Market Update: 12 April 2023
Rex International* (SGX: 5WH) - NAV Update - Production growth outlook for 2023
Trinity Exploration & Production PLC (AIM:TRIN) - Fire at Trintes Bravo platform
Gran Tierra Energy Inc (TSX:GTE, LSE:GTE, NYSE-A:GTE, ETR:G1P) - Licence extension
Energy News
Brent Oil US$85.5/bbl vs US84.7/bbl yesterday
WTI Oil US$81.4/bbl vs US$80.3/bbl yesterday
Henry Hub Gas US$2.19/mmBtu vs US$2.16/mmBtu yesterday
UK NBP Futures 104p/therm vs 102p/therm yesterday
TTF Dutch Futures €44/MWh vs €43/MWh yesterday
- Crude oil prices were broadly unchanged with the API reporting a weekly 0.4mb build in US crude oil stocks (vs 1.3mb draw expected).
- European gas prices edged higher as French nuclear reactors’ operating levels were reported as falling from 68% to 59% of capacity w/w from 35 available reactors, down from 39 last week.
- CNOOC announced that it has successfully built its first floating wind turbine that will be used via submarine cables to power a nearby offshore oil and gas cluster located in the South China Sea.
Company News
Rex International* (SGX: 5WH) SGD0.185, Market Cap SGD241m: NAV Update - Production growth outlook for 2023
Valuation: SGD0.32/sh, BUY
- Rex International Holding Ltd (“Rex”) is an oil and gas company headquartered in Singapore. The Company's main activity is in offshore oil exploration and production on assets located in Oman, Norway, and Malaysia.
- The Company has quickly grown its portfolio to include three production assets that are generating significant unhedged free cash flows and has a medium-term production target of 20kboe/d.
- In our view, Rex needs to restore investor confidence in the production base this year as it focuses on paying a regular dividend and boosting production volumes.
- Our 12-month target price of SGD0.32/sh is based solely on the value of the Core NAV assets and provides 73% of potential upside to investors.
*SP Angel acts as Corporate Broker to Rex International
Trinity Exploration & Production PLC (AIM:TRIN) 84.7p, Market Cap £33m: Fire at Trintes Bravo platform
- Trinity announced that on Monday 10th April a generator-related fire occurred on the Company’s Bravo Platform in the Trintes Field (100% WI), offshore east coast Trinidad.
- Production from the Bravo platform was halted, the fire was quickly extinguished, and the platform evacuated. As a precautionary measure, production from the other Trintes platforms, Delta and Alpha, was also shut down.
- No hydrocarbons were released into the environment as a result of this incident and the Alpha and Delta platforms were restarted overnight and are expected to attain pre-shut-in production levels in the coming days.
- Damage on the Bravo platform, which accounts for c.350b/d of total Trintes field production of ~1kb/d, is limited to the generator with the platform structure and other equipment in good order.
- The Company estimates replacement of the generator and associated repairs on the Bravo platform will be completed within three to four days and plans to initiate production restart following regulatory approval.
Fortunately, Trinity is able to report that there were no serious injuries, hydrocarbon releases or significant damage from this regrettable incident. We expect the Company to provide further updates ahead of the FY22 results and FY23 guidance that are expected in early 2Q23. Investor focus remains on the current paused onshore drilling campaign, which includes a high angle and also a deeper well that are expected to deliver a meaningful step-change in production and reserves on success. In our view, Trinity’s intention to implement shareholder cash returns once its current drilling programme has completed may suffer some creep into the latter half of the year, but the Board has already bought back ~0.7m shares in its current share buyback programme and we expect a strategic update at the upcoming FY22 results presentation.
Gran Tierra Energy Inc (TSX:GTE, LSE:GTE, NYSE-A:GTE, ETR:G1P) C$1.21, Market Cap C$417m: Licence extension
- Gran Tierra announced an agreement with Ecopetrol (NYSE:EC) by which the parties renegotiated the terms and the duration of the contract for the Suroriente Block (52% WI), which was scheduled to end in mid-2024.
- Since becoming the operator in 1Q19, the Company’s enhanced oil recovery programme has increased gross production by 32% from an average of 6.2kb/d in February 2019 to an average of 8.2kb/d in 1Q23.
- Gran Tierra has now extended the licence period by 20 years and will continue as the operator of Suroriente, with a planned $123m capex programme over three years that will be funded from internal cash flow.
The agreement further strengthens and consolidates Gran Tierra's position as a premier operator and the top contracted area holder in the Colombian Putumayo Basin. The additional term of the contract now allows long-term investment in infrastructure and work programmes to enhance oil recovery efficiency in existing fields, and appraisal drilling to potentially prolong the life of the fields. 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. The Company’s ongoing capital allocations policy targets 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.
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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