Market Update: 15 June 2023
Sound Energy PLC (AIM:SOU)* - NAV Update - Funding secured and likely partner revealed
Coro Energy PLC (AIM:CORO) - Vietnam solar acquisition
CVE: CEQ - Transformative acquisition
BW Energy (FRA: 6BW) & Panoro Energy (OTC:PESAF, OSL:PEN) (Panoro Energy (OTC:PESAF, OSL:PEN)) - Production added
Energy News
Brent Oil US$74.0/bbl vs US$75.0/bbl yesterday
WTI Oil US$69.0/bbl vs US$70.0/bbl yesterday
Henry Hub Gas US$2.35/mmBtu vs US$2.33/mmBtu yesterday
UK NBP Futures 109p/therm vs 75p/therm yesterday
TTF Dutch Futures €44/MWh vs €34/MWh yesterday
- Crude oil prices pulled back after the EIA reported a 7.9mb w/w US crude build, as well as ~2mb builds to both distillate and gasoline stocks, with refinery utilisation falling from last week’s high of 95.8% to 93.7%.
- European gas prices surged higher yesterday as prolonged outages in Norway and forecasts for hot weather across the continent stimulated supply concerns.
- EU natural gas storage levels rose 3% w/w to 72.9% full (vs 55.9% 5-year average), with strong builds in Germany, Italy, the Netherlands and France contributing to aggregate storage of 721TWh.
- French nuclear reactor operating levels were reported as decreasing from 55% to 53% of capacity w/w from 29 available reactors (from 32) out of 56 units.
Company News
Sound Energy PLC (AIM:SOU)* 1.80p, Mkt Cap £33m: NAV Update - Funding secured and likely partner revealed
Valuation: 4.6p/sh, BUY
- Sound Energy has announced bridge financing of up to £4m through the issue of convertible bonds, which has secured its near-term funding needs until YE23.
- The Company has also entered into a 45-day period of exclusivity with Calvalley Petroleum for the partial divestment of a 40% equity interest in both the Tendrara development project and the Grand Tendrara exploration permit (75% WI) in Morocco.
- The proposed deal would provide the Company with the required equity funds to achieve first gas under its Phase 2 development plan and also carry the costs of drilling an exploratory well on the TE-4 Horst.
- We update our financial forecasts and NAV for the terms of the proposed deal and reiterate our BUY rating with a revised 4.6p/share target price.
*SP Angel acts as Corporate Broker to Sound Energy
Coro Energy PLC (AIM:CORO) 0.215p, £6.1m: Vietnam solar acquisition
- Coro announced that it has signed the acquisition of a 2.39MW leased rooftop solar portfolio in Vietnam across three locations close to Saigon from KIMY (private) for $1.3m ($543/MW).
- The total acquisition price includes the assumption of $0.6m of existing specialist renewables debt with a Vietnamese bank, $285k payable in new shares and the remainder in cash staggered over the next 6M.
- The cash consideration is anticipated to be settled from the existing cash balance of the Company's Vietnam subsidiary and future cash flows from the solar portfolio, with completion of the deal anticipated in 4Q23.
- The solar portfolio has been operational for two years and benefits from an existing power purchase agreement with a remaining 18-year term, with the power off-taker being state owned Electricity Vietnam.
Following comprehensive due diligence and site visits during the exclusivity period, which involved the removal of one of the portfolio's rooftop systems from the acquisition, the transaction can now move forward towards completion. The Board believes that redeploying capital to Southeast Asia is a more value accretive use of Coro’s resources than reinvesting in the Italian gas portfolio and enables management to focus exclusively on growing its oil, gas and clean energy portfolio in Southeast Asia. Subject to the closure of the €7.5m sale, Coro believes that it will be in a strong funding position as it progresses a strategy to become a major regional player in the renewables space. Investors will also look for updates on the farm-down process for the Indonesian Duyung gas development (15% WI), which should resolve the upcoming refinancing of the Eurobond that matures in April 2024.
CVE: CEQ C$0.28, Market Cap C$11m: Transformative acquisition
- Criterium announced the acquisition for the nominal sum of $1 of Mont D'Or Petroleum (private), which operates the Tungkal and West Salawati PSCs (100% WI) in Indonesia.
- The Company will assume $32.5m of outstanding debt, which will be reduced to $19.7m post-closing through cash payments ($7.9m) and conversion to equity ($4.9m), and issue an additional $1.89m in new shares.
- The Tungkal PSC is located onshore South Sumatra and produces 1,030b/d from 4.6mb of 2P reserves, while the West Salawati PSC is located in Southwest Papua and produces 20b/d from 0.1mb 2P reserves.
- Criterium plans to optimise production via workovers and infill drilling to grow production to 1.4-1.6kb/d by 1Q24 and 2.2-2.6kb/d by YE24 funded from cash flow, which is expected to generate $25m EBITDA in 2024.
This transformative acquisition will establish Criterium as an operator in Southeast Asia while providing immediate production and operating cash flow, delivering on its strategy to build a balanced portfolio of low risk producing assets with tangible reinvestment opportunities. The SE Asia region continues to provide an active market for E&Ps (Valeura, Jadestone and Rex) looking to access new opportunities, finding support from the equity and debt markets for near-term revenue opportunities with low technical risk.
BW Energy (FRA: 6BW) NOK26.85, Market Cap NOK6.9bn: Production added
- BW Energy (73.5% WI) & Panoro Energy (Panoro Energy (OTC:PESAF, OSL:PEN)) (PEN NO, 17.5% WI) announced first oil from the DHIBM-4H development well at the Hibiscus Ruche Phase I development on the Dussafu Marin Permit offshore Gabon.
- This is the second of six planned production wells and is currently flowing at 6kb/d from the prolific Gamba reservoir, in line with expectations. Drilling of the next production well (DHIBM-5H) is now underway.
- The Hibiscus / Ruche Phase 1 drilling campaign targets four Hibiscus Gamba and two Ruche Gamba wells which are expected to add c.30kb/d gross production when all wells are completed in early 2024.
- Final commissioning of the new gas lift compressor onboard the FPSO BW Adolo is ongoing to support production from all six existing production wells at the Tortue field, which will add 3kb/d on completion.
The JV partners have entered a phase of continual drilling activity in Gabon that should deliver a step-change in production and boost exposure to the current high commodity price environment. Following last week’s closure of 3R Petroleum’s Potiguar acquisition from Petrobras (NYSE:PBR)’ divestment programme, BW investors should also look for progress on its own proposed $75m acquisition of a 100% stake in the Golfinho Cluster and Camarupim Cluster maritime concessions and a 65% stake in the BM-ES-23 block offshore Brazil, which is expected to add ~9kb/d on completion.
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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Recommendations are based on a 12-month time horizon as follows:
Buy - Expected return >15%
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