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Today's Oil & Gas Update - Eco (Atlantic) Oil & Gas, Bahamas Petroleum, IGAS Energy and more...

Eco (Atlantic) Oil & Gas (LON:ECO): Financially stable ahead of 2020 drilling programme Bahamas Petroleum (LON:BPC) – MSA signed with Baker Hughes ahead of 2020 drilling campaign President Energy (LON:PPC) – Completion of Angostura Acquisition

Eco Atlantic Oil & Gas Ltd - Today's Oil & Gas Update - Eco (Atlantic) Oil & Gas, Bahamas Petroleum, IGAS Energy and more...

Oil & Gas Daily Flow

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

Market Update: Wednesday 20 November 2019

Eco (Atlantic) Oil & Gas (LON:ECO): Financially stable ahead of 2020 drilling programme

Bahamas Petroleum (LON:BPC) – MSA signed with Baker Hughes ahead of 2020 drilling campaign

President Energy (LON:PPC) – Completion of Angostura Acquisition

IGas Energy (LON:IGAS) – Refinancing saves c.£1m per annum

 

Energy Prices         

Brent Oil US$59.8/bbl vs US$62.5/bbl yesterday

WTI Oil US$55.2/bbl vs US$56.8bbl yesterday

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

 

Oil Price News

  • Oil prices are coming under pressure during after comments from Russia’s energy minister cast doubt on curbing oil production further with OPEC next month
  • The price of crude has breached a key technical level and could continue to slide amid lingering US-China trade talk uncertainty
  • US crude futures were down 0.9% at $60.6/bbl on the New York Mercantile Exchange
     

Gas Price News

  • Natural gas prices moved lower today as warmer than normal weather is expected to cover most of the US for the next 6-10 and 8-14 days.
  • Prices declined 4.5% on Monday after dropping nearly 4% in the prior week.
  • There is one tropical disturbance in the lower Atlantic that NOAA projects 10% chance of turning into a tropical cyclone over the next 48-hours

 

M&A activity builds momentum across the sector

  • The past 12 months has seen the acquisition of Faroe Petroleum (FPM.L) by DNO (DNO ASA); a £380m bid for Eland Oil & Gas (ELA.L) by Seplat Petroleum (SEPL.L); and Amerisur Resources (AMER.L) currently engaged in a competitive bid.
  • Aramco’s proposed IPO is another good barometer for sector sentiment in our view. Days before a widely expected official approval for what would be the world’s largest IPO ever, Saudi Arabia has yet again delayed the much-hyped listing by at least several weeks, with international investors seemingly not buying the Saudi insistence that the biggest oil company in the world is worth US$2tn. 

 

UK Sector Backdrop 

  • AIM Oil & Gas indices were 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

Eco (Atlantic) Oil & Gas (LON:ECO): Financially stable ahead of 2020 drilling programme

Share price: 50.25p, Market Cap: £99.6m

  • As at 30 September 2019, the company had cash and cash equivalents of CAD$30.7m.
  • Eco therefore remains well funded and currently has CAD$27.9m of cash and cash equivalents on the balance sheet.
  • During the first quarter of the financial year, Eco completed its previously announced private placement raising gross proceeds of CAD$22.6m underlining shareholder support.
  • Operationally, following two successful discoveries alongside Tullow and Total in Guyana, results suggest that the samples recovered to date from Jethro-1 and Joe-1 wells are mobile heavy crudes with high sulphur content.
  • The Joint Venture partners on the block have engaged a third-party consultant with heavy oil development expertise to help conduct preliminary evaluations related to production and commercialisation. 
  • In terms of wells slated for 2020, multiple prospects currently being reviewed with high graded candidates under consideration for a drilling programme next year.
  • The operator, Tullow, is preparing a budget for long lead items including wellheads and casing.
  • Once the final well fluid reports and related testing data for the two discoveries as well as results from other regional exploration activities, including drilling of the neighbouring Carapa well have been analysed and evaluated, an updated CPR will be published.

Conclusion: Eco remains in a very comfortable financial position ahead of an active drilling programme next year. There are several development scenarios for Eco and its partners in Guyana, particularly given significant technical advances in extracting heavy crude. Heavy and high sulphur oil has been developed and produced in the North Sea, Gulf of Mexico, the Campos Basin in Brazil, Venezuela and Angola and therefore we believe the partners will have no shortage of opportunities to develop these large discoveries.

 

Bahamas Petroleum (LON:BPC) – MSA signed with Baker Hughes ahead of 2020 drilling campaign

Share price: 1.9p, Market Cap: £40.6m

  • In August 2019, following extensive technical discussions and mutual due diligence, BPC received proposals (including pricing) for a range of well-related equipment, including wellheads and tubulars, for the intended drilling 2020 campaign.
  • At that time, and as previously announced, BPC issued a notice of award to Baker Hughes for provision of that equipment, as a precursor step to a detailed contract as is customary in the industry. 
  • Following a further period of negotiation and collaborative work, BPC has now entered into a Master Services Agreement ("MSA") with Baker Hughes for the provision of specified equipment.
  • Further to the MSA entered into, BPC has now also placed a first purchase order with Baker Hughes , for a wellhead set, a contingency well head set, and 36" conductor casing.
  • The wellhead set is being manufactured to order for BPC's intended well, and delivery is expected in a timeframe consistent with the current drilling schedule.

Conclusion: In ordering these high value, long-lead items, along with the other multiple work streams ongoing, management is taking demonstrative steps to ensure the company remains on track for drilling to commence as per its previously announced drilling schedule.
 

President Energy (LON:PPC) – Completion of Angostura Acquisition

Share price: 4.2p, Market Cap: £47.3m

  • Following its October announcement, President has confirmed that its acquisition of the Angostura exploration contract in Rio Negro Province, Argentina, has successfully completed alongside the agreement for subscription for US$1.825m of new ordinary shares in the capital of the company by CGC becoming unconditional.
  • As part of the Acquisition, up to three experienced employees are being transferred to the company and these are currently being integrated into President's operational team.

Conclusion: The acquisition adds 500boepd to President’s production base – a 10% increase, with the gas is compressed on site and sent by pipeline to the company’s Las Bases facility and the oil by truck to join the rest of their oil. The exploration contract expires in this month, but President can request a second exploration period. The vendor, CGC, is also investing US$1.825m in President as part of the deal.
 

IGas Energy (LON:IGAS) – Refinancing saves c.£1m per annum

Share price: 34.8p, Market Cap: £42.5m

  • IGas has announced that it has now completed the repayment of its Secured Bonds at par value (100%) plus accrued interest through the drawdown of US$25m from the recently announced RBL with BMO Capital Markets.
  • Accordingly, this transaction has no impact on net debt, which was £5.3m as at 31 October 2019. The RBL has a five-year term, an interest rate of LIBOR plus 4.0% and matures in September 2024. 
  • Net production for the year to 31 December 2019 remains on track and at the top end of the range previously guided, between 2,200 - 2,400boepd, with operating costs still guided to be US$31/boe. 
  • Assuming current exchange rate levels the company will generate c.£15m of free operating cash flow in 2019 from the conventional business before administrative expenses, capital investment and finance costs.

Conclusion: A good result for IGas, with the refinancing providing additional available capital to grow the company’s conventional business, alongside a reduction of financing costs of c.US$1m on an annualised basis.
 

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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