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Today's Oil & Gas Update - Cairn Energy, Premier Oil and Pantheon Resources.

Oil & Gas Daily FlowNon-Independent Research; Marketing & Sales Commentary - MiFID II exempt information – see disclaimer belowMarket Update: Thursday 17 October 2019Cairn Energy (LON:CNE): Chimera well turns up dry, UK North SeaPremier Oil (LON:PMO)

Cairn Energy PLC - Today's Oil & Gas Update - Cairn Energy, Premier Oil and Pantheon Resources.

Oil & Gas Daily Flow

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

Market Update: Thursday 17 October 2019

Cairn Energy (LON:CNE): Chimera well turns up dry, UK North Sea

Premier Oil (LON:PMO) – Success at Tolmount East 

Pantheon Resources (LON:PANR) – Acquisition of Halliburton's 25% working interest in Alkaid/Phecda

 

Energy Prices     

Brent Oil US$59.4/bbl vs US$58.6/bbl yesterday

WTI Oil US$53.7/bbl vs US$53.3bbl yesterday

Natural Gas US$2.2/mmbtu vs US$2.2/mmbtu yesterday

 

Oil Price News

  • Oil prices reversed its downward trend yesterday, supported by hopes that OPEC and allies may deepen their production cuts in December, while weakening global economic and oil demand outlook continues to weigh on prices
  • OPEC’s chief suggested that the OPEC+ coalition is open to discussing and possibly doing ‘whatever it takes’ to rebalance the market
  • U.S. crude futures were up 1.2% at $54.5/bbl on the New York Mercantile Exchange, underlining uncertainties in the global economy
  • Longer term, US-China trade tensions and the outlook for Fed policy remain the single largest drivers of oil prices in our view
     

Gas Price News

  • Natural gas prices moved lower on Wednesday ahead of today’s inventory report from the Department of Energy
  • Expectations are for inventories to rise by 132Bcf according to survey provider ‘Estimize’. This follows a 98Bcf increase reported by the Energy Information Administration

 

UK Sector Backdrop 

  • Despite a tough capital market environment, UK equities in the Oil & Gas sector remained flat YTD (2018: -16%) wiping out September’s 8% gains
  • AIM Oil & Gas indices were also flat YTD despite some volatility, yet stabilising 2018’s 13% decline
  • These indices have largely tracked the oil price, and with the futures market also remaining steady
  • The small/mid cap constituents of the sector are due to engage in an active year of operational activity in 2020, with a number of high impact drilling catalysts
     

Company News

Cairn Energy (LON:CNE): Chimera well turns up dry, UK North Sea

Share price: 200p, Market Cap: £1,189m  

  • Disappointment for Cairn, confirming that the Chimera wildcat well is dry.
  • The well was drilled approximately 40 kilometres (km) north of the Kraken field, and targeted Paleocene Heimdal Sandstones within the Lista Formation.

Conclusion: Whilst clearly disappointing for Cairn, the company’s financial exposure to the well was somewhat limited following recent farm outs of the licence to Suncor DNO. Elsewhere, Catcher is currently operating at 99% efficiency and Kraken is improving. The company is now moving fast to the development stage and whilst Cairn aren’t planning to be holding quite such a big stake in the future it will remain a substantial part of the portfolio.

Premier Oil (LON:PMO) – Success at Tolmount East 

Share price: 83p, Market Cap: £670m

  • More success with the drill-bit for Premier, today confirming the successful well result at Tolmount East (Premier 50% operated interest) in the UK Southern Gas Basin. 
  • The well was targeting 220Bcf of P50 gross resource, in an undrilled area four kilometres east of the 500Bcf Tolmount gas field.
  • The well penetrated 241ft of gas bearing Leman sands with a net-to-gross ratio of 71%, porosity of 16% and gas saturation of 82%.   
  • The company confirmed that the reservoir sands encountered are at the upper end of expectations and no gas water contact was penetrated.  
  • The reservoir section was cored with 216ft being recovered.  A full Logging-While-Drilling and wireline acquisition programme was undertaken, including extensive pressure data and fluid sampling.
  • The well data will now be integrated with the new 3D seismic dataset as part of the fast-track development planning for Tolmount East. 

Conclusion: Another win for Premier, underpinning a very strong production story. Operationally the company has maintained its strong performance, shown in record production of 84.1kboepd led by Catcher with an operating efficiency of 99%. We are especially bullish on Tolmount-the next Catcher- which is clearly is on schedule with development and appraisal opportunities.

Pantheon Resources (LON:PANR) – Acquisition of Halliburton's 25% working interest in Alkaid/Phecda

Share price: 17p, Market Cap: £86m 

  • Pantheon has executed a contractual agreement with Halliburton to acquire its 25% working interest in the six leases jointly held with Pantheon on the North Slope of Alaska.
  • Under the agreement, Halliburton will transfer to Pantheon their working interests in the leases in exchange for Pantheon accepting full responsibility for all future lease obligations.
  • As a result of this transaction Pantheon now holds 100% working interest in the 22,804 acres that make up the Alkaid/Phecda project, and 92% working interest in two additional adjacent leases comprising 11,367 gross acres.
  • Upon the conclusion of this transaction, Pantheon will hold a 90-100% working interest in c.177,000 gross acres containing potential for 1.2Bnbbo recoverable, located in close proximity to the North Slope of Alaska's major highway and pipeline infrastructure.
  • In addition, Pantheon holds 10% working interest in the Winx acreage, covering c.23,000 gross acres.

Conclusion:  A shrewd acquisition in our view given the location of the acreage, in close proximity to the Dalton Highway and Trans Alaskan Pipeline, therefore offering significant cost and timing advantages over other North Slope Projects, with the possibility of year-round activity and targeted first production as early as 2020.

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

  

Research – Oil & Gas

Sam Wahab - 0203 470 0473

[email protected]

Sales

Richard Parlons – 020 3470 0472

Abigail Wayne – 020 3470 0534

Rob Rees – 020 3470 0535  

 

SP Angel                                                            

Prince Frederick House

35-39 Maddox Street London

W1S 2PP

 

+SP Angel employees may have previously held, or currently hold, shares in the companies mentioned in this note.

 

Sources of commodity prices

Oil Brent, WTI

ICE

Natural Gas

NYMEX

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