Market Update: 2 March 2023
Rex International Holding - Maiden dividend announced
Aminex PLC (LSE:AEX) - First gas and revenues advanced to 4Q
Angus Energy PLC (AIM:ANGS) - Positive indications from sidetrack
Touchstone Exploration Inc (AIM:TXP, TSX:TXP, OTC:PBEGF) - Royston finds thick sands
LON:SGN - Name change from Ncondezi
Pancontinental Oil & Gas NL (ASX:PCL) & Woodside Energy Group Ltd (ASX:WDS, LSE:WDS, OTC:WOPEF) - M&A in Namibian Orange Basin
Energy News
Brent Oil US$84.6/bbl vs US82.8/bbl yesterday
WTI Oil US$78.1/bbl vs US$76.3/bbl yesterday
Henry Hub Gas US$2.74/mmBtu vs US$2.74/mmBtu yesterday
UK NBP Futures 118p/therm vs 118p/therm yesterday
TTF Dutch Futures €47/MWh vs €48/MWh yesterday
- Crude oil prices edged higher after the EIA reported a 1.2mb US crude inventory build last week, just ahead of ~0.5mb consensus, and a total stock draw of 3mb with refinery utilisation essentially unchanged at 85.8%.
- Natural gas prices were flat with German natural gas storage reportedly falling w/w from 71% to 69.5% full (vs 43.8% 5-year average) and the EU down w/w from 63% to 61.1% full (vs 39.6% 5-year average).
- A late-winter cold snap boosted LNG flows into northwest Europe’s gas networks this week to the highest level since December, with NW Europe LNG futures on Wednesday settled at $13.09/mmBtu.
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Company News
Rex International Holding - S$0.172 Market Cap S$224m: Maiden dividend announced
- Rex reported FY22 revenues up 7.5% y/y to US$170m, impacted by planned and unplanned stoppages in 2022, which generated $62m adj EBITDA and doubled its cash position y/y to US$106m at YE22.
- The Company’s revenues were boosted by the inclusion of oil liftings from the Brage Field in Norway and an increase in oil prices on the Yumna Field in Oman, partially offset by lower volumes from Yumna.
- Rex reported a US$0.4m FY22 profit after tax, which includes impairment of exploration and evaluation assets resulting from the relinquishment of three assets in Norway and the operational issues in Oman.
- The Company proposed an ordinary dividend of S$0.005/sh payable in May 2023 (2.9% yield), with the possibility for an additional interim dividend later in 2H23 subject to the 1H23 financial performance.
While the FY22 results were indeed impacted, the operational issues in 2022 have been resolved and with the addition of the Yumna-4 producer well in January 2023, this 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 dividend and sets a near-term production target of 20kboe/d.
*SP Angel acts as Corporate Broker to Rex International Holding
Aminex PLC (LSE:AEX) 1.06p, Market Cap £45m: First gas and revenues advanced to 4Q
- Aminex announced plans to accelerate gas production from the onshore Tanzania Ntorya gas field (25% WI) and is now targeting October 2023 for production of first gas, versus previous guidance of early 2024.
- The Company has scheduled a two-week well-testing programme on the Ntorya-2 well for late March to provide additional information required for the design of the processing facilities and the export pipeline.
- Aminex also announced a further delay to the spudding of the Chikumbi-1 well, which awaits 3D seismic processing and interpretation in mid-March to optimise the target location at the Cretaceous reservoir level.
- Advanced negotiations regarding a gas sales agreement (GSA) for the Ntorya Gas Field are ongoing with the Tanzania Petroleum Development Corporation. It is expected that the GSA will be agreed and finalised shortly.
Despite announcing a delay on drilling the Chikumbi-1 well from March to “later this year”, and the associated delay to the subsequent well-workover of the Ntorya-1 well, the Company has more importantly halved the time to first commercial gas production from the Ntorya field. Aminex, with a 25% non-operated interest that is carried up to a maximum $140m gross capex ($35m net), is steadily moving towards first cash flow by the end of this year and we expect further de-risking events on the Ntorya gas development project as the Company targets first gas in October.
Angus Energy PLC (AIM:ANGS) 1.55p, Market Cap £54m: Positive indications from sidetrack
- Angus announced that drilling of the SF7v sidetrack development well at the Saltfleetby gas field (100% WI) has concluded and that completion operations will commence later this week in the Westphalian reservoir.
- The Company is confident from the logs and gas shows in the reservoir section that the well will be a successful producer, with flow testing planned for late March and gas export expected from 1st April.
- The cost overrun on drilling has resulted in a short-term funding need for the Company, which plans to enter into a 6-month £3m junior debt facility with Aleph Commodities on less dilutive terms than an equity raise.
- The Company announced that Richard Herbert is to be appointed CEO with full control of day to day operations, with George Lucan to be appointed Executive Chairman with a focus on strategy and stakeholder relations.
Following a two-month delay, operations on the SF7V sidetrack well and compressor are progressing and expected to be commissioned by the end of this month, which is forecast to double the average 4Q22 production of 5.5mmcf/d from the Saltfleetby field. After a transformational 2022 for the Company, development operations have been funded and management remains on-track to deliver sales gas volume growth in 2023.
Touchstone Exploration Inc (AIM:TXP, TSX:TXP, OTC:PBEGF) 70.5p, Market Cap £164m: Royston finds thick sands
- Touchstone announced substantial Herrera sands were penetrated in the Royston-1X sidetrack well located on the onshore Ortoire block (80% WI) in the Republic of Trinidad and Tobago.
- The Company said the well encountered a total Herrera turbidite thickness of 1,664ft with an estimated 765ft of net sand penetrated, which exceeds pre-drill expectations.
- Mud logging and wireline logs indicate hydrocarbon accumulations in the targeted Herrera sections and Touchstone expects to commence a comprehensive testing programme in April.
Following stuck pipe in the original discovery well, initial indications suggest the Royston sidetrack will confirm the commerciality of the previously tested zones and the deeper potential. Touchstone is looking to high grade its asset portfolio, where the Company has significant running room to target the Herrera turbidite fairway around its core Ortoire licence. First gas from the Coho development in 2H22 has transformed the Company into a sustainable cash flow generating production-based E&P that can now grow production volumes through a combination of additional drilling and well optimisation, as well as take its learnings from Coho in the development of the larger Cascadura project.
LON:SGN 0.8p, Market Cap £3.3m: Name change from Ncondezi
- Solgenics confirmed the name change from Ncondezi Energy Limited (NCCL LN) to Solgenics Limited, which will also trade under the new ticker "SGN" from 8am (GMT) this morning.
- The name change Solgenics reflects the Company's focus on renewable energy development and the new website www.solgenics.com will go live on or around 6th March 2023
- The Company commented that offtake discussions for the flagship 300MW Tete Solar Project in northern Mozambique are progressing and further updates are expected later in the month.
Ncondezi is repositioning as a green and sustainable energy developer and while the solar PV project is still in its early phases, management has moved quickly to fast track the proposed development and has an achievable target to deliver power on the grid in 2024, subject to funding and offtake agreements. We look forward to the results of discussions on a solar offtake agreement and an update on the transmission connection solutions targeted for end 1Q23.
Pancontinental Oil & Gas NL (ASX:PCL) A$0.013, Market Cap A$98m: M&A in Namibian Orange Basin
- Pancontinental has granted Woodside Energy Group Ltd (ASX:WDS, LSE:WDS, OTC:WOPEF) an exclusive option to acquire a 56% equity interest in the deep-water PEL87 exploration licence in the Orange Basin, offshore Namibia.
- PEL87, covering a large area of 10,970 sq km, hosts the very large Saturn turbidite complex and is on-trend with the recent major oil discoveries made by Total and Shell, and adjacent to Chevron and Galp acreage.
- Pancontinental has also paid $1.5m to enter into an option agreement with Custos Investments (private) to acquire an additional 1% interest to result in a 20% WI in PEL87 by paying Custos a further $1m.
- As consideration, Woodside will fully fund an estimated $35m 3D seismic survey and pay Pancontinental $1.5m in cash. If it exercises the option, Woodside will drill the first exploration well, carrying Pancontinental’s 20% interest, and pay the company a further $2.5m in cash.
There are unprecedented levels of interest for exploration assets in the Orange Basin, offshore Namibia and South Africa, due to the considerable exploration success and renewed drilling activity in the region. Exploration is moving ahead quickly, with 3D seismic acquisition planned to start later in March and results by mid-2023, which could lead to the exercise of the option around YE23 and subsequent drilling as early as next year. The deal with Woodside is a very good one for Pancontinental, retaining its strategic optionality (20%) by carrying the Company’s costs through a staged exploration programme with further options built-in to protect it from future cash calls. Surprisingly, Woodside’s CEO has previously eschewed the need for the Company to return to frontier exploration and made no mention of this tilt in its strategy during the recent FY22 results call. However, 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. Over the results season, we have heard about increasing capex budgets for drilling activity and M&A from the Majors, mid-caps and independents, which are increasingly looking to access new large-scale resource bases that are only available in frontier areas like the Orange Basin. We think the Exploration side of the E&P equation will attract much more attention in 2023 as Production companies look to differentiate from other cash-recycling E&P businesses by deploying excess revenues into new opportunities that provide growth potential to their shareholder cash returns in the medium term.
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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