Market Update: 19 June 2023
Tower Resources PLC (AIM:TRP)* - Lays out forward plans
Kistos PLC (AIM:KIST) - Benriach is sub-commercial
Arrow Exploration Corp (TSX-V:AXL, AIM:AXL, OTC:CSTPF) - Nears 3kboe/d target
Energean PLC (LSE:ENOG) - Refinancing plans
FAR Limited (ASX: FAR) - Proposes cash return
Energy News
Brent Oil US$76.4/bbl vs US$75.2/bbl last Friday
WTI Oil US$71.7/bbl vs US$70.3/bbl last Friday
Henry Hub Gas US$2.58/mmBtu vs US$2.55/mmBtu last Friday
UK NBP Futures 81p/therm vs 87p/therm last Friday
TTF Dutch Futures €32/MWh vs €34/MWh last Friday
- Crude oil prices edged higher going into the weekend ahead of the closure of US markets today for the Juneteenth federal holiday, which since 2021 has marked the freedom of the last enslaved people in 1865.
- The US Baker Hughes rig count was down 8 units to 687 rigs last week (-53 y/y), with oil rigs down 4 to 552 units while gas rigs were down 5 to 130 units, as the Permian and the Marcellus basins both lost 4 rigs w/w.
- The Eden Project in Cornwall will today commence the UK’s first deep geothermal energy project in nearly four decades by tapping into hot water located 5km underground to provide heating for its facilities.
Company News
Tower Resources PLC (AIM:TRP)* 0.041p, Market Cap £3.4m: Lays out forward plans
- Tower announced its preliminary results for the 12M ended 31 December 2022, which also provided management commentary on the Company’s portfolio.
- The Company expects to receive an extension on the Thali licence in 3Q23, and is in active discussions regarding the financing for the NJOM-3 well ahead of the availability of its preferred rig option in 2H23.
- The initial results of the basin modelling work carried out on the PEL96 licence (80% WI) has positive indications for the hydrocarbon prospectivity in the northern Walvis Basin, offshore Namibia.
- In South Africa, the operator of the Algoa-Gamtoos block (50% WI) continues to negotiate with potential contractors for 3D seismic data acquisition and explore farm-out options with interested parties.
As part of its FY22 results, Tower gives a broad update to the market on the status of negotiations with the government to extend the licence period on its Thali licence, discussions with multiple sources of capital and rig contract talks as it looks to put a beneficial funding arrangement in place to drill the Njonji structure later this year. While the Cameroon asset remains the focus for Tower, investors should remember that the Company also retains interests in highly prospective exploration licences in both Namibia and South Africa.
*SP Angel acts as Nominated Advisor and Broker to Tower Resources
Kistos PLC (AIM:KIST) 260p, Market Cap £215m: Benriach is sub-commercial
- Kistos announced the offshore UK Total-operated Benriach exploration well (25% WI) has intercepted sub-commercial quantities of gas in the target Royal Sovereign formation.
A disappointing end to the high impact Benriach exploration well on Kistos’ West of Shetland acreage, which was located close to the existing Greater Laggan (20% WI) pipeline and infrastructure. Nonetheless, investors should still be able to look forward to a final investment decision on the Glendronach field development in 2H23 as well as management’s attempt to build further on a track record of growing the business and delivering shareholder value. The recent entry into Norway with a prequalified team also has clear strategic advantages in allowing Kistos to allocate capital to a third jurisdiction in response to punitive windfall taxes in the UK and the Netherlands.
Arrow Exploration Corp (TSX-V:AXL, AIM:AXL, OTC:CSTPF) 22.1p, Market Cap £51m: Nears 3kboe/d target
- Arrow reported the Carrizales Norte-1 (CN-1) discovery well on the onshore Colombia Tapir Block (50% WI) is currently producing above expectations from the C7 formation at 1.1kb/d gross.
- The CN-2 development well has spudded and drilling, testing and completion of the well is expected to take three weeks. The CN-3 development will be drilled immediately upon completion of the CN-2 well.
- The Company reported current Group production of 2.7-2.9kboe/d, with an additional ~0.3kb/d net shut-in due to ongoing protests impacting the Capella field (10% WI), and $11.2m cash as at 1st June.
Another good result from the team at Arrow as part of the Company’s ongoing ten-well drilling programme on the Tapir block, with each of the wells in the 2023 capex programme anticipated to add c.3-400b/d net to the Company on success. Supported by net cash on its balance sheet and robust operations in Colombia and Canada driving positive cashflows, Arrow remains well positioned to deliver shareholder upside from the 2023 investment programme and has effectively already achieved its 3kboe/d Group production target in 1H23. Following completion of the planned drilling programme, the Company plans to move the rig back to the CN field for low-risk infill drilling, with investors also looking towards the current Tapir seismic programme in the Llanos Basin to provide material upside potential to the story.
Energean (Energean PLC (LSE:ENOG)) 1,120p, Market Cap £1.99bn: Refinancing plans
- Energean announced plans to offer $650m aggregate principal amount of 10-Year senior secured notes for trading on the TASE-UP of the Tel Aviv Stock Exchange.
- The Company intends to use the proceeds to retire in full the $625m 4.5% 3-Year senior secured notes due in March 2024, which are currently yielding over 7%.
- Ramp-up on the offshore Israel Karish FPSO (100% WI) is ongoing, with North Karish still expected onstream by YE23 together with FID on the Olympus Area via tie-back to Energean Power FPSO.
The Company’s strong production ramp-up from the Karish field 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 to reach a target of 200kboe/d. Whilst the year-long escalation in global interest rates and extended maturity will likely feed through into the resultant coupon offering, the quality and de-risking of the asset portfolio should allow the Company to maintain a tight credit spread. The equity markets continue to watch for growth in the $50m/qtr dividend (~8% annualised yield) that is guided to double in 2024, as well as potential upside from significant exploration drilling.
FAR Limited (ASX: FAR) A$0.815 Market Cap A$77m: Proposes cash return
- FAR announced plans to convene a shareholder meeting in mid-3Q23 to approve a proposed capital return of A$0.40/sh (approximately $25m or A$36m), which is not planned to count as a dividend for taxation purposes.
- The Company has c.$30m of net cash, but management has been unable to identify an appropriate new business initiative that offers significantly better returns than the proposed capital return.
- FAR continues to assess the monetisation of the Woodside contingent payments (of up to $55m) from the ongoing Sangomar development in Senegal and the farm-out of the Gambian blocks.
Following the sale of FAR’s interest in the Sangomar oil development to Woodside in mid-2021, the Company has used the $126m cash received to carry out an A$0.80/sh capital reduction in 2021 and a series of share buybacks over the last 18M. Drilling on the Bambo-1 exploration well offshore Gambia was unsuccessful in late 2021, and FAR is now progressing a farm down of its working interest in Blocks A2 and A5 (100% WI) in return for a carry on the cost of a further well and a contribution to past costs. The shares are up 10% today following an announcement that effectively marks the accelerated wind-down of the Company, with the return of a substantial portion of FAR's cash reserves and planned divestment of the contingency payments ahead of the commencement of Woodside payments from 2025.
Research
David Mirzai – David.Mirzai@spangel.co.uk – 0203 470 0473
Sales
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Sources of commodity prices
Oil Brent - ICE
Natural Gas - NYMEX
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