Market Update: 18 May 2023
United Oil & Gas PLC (AIM:UOG) - Maria sale delayed
Invictus Energy Ltd (ASX:IVZ) - Operations on-track
Energean PLC (LSE:ENOG) - FY23 production guidance lowered
Energy News
Brent Oil US$76.6/bbl vs US$74.7/bbl yesterday
WTI Oil US$72.5/bbl vs US$70.6/bbl yesterday
Henry Hub Gas US$2.37/mmBtu vs US$2.38/mmBtu yesterday
UK NBP Futures 72p/therm vs 75p/therm yesterday
TTF Dutch Futures €31/MWh vs €32/MWh yesterday
- Crude oil prices moved higher yesterday in line with the general markets as hopes were raised for a deal to raise the US Government’s debt ceiling.
- The EIA reported a 5mb US crude inventory build last week, offset slightly by a 1.4mb gasoline draw and little change to distillate stocks, with refinery utilisation increasing by 1% to 92%.
- Separately, the EIA announced a revision to its estimate for the number of drilled wells per rig in the US due to higher productivity, and now uses a higher rig efficiency of slightly more than 1.3 wells per rig-month (from 1.2).
- European energy prices were stable as EU natural gas storage levels rose 3.2% w/w to 64.3% full (vs 45.5% 5-year average), with ~5TWh builds in France, Germany and Italy contributing to aggregate storage of 726TWh.
Company News
United Oil & Gas PLC (AIM:UOG) 1.4p, Market Cap £9.2m: Maria sale delayed
- 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 31st July 2023 to allow Quattro time to complete a new financing process, and has agreed that a further extension may be required.
- 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.
- The Company commented that the sale to Quattro on the current agreed terms remains the best option for United to realise value for its shareholders. A further update will be provided to the market in due course.
Despite this disappointing update, after engagement with Quattro and its new broker in Canada, United has agreed to grant a further extension of the long stop date and has greater confidence in the new financing process. 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 has started 2023 positively and the Egyptian investment campaign 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.
Invictus Energy Ltd (ASX:IVZ) A$0.12, Market Cap A$115m: Operations on-track
- Invictus has awarded a contract to Polaris to acquire 400km of infill 2D seismic survey as part of the Phase 2 exploration campaign on licence SG 4571 (80% WI) in Zimbabwe’s onshore Cabora Bassa Basin.
- The Company intends to use the 2D seismic data to mature a number of already identified leads mapped within the Cabora Bassa acreage to drillable prospects, providing additional prospective resource upside.
- Invictus continues to advance preparations to drill the Mukuyu-2 appraisal well in 3Q23, which will look to build on the success of the Mukuyu-1 well and confirm a commercial gas-condensate discovery.
Invictus continues to work towards appraisal drilling on the large 20Tcf Mukuyu structure to confirm a gas condensate discovery, which is expected to spud in August and take 6-8 weeks to drill, with testing to follow in 4Q23 on success. The Mukuyu-2 well will be specifically designed to target the multiple gas condensate bearing intervals detected drilling the Mukuyu-1/ST1 well in the Upper Angwa and Pebbly Arkose formations, as well as testing the deeper Lower Angwa target. Following last year’s run-up in the share price on very high expectations, the market has better adjusted to the reality of early-stage wildcat exploration in frontier areas, where the Company has only drilled the first well in one of the last untested large frontier rift basins in onshore Africa.
Energean PLC (LSE:ENOG) 1,150p, Market Cap £2.05bn: FY23 production guidance lowered
- Energean reported average 1Q23 production of 94.4kboe/d (75% gas) generating $289m revenues and $162m EBITDAX, with production in the four-months to 30 April 2023 averaging 100kboe/d (82% gas).
- The Company reduced FY23 production guidance to 125-140kboe/d (from 131-158kboe/d) due primarily to a 10% revision to this year’s gas sales forecast in Israel and higher decline rates from the NEA#6 well in Egypt.
- Ramp-up on the offshore Israel Karish FPSO (100% WI) is ongoing, with North Karish still expected onstream by YE23 together with a final investment decision on the Olympus Area via tie-back to Energean Power FPSO.
- Energean commented that the Company remains on track to deliver the mid-term targets of 200kboe/d, $2.5bn revenues, $1.75bn EBITDAX and <1.5x leverage in 2H24, as well as $1bn in cumulative dividends by YE25.
Missed production targets are never taken lightly in the market (-7% in early trading), even during a ramp-up phase with medium term guidance remaining undiminished. Nonetheless, this is a solid update from the Company that is targeting further de-risking from the ramp-up of volumes on the Karish field and delivery of key development projects this year, as well as potential upside from significant exploration drilling. The equity markets continue to watch for growth in the $50m/qtr dividend (~7.8% annualised yield) that is guided to double following the delivery of the Company’s mid-term production target of 200kboe/d in 2024.
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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