Market Update: 17 April 2023
Mosman Oil and Gas Ltd (AIM:MSMN)* - G1 well responds to gas lift
United Oil & Gas PLC (AIM:UOG) - Maria sale extension
Block Energy PLC (AIM:BLOE) - Solid 1Q performance
Energy News
Brent Oil US$86.4/bbl vs US85.9/bbl last Friday
WTI Oil US$82.3/bbl vs US$82.0/bbl last Friday
Henry Hub Gas US$2.15/mmBtu vs US$2.04/mmBtu last Friday
UK NBP Futures 100p/therm vs 98p/therm last Friday
TTF Dutch Futures €41/MWh vs €41/MWh last Friday
- Crude prices edged higher over the weekend as the IEA warned that supply cuts by OPEC+ would hurt Western economies already experiencing inflationary pressures and that China would drive 2023 global demand growth.
- The US Baker Hughes rig count was down 3 units to 748 rigs last week (+55 y/y), with oil rigs down 2 to 584 and gas rigs down 1 to 157 units, though the Permian region still posted a gain of 3 units to 356 rigs.
Company News
Mosman Oil and Gas Ltd (AIM:MSMN)* 0.084p, Market Cap £5.8m: G1 well responds to gas lift
- Mosman announced that the Arco-Fee G-1 (G1) well on the onshore Texas Cinnabar project (75% WI) flowed oil following a successful workover to enable gas lift.
- The Company has completed a workover on the legacy G1 well and has been injecting gas from the new Cinnabar-1 development well, which has resulted in initial flow rates of circa 5b/d of oil.
- Mosman plans to optimise production from G1 with the addition of gas compression that is required to increase the gas injection pressure, which will be funded from existing cash reserves and the recent placing proceeds.
These initial flow rates are positive and provides the Company with a more capital efficient and timely return on its capital as it moves towards a full-scale development at Cinnabar. The Cinnabar development could be potentially transformational for Mosman, as it should be possible to drill several more wells at 40-acre spacing across the Company’s acreage to boost its group production and cash flow in the near-term.
*SP Angel acts as Nominated Advisor and Broker to Mosman Oil & Gas
United Oil & Gas PLC (AIM:UOG) 1.64p, Market Cap £11m: Maria sale extension
- United has extended the long stop date for completing the sale of the Maria discovery in offshore UK Block 15/18e (100% WI) to Quattro Energy Limited (private), which is for a maximum consideration of up to £5.7m.
- The two parties have agreed an extension of this long stop date to the 17th May 2023 to allow additional time for the conditions required for completion to be satisfied.
- The proposed consideration comprised an initial £2.45m cash payment, an additional £1m payment upon approval of an FDP (expected late 2023) and £2.25m in production bonuses.
This is hopefully just a small delay to completing the transaction, which reflects United's strategy to focus the new ventures programme on opportunities in the Greater Mediterranean and North Africa region. The Company had mixed results from the 2022 Egyptian drilling campaign, but the 2023 capex programme has started positively and targets lower risk development drilling and optimising production from existing wells through low-cost workovers. Nonetheless, the UK Maria sale proceeds are an important catalyst for stakeholders as the proceeds should allow United to pay down the debt and initiate a limited buyback programme. We expect shareholder focus to be on both value creation from the existing portfolio as well as on the Company’s ability to deliver M&A opportunities to support its growth strategy.
Block Energy PLC (AIM:BLOE) 1.71p, Market Cap £12m: Solid 1Q performance
- Block announced average 1Q23 production up 7% q/q to 400boe/d (74% oil) from the West Rustavi/Krtsanisi Field (100% WI), onshore Georgia.
- During the period, the Company generated $1.2m by selling 13.3kb of oil at an average price of $75/bbl and 37.3mmcf of gas at an average of $5.57/mcf, and held a further 12.5kb of oil in storage to be sold in April.
- Block secured a $2m senior loan facility and drew down $1.06m to accelerate the Project I development programme, which includes the recent successful drilling of well WR-B01Za.
- The Company now intends to drill the remaining side-tracks and new wells defined in the Krtsanisi anticline field development plan, which targets 19.5mb of internally estimated 2C contingent resources in Project I.
Following positive results from the Block’s first two development wells, focus now switches to the upcoming drilling of the KRT-45_ST development well as part of the Project I investment campaign that is funded from quick payback on the new wells and the new senior debt facility. The Company has made significant progress in the last 18M to drive Projects I (Middle Eocene development) and II (Patardzeuli full-field redevelopment) forward, as well as creating exposure to material exploration upside at no cost through the 50% farmout of non-core areas of Licence XIᴮ. We expect Block to continue to pursue a diverse drilling and workover programme aiming to generate steady production and revenue growth and to recycle this capital back into exploiting the resource potential on its portfolio of assets.
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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