Market Update: 17 May 2023
Egdon Resources PLC (AIM:EDR) - Recommended £26.6m sale
Energy News
Brent Oil US$74.7/bbl vs US$75.3/bbl yesterday
WTI Oil US$70.6/bbl vs US$71.2/bbl yesterday
Henry Hub Gas US$2.38/mmBtu vs US$2.37/mmBtu yesterday
UK NBP Futures 75p/therm vs 74p/therm yesterday
TTF Dutch Futures €32/MWh vs €32/MWh yesterday
- Crude oil prices edged lower after the API reported a 3.7mb build in US crude oil and fuel stocks (vs 1.3mb draw expected).
- European energy prices are unchanged with Gazprom reporting a stable supply of 41.2mcm/d via the Sudzha gas pumping station in Ukraine and French nuclear reactors’ operating levels reported at 61% of capacity.
- According to industry media, KUFPEC has authorised a sales process for its Norwegian assets that are expected to produce 19kboe/d in 2023 from interests in the Gina Krog, Sleipner West and Sleipner East fields.
Company News
Egdon Resources PLC (AIM:EDR) 4.2p, Market Cap £24m: Recommended £26.6m sale
- Egdon announced the terms of a recommended sale to Petrichor Partners (private) for 4.5p/sh in cash consideration, which is at a 96% premium to last night’s closing price and values the Company at £26.64m.
- Petrichor is part of the HEYCO Energy Group, which is ultimately controlled by George Yates, and has been a substantial shareholder in Egdon since 2016 with a current shareholding of ~44% of the Company’s shares.
- HEYCO Group commented that the public market continues to undervalue Egdon’s assets, including the Wressle development, and believes that the acquisition will provide a ready base for future growth.
- The proposed acquisition requires the support of 75% of the shares voted at the Court Meeting and at the General Meeting, which is expected to occur in 3Q23, as well as standard regulatory consents.
- Petrichor has received irrevocable undertakings from the Egdon Directors, Harbour Energy and Union Jack Oil, which together represent an aggregate 77.4m shares (c.14.23%), to vote in favour of the deal.
Egdon noted that there is a general lack of investor support in UK public markets for small cap natural resource companies evidenced by the recent share price performance in the past two years that did not reflect the improving operational outlook, particularly with the strong production from the Wressle oil field asset (30% WI). The recommended deal provides investors with a cash exit near the top of the stock’s three-year high and despite the increase in shareholder activism seen in the last 12M across the E&P sector, the support of nearly 60% of the shareholder base is likely to ease the deal’s passage. More importantly, as with the proposed Hurricane Energy acquisition by Prax, this deal would again signify private equity seeing greater appeal in the risk/reward value proposition than the public markets. Egdon has an active programme of development activity on the Wressle field to boost volumes, with exploration and appraisal drilling activity at Biscathorpe and North Kelsey anticipated in the next 12M. The transaction clearly has positive read-through to Egdon’s peers, including Union Jack Oil* (UJO LN), and we expect to see increasing M&A activity in the oil and gas sector driven by the recent stabilisation of commodity prices and the increasingly robust balance sheets exhibited by a range of mid-caps to Majors.
*SP Angel acts as Nominated Advisor and Broker to Union Jack Oil
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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