Market Update: 24 May 2023
ATOME Energy PLC (AIM:ATOM)* - Upscales equity raise
Enquest PLC (AIM:ENQ) - Strong operational update
Hibiscus Petroleum Bhd (OTC:HIPEF) - Record production levels
Energy News
Brent Oil US$77.9/bbl vs US$75.9/bbl yesterday
WTI Oil US$74.3/bbl vs US$72.0/bbl yesterday
Henry Hub Gas US$2.34/mmBtu vs US$2.40/mmBtu yesterday
UK NBP Futures 66p/therm vs 66p/therm yesterday
TTF Dutch Futures €29/MWh vs €29/MWh yesterday
- Crude oil prices jumped higher yesterday after a warning from the Saudi Energy Minister that short-sellers “will be ouching” again and the API reported a 6.8mb draw in US crude oil and fuel stocks (vs 0.5mb build expected).
- European energy prices were flat as French nuclear reactor operating levels were reported as decreasing from 62% yesterday to 61% of capacity from 35 available reactors out of 56 units.
- Gazprom announced a 40% y/y fall in net profit for 2022 due to Russian tax hikes and annual gas export volumes almost halving to 101bcm, causing the Company to scrap plans for a full-year final dividend.
- Equinor announced that during a capacity test at the Johan Sverdrup field, production levels reached a record-high of 755kb/d, up from the 720kb/d plateau estimated pre-development.
Company News
ATOME Energy PLC (AIM:ATOM)* 101p, Mkt Cap £36m: Upscales equity raise
- ATOME announced that it has expanded the previously announced £2.4m strategic subscription at 95p/sh by Baker Hughes to additional approved investors to raise gross proceeds of £4.1m.
- The Company previously announced that the proceeds of the subscription would be used for general working capital, which we expect to include accelerating the deployment of its innovative business model and know-how into other geographies.
- Investors can register here for a management presentation on Friday 26th May 2023 at 1pm (GMT).
*SP Angel acts as Corporate Broker to ATOME Energy
Enquest PLC (AIM:ENQ) 16.5p, Market Cap £312m: Strong operational update
- EnQuest reported 47.7kboe/d net production in the four months to end-April, which is above the top end of the Company’s 42-46kboe/d guidance range driven by strong uptime across the portfolio and ahead of planned maintenance shutdowns at Kraken, Magnus and GKA in 3Q23.
- EnQuest commented that in response to changes in the UK Energy Profits Levy, the Company is optimising capital allocation by prioritising organic investments with quick pay backs while remaining focused on deleveraging and pursuing accretive M&A opportunities.
- A total of eight wells have been plugged and abandoned at Heather and Thistle during 4M23, with the decommissioning team targeting a total of 23 wells to be completed by year end.
A positive update from EnQuest, which is still adjusting to the changes in the EPL windfall tax last year that have significantly changed the investment landscape. Most notably, the levy has reduced the borrowing base for asset reserve based lending (RBL) facilities, which has been the leading funding component in asset transactions for several years to transfer ownership of under-capitalised non-core assets belonging to the Majors into the portfolios of independent E&Ps focused on reinvesting in the basin and extending the asset life of these assets. EnQuest expects the new investment landscape will support its production growth ambitions by pursuing accretive M&A transactions that optimise the associated tax efficiencies from over $2bn of corporate tax losses, which we think provides further evidence of cash generative companies looking to redeploy an increasing portion of their excess cash flows into new opportunities. Management expects to announce the 1H23 results in September.
Hibiscus Petroleum Bhd (OTC:HIPEF) RM0.93, Market Cap RM1.9bn: Record production levels
- Hibiscus reported average 1Q23 net production up 6.6% q/q to 21.2kboe/d generating RM523 revenues, RM292m EBITDA and 3.55 sen/sh net income for the financial quarter ended 31 March 2023 (3Q of FY23).
- The Company highlighted its technical capabilities with the drilling and completion of the longest well in Malaysia, the BOC-29ST1, that TD’d at 7km and is currently producing 3kb/d from the Bunga Orkid field.
- The Group declared an interim dividend of 0.75 sen/sh and continues to target a minimum total dividend per share of 2.5 sen for the financial year ending 30 June 2023 (1.5 sen declared to date).
A positive set of results from Hibiscus, which will be glad to see a continued positive response to production and uptime following the repairs carried out during last year’s annual maintenance shutdowns in Malaysia and the UK. The Company remains on-track to deliver c.19.7kboe/d average FY23 net production, which should support the planned dividend that has an implied 2.7% FY23 target yield to reward shareholders and provide a base for future cash returns.
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
SP Angel
Prince Frederick House
35-39 Maddox Street London
W1S 2PP
+SP Angel employees may have previously held, or currently hold, shares in the companies mentioned in this note.
Sources of commodity prices
Oil Brent - ICE
Natural Gas - NYMEX
Disclaimer Non-Independent Research
This note has been issued by SP Angel Corporate Finance LLP ("SP Angel") in order to promote its investment services and is a marketing communication for the purposes of the European Markets in Financial Instruments Directive (MiFID) and FCA's Rules. It has not been prepared in accordance with the legal requirements designed to promote the independence or objectivity of investment research and is not subject to any prohibition on dealing ahead of its dissemination.
SP Angel considers this note to be an acceptable minor non-monetary benefit as defined by the FCA which may be received without charge. In summary, this is because the content is either considered to be commissioned by SP Angel's clients as part our advisory services to them or is short-term market commentary. Commissioned research may from time to time include thematic and macro pieces.
For further information on this and other important disclosures please the Legal and Regulatory Notices section of our website Legal and Regulatory Notices
While prepared in good faith and based upon sources believed to be reliable SP Angel does not make any guarantee, representation or warranty, (either express or implied), as to the factual accuracy, completeness, or sufficiency of information contained herein.
The value of investments referenced herein may go up or down and past performance is not necessarily a guide to future performance. Where investment is made in currencies other than the base currency of the investment, movements in exchange rates will have an effect on the value, either favourable or unfavourable. Securities issued in emerging markets are typically subject to greater volatility and risk of loss.
The investments discussed in this note may not be suitable for all investors and the note does not take into account the investment objectives and policies, financial position or portfolio composition of any recipient. Investors must make their own investment decisions based upon their own financial objectives, resources and appetite for risk.
This note is confidential and is being supplied to you solely for your information. It may not be reproduced, redistributed or passed on, directly or indirectly, to any other person or published in whole or in part, for any purpose. If this note has been sent to you by a party other than SPA the original contents may have been altered or comments may have been added. SP Angel is not responsible for any such amendments.
Neither the information nor the opinions expressed herein constitute, or are to be construed as, an offer or invitation or other solicitation or recommendation to buy or sell investments. Opinions and estimates included in this note are subject to change without notice. This information is for the sole use of Eligible Counterparties and Professional Customers and is not intended for Retail Clients, as defined by the rules of the Financial Conduct Authority ("FCA").
Publication of this note does not imply future production of notes covering the same issuer(s) or subject matter.
SP Angel, its partners, officers and or employees may own or have positions in any investment(s) mentioned herein or related thereto and may, from time to time add to, or dispose of, any such investment(s).
SPA has put in place a number of measures to avoid or manage conflicts of interest with regard to the preparation and distribution of research. These include (i) physical, virtual and procedural information barriers (ii) a prohibition on personal account dealing by analysts and (iii) measures to ensure that recipients and persons wishing to access the research receive/are able to access the research at the same time.
SP Angel Corporate Finance LLP is a company registered in England and Wales with company number OC317049 and whose registered office address is Prince Frederick House, 35-39 Maddox Street, London W1S 2PP. SP Angel Corporate Finance LLP is authorised and regulated by the Financial Conduct Authority whose address is 12 Endeavour Square, London E20 1JN.
Recommendations are based on a 12-month time horizon as follows:
Buy - Expected return >15%
Hold - Expected return range -15% to +15%
Sell - Expected return < 15%