Market Update: 21 June 2023
Chariot Ltd (AIM:CHAR, OTC:OIGLF) – Farm-out discussions progressing
Hartshead Resources NL (ASX:HHR) – FDP submission
Africa Oil Corp (TSX:AOI) – Refinancing improves flexibility
Energy News
Brent Oil US$75.9/bbl vs US$76.7/bbl yesterday
WTI Oil US$71.3/bbl vs US$71.9/bbl yesterday
Henry Hub Gas US$2.51/mmBtu vs US$2.67/mmBtu yesterday
UK NBP Futures 97p/therm vs 93p/therm yesterday
TTF Dutch Futures €39/MWh vs €37/MWh yesterday
- Crude oil prices were broadly unchanged as the API reported a 1.0mb build in US crude oil and fuel stocks (vs 1.3mb draw expected).
- European energy prices edged higher despite French nuclear reactor operating levels reported as increasing overnight from 57% to 61% of capacity from 34 available reactors (from 32) out of 56 units.
- US natural gas prices eased on forecasts for cooler temperatures following triple-digit temperatures in parts of the Lower-48 in the last few days boosting demand for gas used in power consumption.
- Civitas has agreed two deals with PE player NGP Energy Capital Management to acquire 100kboe/d (54% oil) in the Permian’s Midland and Delaware basins for cash and stock totalling $4.7bn. The acquisitions are priced at 3x 2024 estimated adjusted EBITDAX, in-line with recent US Permian transactions.
- OMV has taken FID on the ~3.6Tcf Neptun Deep offshore gas project, which has an estimated development capex of €4bn and unit opex of $3/boe, and will turn Romania into the largest gas producer in the EU.
Company News
Chariot Ltd (AIM:CHAR, OTC:OIGLF) 15.1p, Market Cap £146m: Farm-out discussions progressing
- Chariot announced FY22 results reporting $12.1m cash as at 31 December 2022 and commenting that the Company has sufficient cash resources to meet its corporate overhead until 4Q23.
- The Company expects to shortly complete the farm-out process on the Anchois gas development project in the offshore Morocco Lixus licence (75% WI), noting strong industry interest and multiple offers received.
- Chariot said that based on the offers received, it anticipates to recover a significant portion of its past cash expenditure (~$20m) in 2H23 and may also be provided with capex financing to first gas.
- The renewable and hydrogen projects are at an earlier stage of development and the Company is evaluating project finance and investment options ahead of any significant capital requirement.
Chariot has made significant progress on the Anchois project since the successful drilling at the start of 2022, with the completion of the engineering and design for the development, ongoing detailed negotiations with gas offtakers and a consortium of Moroccan and international banks indicating their support to provide project debt finance. The Company is looking to secure a gas sales agreement (GSA) that targets sales of up to 0.6bcm per year (c.60mmcf/d) on a take or pay basis for a minimum of 10 years to be delivered via the Maghreb-Europe Gas (GME) pipeline for supply to Morocco’s idle gas power plants. While updates from Chariot’s transitional power and green hydrogen portfolio have added to the development pipeline, we think that moving the Company’s proposed Anchois gas project offshore Morocco towards a farm-out and final investment decision remains the key value driver for investors in 2023.
Hartshead Resources NL (ASX:HHR) A$0.043, Market Cap A$99m: FDP submission
- Hartshead announced the field development plan (FDP) submission to the UK regulator (NSTA) on the proposed c.300bcf Phase I gas development on P2607 (30% WI).
- The field development consists of six wells producing gas from 2025 into two unmanned platforms on the Anning and Somerville gas fields with gas export via a subsea tie-in to the offtake route.
- Post receiving technical feedback from the NSTA, the Company will move to finalise project debt funding and take a Final Investment Decision (FID) for the Phase I development with its JV partner, RockRose Energy.
- Discussions with parties for the debt funding of Hartshead’s remaining expenditure are well advanced and are expected to be concluded alongside FID in 3Q23.
Completion of a farm-out agreement with RockRose has already materially de-risked the Phase I development of the Anning and Somerville gas fields by securing over $350m of gross project expenditure, as well as also providing independent technical and commercial validation of the Company’s gas development. The FDP submission further advances the project as Hartshead now moves to put the remaining development finance requirements in place, targeting an FID in 3Q23 that would allow early cashflows from first gas in 2025. The recent pick-up in E&P farm-out deals (Hartshead, Jersey, Pancontinental) suggests that the international M&A market is also starting to finally flex its muscles in the exploration and development asset market.
Africa Oil Corp (TSX:AOI) SEK22.9, Market Cap SEK5.5bn: Refinancing improves flexibility
- AOC announced that following the renewal of its OML130 licence for 20 years, Prime has refinanced its RBL facility for a principal amount of $1,050m with a six-year tenor.
- Prime will today distribute $125m of gross dividends, or $62.5m net to Africa Oil's 50% shareholding in Prime, taking the total net dividend payments to $712.5m since it acquired the asset for $519.5m in January 2020.
- Africa Oil also announced a doubling in the Company’s available standby credit facility amount to $200m, which is currently undrawn, and a net cash position of $158.2m at end-1Q23.
- As a result of the OML130 licence extension, the Company commented that it has greater flexibility in near-term capital allocation decision making, underpinned by the strong balance sheets in both businesses.
Africa Oil’s cash flowing production assets in Nigeria have already paid back on its investment and should continue to underpin sustainable shareholder distributions for some time yet (~13% yield in 2022), with FY23 production guidance of 18-21.5kboe/d expected to be supported by new drilling and investment. Potential catalysts may also come from ongoing activity across its Orange basin acreage, where Africa Oil is participating in exploration and appraisal drilling on the Venus discovery (~17% WI) in Namibia and expects the farm-out process for Block 3B/4B (~23.5% WI) in South Africa to secure a new partner this year, and may also include a potential rationalisation of its portfolio holdings in 2H23.
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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