Market Update: 8 June 2023
Hurricane Energy PLC (LSE:HUR) suspended: Scheme of arrangement becomes effective
Savannah Energy (NYSE: OVV) suspended: Solid FY22 results
Aker BP (OTCMKTS: AKRBF) - Maintains superior credit rating
3R Petroleum (BVMF: RRRP3) - Closes Potiguar acquisition
Energy News
Brent Oil US$77.4/bbl vs US$76.4/bbl yesterday
WTI Oil US$73.0/bbl vs US$71.8/bbl yesterday
Henry Hub Gas US$2.34/mmBtu vs US$2.27/mmBtu yesterday
UK NBP Futures 68p/therm vs 59p/therm yesterday
TTF Dutch Futures €29/MWh vs €25/MWh yesterday
- Crude oil prices moved higher as the EIA reported a 0.5mb US crude draw and refinery utilisation surging 2.7% to 95.8%, the highest level since August 2019, resulting in a near 11mb build in crude oil product stocks.
- European energy prices edged higher despite EU natural gas storage levels rising 1.9% w/w to 70.5% full (vs 53.5% 5-year average), with strong builds in Germany and Italy contributing to aggregate storage of 795TWh.
Company News
Hurricane Energy PLC (LSE:HUR) suspended: Scheme of arrangement becomes effective
- Hurricane shares have been suspended from Aim ahead of delisting, with registered shareholders entitled to receive 6.02p/sh and a deferred consideration unit within 14 days.
- The deferred consideration unit entitles the holder to receive 17.5% of all future net revenues earned by Hurricane until 31 December 2026, capped at a total of 6.48p/sh.
- Prax previously commented that it is trying to acquire other producing oil and gas assets, noting that the M&A market has a limited credible buyer universe and numerous large companies looking to exit their UK positions.
Hurricane Energy represents one man’s determination to prove that fractured basement rocks in the UK West of Shetlands contained significant oil resources which could be produced at commercial rates. Despite a short, but chequered, history in the UK Aim market, the Company was ultimately unable to secure a larger farm-in partner to fund further exploration and exploitation of its initial success and ended up dependent on the production volumes and revenues from just a single well (still producing in excess of 7kb/d). The Company commenced a formal sales process in 4Q22, as NSTA flaring concerns resulted in it being unable to invest in the Lancaster field, and the Board received multiple proposals from credible counterparties. The Prax deal provides investors with upfront cash in excess of the pledged $70m dividend and a share of ongoing cashflows from the Lancaster field, as well as from any acquired assets should Prax leverage Hurricane’s accumulated tax losses in pursuit of its upstream growth strategy in the medium term. Prax has hired a management team led by Alessandro Agostini, Oliver Dunn and Iain McKendrick, which has a considerable track record in executing upstream deals and considers Hurricane as the first step and the platform to build an upstream division through the acquisition of further, complementary UK continental shelf upstream assets.
Savannah Energy (NYSE: OVV) suspended: Solid FY22 results
- Savannah reported average FY22 gross production up 20% y/y to 26.8kboe/d (90% gas) from its Nigerian operations generating $290m revenues and $222m adjusted EBITDA to end YE22 with $405m net debt.
- The Company is currently focussed on closing the proposed $1.25bn acquisition of PETRONAS’ assets in South Sudan in 3Q23 and at least one further hydrocarbon asset deal.
- Savannah plans to conduct a flow testing programme in 4Q23 on the 35mb R3 East field to provide data to optimise the FDP development plan in Niger, ahead of expected first commercial oil production in 2024.
- The Company is targeting project sanction in 2024 on 525MW of hydroelectric, solar photovoltaic and wind projects in Cameroon and Niger, and aims to grow the pipeline to 1GW+ of renewable energy projects by YE23.
Savannah’s key asset remains a significant controlling interest in a large-scale integrated gas production and distribution business that is currently supplying gas to facilitate almost a quarter of Nigeria’s thermal power generation. Despite the proposed nationalisation of the Company’s recently acquired Exxon assets by the Chadian government, there are several other potential catalysts that management are progressing towards completion over the next 12M. We look forward to further updates from its busy management team.
Aker BP (OTCMKTS: AKRBF) NOK262, Market Cap NOK165bn: Maintains superior credit rating
- Aker BP announced that it has priced its USD-denominated bond offering with $0.5bn of 5.6% 2028 notes offered at 99.91% and $1bn of 6% 2033 notes at 99.762%.
- The Company intends to retire $0.5bn of its existing 5-Yr bonds with 2-3% coupons issued in 2020-21, which are currently yielding between 5.6-6.0%, and the remainder for general corporate purposes.
- The Company plans to invest more than $20bn over 2023-2028 to develop 730mboe of net resources ($27/boe) at a $35-40/boe break-even price that will boost Group production volumes from 400kboe/d to 525kboe/d.
AkerBP is the second largest Norwegian operator that guides 430-460kboe/d net production for FY23, which is driven by c.750kb/d gross production volumes from the giant Johan Sverdrup field (31.6% WI). The Company’s strong production ramp-up from Phase 2 and cash flow in YTD23 has put it into a strong position to refinance part of its corporate bond facilities to fund its medium-term growth plans. Whilst the year-long escalation in global interest rates has fed through into the resultant coupon offering, the quality of the asset portfolio allows the Company to maintain a tight credit spread of ~2.5% above the official 3.25% Norwegian base rate. In our view, Norway remains a relatively supportive and investment friendly fiscal regime and Aker BP continues to set the benchmark for the independent E&P sector on low operating costs and GHG intensity.
3R Petroleum (BVMF: RRRP3) R$32.66, Market Cap R$6.6bn: Closes Potiguar acquisition
- 3R received approval from the ANP to assume operatorship from Petrobras (NYSE:PBR) over the Potiguar cluster of 22 oil and gas fields (100% WI) and associated infrastructure located in the Potiguar Basin, offshore Brazil.
- The Potiguar Cluster has produced in 2023 at an average rate of 16.5kb/d plus 1.3mmcf/d, which was expected to increase the Company's pro forma net production to 42.3kboe/d in April 2023 (20.7kboe/d in 1Q23).
- The Company commented that the Potiguar Cluster is fully integrated with the other assets acquired by the Company in the region, which enables an optimised operation, taking advantage of synergies, gaining scale with suppliers and service providers, as well as reducing of logistical costs.
After a lengthy approvals process following the deal announcement in 2022, 3R Petroleum has completed a significant step-change to its operations in acquiring an asset package that was no longer considered material to Petrobras. Investors will now look for steady operational catalysts this year as the Company looks to resume a strategy of expanding production volumes across the asset portfolio and focuses on asset productivity and cost reduction.
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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