Headlines
In Brief:
Ascent Resources (LON:AST – 1.03p) – Placing a Step Forwards
Hurricane Energy (LON:HUR – 39p) – Dessert Time Approaching
Jupiter Energy (LON:JPRL – 12p/A$0.25) – Out of Hibernation
SEPLAT Petroleum (LON:SEPL – 84p/NGN390) – Not Pretty, But Good Discipline
Victoria Oil and Gas (LON:VOG – 33p) – Year of Transition
In Brief
Ascent Resources (LON:AST – 1.03p) – Placing a Step Forwards: The news of the placing in today’s announcement allowing the Company to intervene and complete it well would ordinarily be the centre of attention. However, we believe that of more importance is restructuring of the past due loans (initially provided in 2013 and 2014) such that it has a contemporaneous due date in 3Q’19. This alleviates significant pressure on the balance sheet and provides ample headroom for the management to not only progress its work programme, but also work on a reasonable refinancing solution. While investors may be disappointed in the lack of a bright headline, we believe the restructuring of the debt alleviates a significant amount of pressure from the Company
Hurricane Energy (LON:HUR – 39p) – Dessert Time Approaching: With today’s announcement, we believe that the overwhelming majority of tests required to assess the performance of the reservoir have been completed, and that the next stage of development, the front-end engineering and design (“FEED”), can now get underway. This represents a significant step forward for the Company and one that management themselves have been waiting for when they raised equity earlier this year to complete the well. In undertaking this drilling, the Company has added significantly more value to shareholders and as such has provided management with significantly more leverage in the negotiations to come. Given all of this, time is now fast approaching when the fruits of the investment that they have put in should start to yield them self, i.e. the proof of the pudding should be in the eating. We believe that investors should be pleased with the way that the Company has managed its portfolio, and more specifically, the way that they have approached risk management.
Jupiter Energy (LON:JPRL – 12p/A$0.25) – Out of Hibernation: Today’s represents a significant change in the outlook for the Company’s development programme, in that the strengthening in the oil price has reached such a point that its plans can now be taken out of hibernation and reactivated. While this will also mean that production can recommence, providing much-needed cash flow, we believe that there will also be the need for additional resources to bring its plans to fruition. We don’t doubt that it has been a trying time for the Company’s investors, and this news should come as a relief, albeit tempered to some extent by the fact that the key question whether it can achieve this from its existing facilities, or whether new equity will be required now needs to be answered.
SEPLAT Petroleum (LON:SEPL – 84p/NGN390) – Not Pretty, But Good Discipline: The issue surrounding the use of Forcados has significantly impacted the Company’s numbers, making “period on period” comparison unpleasant, especially if you limit your observation to the liquids. However, what is obvious in reading the detail, is the fact that the Company has taken steps to mitigate the impact of the loss of the Forcados export route (cash management and focus on non-Forcados production), which to our mind underlines the control that the management team have over its operations. While some might point towards the decision to pull the interim dividend as a negative, we believe that the focus on cash flow and reducing debt burden should, in this instance, be the key takeaway. Against the headwinds that the Company has faced, we believe investors should be pleased with the w ay the management team has navigated the Company through what has been a difficult period, and emerged with a stronger balance sheet.
Victoria Oil and Gas (LON:VOG – 33p) – Year of Transition: It is immediately apparent from today’s operational update is the fact that 2015, this year and 2017 will all be completely different. As such 2016 has clearly become a transitional year for the Company. While there will always the thorny issue of its partner, Grynberg Petroleum, who has a litigious bent, we believe that the Company’s positioning to be able to leverage off its “first mover” status in the Cameroon gas midstream keeps improving. Continue to believe that management and investors alike would be best served by the separation of the upstream and midstream businesses, especially ahead of the drilling of the second Logbaba well, which given its known gaseous high temperature and high pressure environment, carries considerably greater risk than a nominally identical liquids well, or for that matter an n ormally pressured subsurface environment.