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Today's Market View - SDX Energy, Rockhopper Exploration, Chariot Oil & Gas and Europa Oil & Gas

Today's Market View • Bullish comments from Saudi Arabia served to calm the oil markets

Today's Market View - Bullish comments from Saudi Arabia served to calm the oil markets

Oil & Gas Daily Flow

Non-Independent Research; Marketing & Sales Commentary - MiFID II exempt information – see disclaimer below

Market Update: Wednesday 18 September 2019

SDX Energy (LON:SDX): MSD-19 development well completed as a producer

Rockhopper Exploration (LON:RKH): Strong H1 operating performance with continued focus on costs

Chariot Oil & Gas (LON:CHAR): CPR ascribes an additional 1.2Tcf of prospective resources offshore Morocco

Europa Oil & Gas (LON:EOG) - Award of Large Exploration Licence, Offshore Morocco

 

Energy prices:         

Brent Oil US$64.9/bbl vs US$67.2/bbl yesterday

WTI Oil US$60.4/bbl vs US$61.9/bbl yesterday

Natural Gas US$2.7/mmbtu vs US$2.6/mmbtu yesterday

Oil price

Bullish comments from Saudi Arabia served to calm the oil markets yesterday leading to a 7% fall after Monday's biggest one-day rise in 30 years

Nevertheless, we still believe an escalation of tensions in the Middle East represents a key risk to the global supply/demand dynamic

Elsewhere, US-China trade tensions and the outlook for Fed policy remain the single largest drivers of oil prices in our view

Company News

SDX Energy (LON:SDX): MSD-19 development well completed as a producer

Share price: 23p, Market Cap: £45m

SDX has announced that the MSD-19 development well in the West Gharib Concession in Egypt (SDX 50% Working Interest & Joint Operator) has encountered a commercial oil accumulation.

The well was drilled to a total depth of 4,665ft and encountered c.135ft of net heavy oil pay across the Asl Formation, with an average porosity of 24%. 

The well was completed as a producer, connected to the central processing facilities at Meseda and brought online at an average stabilised rate over five days of approximately 315bbl/d (gross).

 Conclusion: A pleasing result for SDX and its shareholders, adding incremental output to the company’s production base, and follows the positive result in the Rabul-7 well announced in June. 2019 production guidance is maintained for this asset at 4,000-4,200bbl/d gross.The shares have underperformed the sector YTD following delays at South Disouq and management changes, however the 12 well campaign in Morocco has the potential to reverse the company’s fortunes in our view, with SDX targeting 15Bcf of gross unrisked prospective resources.

 

Rockhopper Exploration (LON:RKH): Strong H1 operating performance with continued focus on costs

Share price: 20p, Market Cap: £89m

  • The company has reported revenues US$4.8m (H1 2018: US$5.2m) arising from production from the Greater Mediterranean (Egypt and Italy). The reduction in revenues reflects a decrease in realised oil and gas prices, partially offset by a modest increase in production.
  • Working interest production averaged c.1,190boepd (H1 2018: 1,100boepd).
  • G&A costs remained broadly flat in H1 2019 at US$2.4m with the company continuing its prudent approach to capital discipline, with a 35% reduction over the past 3 years.
  • The company’s cash balance continues to fall, with Rockhopper reporting US$26.8m at the end of June 31 (December 2018: US$40.4m) following a CAPEX outlay of US$7.6m on pre-development activities on Sea Lion.
  • Following completion of the announced disposal of Rockhopper Egypt (US$16m consideration), which is anticipated to close in Q4 2019, year-end 2019 cash is guided to be in the region of US$25-30m.
  • In Egypt, Rockhopper’s production is sold to EGPC with the average realised price for oil being US$63.1/bbl (H1 2018: US$68.4/bbl). Gas is sold at a fixed price of US$2.65/mmbtu.

Conclusion: As with many exploration plays, the key figure that investors will focus on is a company’s cash position. Rockhopper’s liquidity, whilst diminishing, is fairly stable in our view. The key focus is clearly Sea Lion, which remains a significant asset both for the company and the sector. With Premier (LSE:PMO) now a confirmed seller of Zama, focus very much seems to be turning to Sea Lion as the next big growth project.

 

Chariot Oil & Gas (LON:CHAR): Updated CPR ascribes an additional 1.2Tcf of prospective resources offshore Morocco

Share price: 3p, Market Cap: £12.4m

  • Chariot has today issued an updated CPR on its additional prospects in the Lixus field, offshore Morocco.
  • The CPR ascribes a considerable 1.2Tcf of unrisked prospective resources in five additional prospects underlining further upside in this large field.
  • These resources, in addition to the Anchois Discovery and the Anchois Satellite prospects, contribute towards an audited total remaining recoverable resource in excess of 2Tcf (comprising 2C contingent resources and prospective resources).

Conclusion: This is a very positive update for Chariot in our view. The combination of the Anchois Discovery, the Anchois Satellite prospects and these five additional prospects defines a strategically significant resource adjacent to a fast-growing energy market with high gas prices substantially re-balances Chariot’s vast portfolio without taking away the upside. With 75% of the asset Chariot are in a strong position and will have no shortage of potential partners in our view.

 

Europa Oil & Gas (LON:EOG) - Award of Large Exploration Licence, Offshore Morocco

Share price: 2p, Market Cap: £10.7m

  • Europa has been awarded a new Exploration Permit covering an area of 11,228km2 in the Agadir Basin, offshore Morocco.  
  • Following completion, Europa will be assigned a 75% working interest and operatorship with ONHYM holding the remaining 25% interest.
  • The company has been awarded an eight-year licence covering large, under-explored area of Agadir Basin
  • Europa intends to focus on the Lower Cretaceous fan sand play, a prolific producer in West Africa
  • Initial, low cost, work programme to mature large stacked, 250MMBO plus prospects already identified on 3D seismic to drillable status ahead of a potential farm-out.

Conclusion: We remain bullish on Morocco as a potentially significant region globally. Europa has successfully diversified its portfolio, gaining exposure to the fast-growing Moroccan domestic market, which gives a much wider potential audience of partners which could extend to utilities and other power and infrastructure providers.

 

121 Oil & Gas Investment Conference, London, 28-29th October 2019

  • SP Angel is sponsoring the annual 121 Oil & Gas Investment Conference in London again this year
  • The event hosts some 25 exploration and production companies along with >160 investment funds and analysts over two days of 1-2-1 meetings. Click here to register to attend

 

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