Market Update: 4 July 2023
Jersey Oil and Gas PLC (AIM:JOG, OTC:JYOGF) - FPSO redevelopment selected
Synergia Energy Ltd (AIM:SYN) - Rig arriving next week
Egdon Resources PLC (AIM:EDR) - Shareholders vote in favour
Orrön Energy (STO: ORRON) - Refinancing announced
Energy News
Brent Oil US$75.5/bbl vs US$75.1/bbl yesterday
WTI Oil US$70.6/bbl vs US$70.4/bbl yesterday
UK NBP Futures 83p/therm vs 94p/therm yesterday
TTF Dutch Futures €34/MWh vs €38/MWh yesterday
- Henry Hub Gas US$2.69/mmBtu vs US$2.72/mmBtu yesterday
- Crude oil prices spiked briefly this morning after Saudi Arabia announced it would extend its unilateral 1mb/d oil production cut into August, which comes in addition to existing curbs agreed by OPEC+.
- European energy prices edged downwards due to lower-than-normal temperatures on the Continent and despite ongoing unplanned outages in Norway.
- US markets are closed today for the Fourth of July Independence Day celebrations.
Company News
Jersey Oil and Gas PLC (AIM:JOG, OTC:JYOGF) 180p, Market Cap £59m: FPSO redevelopment selected
- Jersey and NEO Energy (private) have selected an FPSO development solution for the 100mb Greater Buchan Area (GBA) oil project in the UK North Sea, for which an NSTA review raised no objections.
- The GBA partners have also agreed the key commercial terms for the proposed acquisition of an existing FPSO to be redeployed over the Buchan field, which will be modified to make the vessel “electrification-ready”.
- The Company estimates total gross capital expenditure of ~$900m for the GBA field re-development, which includes the cost of acquiring the FPSO, and targets FDP submission to the NSTA in 1H24.
- Separately, Jersey announced that the NSTA has approved an extension to the P2170 licence to provide the partners with more time to prepare an FDP for the Verbier discovery, as part of a phased GBA development.
The partners are moving ahead with a GBA development solution that Jersey says results in the lowest full-cycle carbon footprint of all the potential options evaluated, with the potential to connect the vessel to one of the anticipated floating wind power developments that are intended to be located in close proximity. Completion of a farm-out agreement with NEO has materially de-risked the GBA development and fully funded the project through to FDP approval, at which point we think that Jersey would be able to attract a higher valuation for part of its remaining 50% interest to fully fund it through to first oil. Jersey intends to farm-out additional equity in the GBA licences in order to ultimately retain a 20-25% carried interest in the development following FDP approval, with first oil targeted for 2026. After a 12M period that saw significant cash flows used primarily to de-lever balance sheets and return cash to shareholders, we think the M&A market for higher risk exploration and development assets is finally starting to reflect increasing activity levels.
Synergia Energy Ltd (AIM:SYN) 0.13p, Market Cap £11m: Rig arriving next week
- Synergia announced that the rig will arrive on location next week at the onshore India Cambay PSC (100% WI) to commence workover operations on the C-77H production well.
- The revised work programme will remove the production tubing and bridge plug to allow the C-77H well to flow unrestricted, in order to establish a baseline of production without artificial lift.
- During the period of baseline establishment, the workover rig will be deployed to the nearby C-19z well to conduct a de-waxing operation, before returning to the C-77H well to install the jet pump artificial lift equipment.
- Separately, the Company announced last week the award by the UK’s NSTA of the Camelot carbon storage (CCS) licence in an application made with its 50:50 partner, Wintershall Dea, with Synergia as operator.
Following equipment delays, Synergia will shortly commence remediation plans to use artificial lift to retrieve the produced condensate from the well bore that is restricting gas production, which should be further augmented by re-connecting the other four zones in the C-77H well. The Company still plans to farm-out up to 50% of the Cambay PSC and bring in a new partner to invest in the assets with a view to increasing production and reserves through the drilling and multi-stage fracture stimulation of two new horizontal production wells (C-78H and C-79H). The nascent CCS side of the business has also taken a significant step towards value realisation at its the Medway Hub CCS project, with the licence awarded and the Company’s impressive and experienced European partner revealed.
Egdon Resources PLC (AIM:EDR) 4.24p, Market Cap £23m: Shareholders vote in favour
- Egdon announced that at the Court Meeting and the General Meeting held yesterday in relation to the proposed acquisition by Petrichor Partners (private), approval of the relevant resolutions at each meeting was obtained.
- The proposed acquisition received 94.7% support at the Court Meeting and 97.7% support at the General Meeting, far in excess of the required 75% of the shares voted.
- The Company now plans to focus on the remaining conditions to be satisfied, including seeking approval from the NSTA, prior to the Court Hearing to sanction the £26.64m acquisition (4.5p/sh).
The recommended deal provides investors with a cash exit near the top of the stock’s three-year high and despite the increase in shareholder activism seen in the last 12M across the E&P sector, the support of nearly 60% of the shareholder base and lack of a competing offer was always likely to ease the deal’s passage. Egdon had noted that there is a general lack of investor support in UK public markets for small cap natural resource companies that did not reflect the improving operational outlook, particularly with the strong production from the Wressle oil field asset (30% WI). More importantly, as with the Hurricane Energy acquisition by Prax, this deal again signifies private equity seeing greater appeal in the risk/reward value proposition of oil and gas assets versus the public markets. Egdon plans to announce an update in due course on the proposed acquisition and expected timetable.
Orrön Energy (STO: ORRON) SEK11.9, Market Cap SEK3.4bn: Refinancing announced
- Orrön announced the refinancing of its €100m bridge financing facility with a new €150m revolving credit facility that has a three-year maturity, with two subsequent one-year extension options.
- The floating interest rate margin is less than 2% above EURIBOR and includes an additional €150m accordion option, adding increased capacity to finance future growth.
Orrön has quickly established a renewables portfolio of scale and diversification, with plans to expand the business by adding greenfield opportunities across Europe to deliver on its long-term growth ambitions. The Company expects to fund this expansion through the cash generation provided by the core operations in the Nordics, together with the largely unutilised debt capacity, which will be further augmented by the start-up of the Karskruv wind farm in Sweden by YE23 that is expected to add 290GWh to the Company’s estimated annual power generation. It is also worth noting that the terms on offer to Orrön as a renewables company stand in stark contrast to those on offer to equivalent sized oil and gas companies, reflecting the quality of the portfolio of cash flow generating assets and the wider encouragement exhibited towards the European low-carbon energy sector.
Research
David Mirzai – David.Mirzai@spangel.co.uk – 0203 470 0473
Sales
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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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