Market Update: 13 April 2023
Rex International* (SGX: 5WH) - 1Q production up q/q
Tlou Energy Ltd (AIM:TLOU, ASX:TOU, BSE:TLOU) - Lesedi-6 drilling ahead
Synergia Energy Ltd (AIM:SYN) - Pump delivery in 2Q
Jadestone Energy PLC (AIM:JSE) - Production guidance disappoints
Serica Energy PLC (AIM:SQZ) - Strong start to the year
Energy News
Brent Oil US$87.2/bbl vs US85.5/bbl yesterday
WTI Oil US$83.2/bbl vs US$81.4/bbl yesterday
Henry Hub Gas US$2.08/mmBtu vs US$2.19/mmBtu yesterday
UK NBP Futures 100p/therm vs 104p/therm yesterday
TTF Dutch Futures €42/MWh vs €44/MWh yesterday
- Crude oil prices edged higher with the EIA reporting a 0.5mb US crude inventory build last week, together with 0.4mb gasoline and 0.7mb distillate stock draws, with refinery utilisation falling by 0.3% to 89.3%.
- The EIA’s Short-Term Energy Outlook outlined how mild winter temperatures and reduced natural gas consumption in the residential and commercial sectors drove down US gas demand in January and February.
Company News
Rex International* (SGX: 5WH) SGD0.19, Market Cap SGD247m: 1Q production up q/q
- Rex reported average March production of 5.1kb/d gross on the Yumna Field in Block 50 offshore Oman, as reported by Masirah Oil (91.81% subsidiary).
- The Company also reported average March production net to Lime Petroleum (91.65% subsidiary) of 2.19kboe/d on the Brage field (33.84% WI) and 1.25kb/d on the Yme field (10% WI), offshore Norway.
- Yme production volumes were impacted following an unplanned week-long shut down, with production resumed on five of eight producing wells and the operator still beaning up the wells to reach their full potential.
Sentiment on the stock has struggled in the last 12M due to a drop off in oil prices and several planned and unplanned stoppages that impacted the Company’s production volumes. However, 1Q23 volumes were up 34% q/q to 8.77kboe/d net to Rex’s subsidiaries, as the Company looks to grow net production to the c.10kboe/d level by mid-2023. The next phase of Rex’s evolution will be deciding how to recycle the positive cash flow generated by the asset base into new opportunities as it targets a 20kboe/d production level and also paying a regular quarterly cash dividend to investors.
*SP Angel acts as Corporate Broker to Rex International
Tlou Energy Ltd (AIM:TLOU, ASX:TOU, BSE:TLOU) 2.2p, Market Cap £18m: Lesedi 6 drilling ahead
- Tlou announced that the Lesedi 6 well has commenced operations with a work programme that includes the drilling of a vertical production well and two lateral wells to provide gas to be converted to electricity.
- The Company plans to improve the sub-surface placement of the Lesedi 6 wellbore in the reservoir, such that dewatering and gas flow will be enhanced from intercepting more net pay in the coal seam interval.
- The gas will be converted to electricity for the existing 10MW Power Purchase Agreement with Botswana Power Corporation (BPC) once the transmission line, substations and associated electrical infrastructure are in place.
Tlou has reviewed the Lesedi 3 and 4 test well results and will now apply these learnings in the sub-surface placement of the Lesedi 6 development well and, following a 3M dewatering process, should build towards a 0.5mmcf/d gas flow rate that should be sufficient to power 2MW of generation capacity. The Company is working hard to bring on the Lesedi 10MW CBM gas-to-power project into production as quickly as possible and, subject to available funding, the Company plans to rapidly expand to 25MW and beyond. We expect interest on the project timeline to remain high, as well as updates on the gas production rates from dewatering wells and a funding solution to complete the project.
Synergia Energy Ltd (AIM:SYN) 0.093p, Market Cap £7.8m: Pump delivery in 2Q
- Synergia announced that the jet pump artificial lift equipment for the C-77H production well on the onshore India Cambay PSC (100% WI) is on schedule for delivery in late May / early June 2023.
- The jet pump equipment will have capacity to lift the fluids from the two currently producing re-frac zones and also the fluids associated with the original four fracked zones that are currently isolated with a bridge plug.
- The Company anticipates that current production of 0.15mmcf/d from these two zones will be enhanced by the jet pump installation and augmented by re-connecting the other four zones in the C-77H well.
- Synergia commented that farm out discussions are ongoing and the Company does not anticipate that the C-77H artificial lift implementation will have an impact on the farm out process being concluded.
The share price has weakened recently due to uncertainty regarding the delay to remediation plans to retrieve the produced condensate from the well bore using artificial lift that is restricting gas production. 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. Interested companies are currently finalising their due diligence regarding the farm-out of and detailed technical and commercial discussions are ongoing. The Company remains optimistic of completing the process in 2023 and commencing a full field development with the drilling of two new horizontal production wells (C-78H and C-79H).
Jadestone Energy PLC (AIM:JSE) 66p, Market Cap £295m: Production guidance disappoints
- Jadestone announced 1Q23 average net production of ~10kboe/d and guided average production of 13.5-17kboe/d for the remaining 9M of 2023 (85% oil), reflecting the resumption of operations at the offshore Australia Montara field FPSO (100% WI) and the inclusion of gas production from the Sinphuhorm acquisition.
- The Company expects that the Malaysia infill well campaign in 2H23 plus the addition of Akatara production commencing during 1H24 should add a further 5kboe/d to Group volumes.
- Jadestone commented that it plans to continue the growth strategy via an active pipeline of M&A opportunities.
While the news flow from the Montara FPSO shutdown and refurbish dominated sentiment in recent months, with production resumed we expect investor focus to transfer to operational and M&A catalysts. Near-term organic growth from the Akatara project remains on track plus an infill drilling programme in Malaysia, but it is the M&A opportunity set in Southeast Asia that holds the most potential for Jadestone to make a significant step-change to the investment case.
Serica Energy PLC (AIM:SQZ) 247p, Market Cap £941m: Strong start to the year
- Serica reported FY22 average production up 18% y/y to 26.2kboe/d generating £812m revenues and £560m operating cash flow to end the year with £433m of net cash and a further £24m in cash hedge security.
- The Company recommended a final FY22 dividend of 14p/sh, which would bring the FY22 total to 22p/sh (~9% annualised yield), and commented that management intends to increase the dividend going forwards.
- Serica announced average 1Q23 net production of 46.8kboe/d, which peaked at 60kboe/d from the introduction of the Gannet GE-04 well, and reiterated average FY23 production guidance of 40-47kboe/d (53% gas).
Serica highlighted on the call that the key rationale for the Tailwind deal was portfolio diversification, and expects the merger to be immediately accretive to reserves, production, cash flow and earnings per share. The deal also enhances the Company’s financial strength from strong ongoing cashflows that should support further M&A, organic investments and returns to shareholders. As the year progresses, stakeholders should also look for greater clarity on the operational and financial synergies of the combination, as well as the potential to now invest in larger and more long-term development projects to make use of EPL offsets for new investments.
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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