receive first gas from the Cascadura development around end-2Q23.
- The Company said the project remains on track, having previously announced targeted completion of the facility by the end of 1Q23, hence today’s news represents a 3M delay to first production on Cascadura.
- Synergia commented that it remains fully funded to complete drilling on the Royston-1X sidetrack well that targets the previously tested Herrera sands in the Ortoire block (80% WI), onshore Trinidad.
While the small delay is frustrating for investors, first gas from the Coho development in 2H22 has transformed the Company into a sustainable cash flow generating production-based E&P that is growing production volumes through a combination of additional drilling and well optimisation, as well as take its learnings from this process in the development of the larger Cascadura project. Touchstone recently high graded its asset portfolio to create significant running room as it targets the Herrera turbidite fairway around its core Ortoire licence, and we now look forward to the drilling results from the Royston well.
Synergia Energy Ltd (AIM:SYN) 0.124p, Market Cap £10m: Cambay farm-out talks continue
- Synergia announced that several companies are finalising their due diligence regarding the farm-out of the onshore India Cambay PSC (100% WI) and detailed technical and commercial discussions are ongoing.
- In addition to the progressive cavity pump solution being progressed on the C-77H well, the Company is also evaluating a cheaper jet pump system for installation on the C-19z well to boost oil production.
- Synergia also said that the conceptual Cambay carbon capture and storage (CCS) scheme has generated considerable interest and support from the Indian authorities and nearby major CO2 emitters.
The stock is down ~20% as uncertainty continues regarding the potential impact and remediation plans to retrieve the produced condensate from the well bore using artificial lift. Synergia resumed production in 2Q22 and plans to farm-out up to 50% of the Cambay PSC and bring in a new partner to invest in the assets with a view to increasing production and reserves through multi-stage fracture stimulation. The Company remains optimistic that it will be able to complete the process in 2023 and commence a full field development with the drilling of two new horizontal production wells (C-78H and C-79H), but we think that it must first resolve the existing operational issues.
Eco (Atlantic) Oil & Gas Ltd (AIM:ECO, TSX-V:EOG) 18.9p, Market Cap £69m: Exploration farm-out talks continue
- Eco announced that following the Gazania-1 drilling campaign in 4Q22 on Block 2B (50% WI), offshore South Africa, the Company had $14.5m cash and no debt as at 31 December 2022.
- The farm-out process is progressing positively for up to 55% of Block 3B/4B (26.25% WI) in the offshore Orange Basin, South Africa, as are the preparations to obtain environmental permits for a two well drilling programme.
- The Company commented that it is also hoping to leverage the unprecedented levels of interest for exploration assets in both Guyana and Namibia due to the considerable exploration success and activity in the area.
Following the disappointing drilling results from the Gazania well year, Eco’s CEO told investors that “the Company does not anticipate a need to raise money for the current portfolio and work programme”. One of the common themes of the last six months has been the renewed gusto in a sector awash with cash and looking for new opportunities to deploy its cash flow to strengthen and expand current shareholder returns into the medium term. As such, the next catalyst is likely to come from the collaborative farm-out process by Eco and its partners on Block 3B/4B that is now in the farm-out agreement negotiation stage, which would likely provide additional funding for future drilling activity.
i3 Energy PLC (AIM:I3E, TSX:ITE, OTC:ITEEF) 19.0p, Market Cap £227m: Positive start to FY23 capex programme
- i3 announced 4Q22 average production up 11% q/q to 22.8kboe/d (45% gas), with 23.4kboe/d current production and prior FY23 production guidance of 22.25-23kboe/d (50% gas), peaking at 26kboe/d.
- The Company has completed the first phase of a $64m FY23 capex budget to deliver 23 gross wells (70% net interest), with multiple wells now on clean-up flow and several Clearwater intervals tested.
- i3's YE22 reserves audit is in progress and the Company expects to release its final numbers in March, prior to the release of FY22 results.
While the share price has tracked the downward trajectory of Canadian natural gas prices since the Summer, we expect operational success from last year’s investment programme to be reflected in the reserves audit next month. The Company’s low-decline assets continue to outperform expectations and the estimated c.$13,500 per boe/d capital efficiency programme this year should support production growth weighted to 2H23, ahead of historically stronger winter pricing. Longer term, i3 remains committed to grow the return of capital to shareholders in line with the underlying profitability of the business, which currently equates to an annual dividend of 2.052p/share (10.7% yield).
Capricorn Energy PLC (LSE:CNE, OTC:CRNZF) 248p, Market Cap £782m: Strategic review by April
- Capricorn announced average FY22 production down 6% y/y to 34.2kb/d but including a 10% increase in liquids average production to ~14.5kb/d, which generate 80% of petroleum revenues.
- The Company reported $597m net cash at YE22, comprising $757m cash and $160m debt, with an additional $130m earn-out consideration on the disposal of the UK Catcher and Kraken interests expected in 1Q23.
- Earn-out consideration in respect of the Catcher and Kraken interests will also be due to Capricorn in relation to 2023-2025 production and oil prices, subject to minimum production and oil price thresholds being met.
- The Company plans to provide an update on the strategic review of the assets, cost base and future strategy of the business at its FY22 results in April, which should include the announcement of the cash returns policy.
Following the recent defeat of the proposed merger of Capricorn and NewMed Energy, the reconstituted Board has a limited window to recommend a route forward for shareholders. Those backing the transformation of the Board were promised that the new team would achieve greater value from this stand-alone small-cap Egyptian producer than was available from the merger preferred by the former management. We await the FY22 results with interest.
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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