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Today's Oil & Gas Update - Cluff Natural Resources, PetrolTal, Mosman Oil & Gas...

Oil & Gas Daily Flow Non-Independent Research; Marketing & Sales Commentary - MiFID II exempt information – see disclaimer below Market Update: Monday 25 November 2019 Cluff Natural Resources (CLNR LN): Multiple applications submitted in the 32nd UK Offshore Licence Round

Amerisur Resources - Today's Oil & Gas Update - Cluff Natural Resources, PetrolTal, Mosman Oil & Gas...

Oil & Gas Daily Flow

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

Market Update: Monday 25 November 2019

Cluff Natural Resources (CLNR LN): Multiple applications submitted in the 32nd UK Offshore Licence Round

PetroTal (LON:PTAL) – Another upgrade to production guidance

Mosman Oil & Gas* (LON:MSMN) – 16% increase in production at Stanley

         

Brent Oil US$62.5/bbl vs US$62.8/bbl on Friday

WTI Oil US$57.9/bbl vs US$58.4bbl on Friday

Natural Gas US$2.71/mmbtu vs US$2.61/mmbtu on Friday

 

Oil Price News

  • The major forecasters see an oil supply surplus next year, but those bearish outlooks largely depend on the health of US shale growth in 2020, an assumption that is looking increasingly fanciful
  • OPEC meets on 5 December in Vienna, followed by talks with a group of other oil producers, led by Russia. The current oil supply cuts run through to March 2020
  • US crude futures were down 0.2% at US$62.1/bbl on the New York Mercantile Exchange

Gas Price News

  • Natural gas futures finished lower last week, but well off their low as forecasts showing colder trends in December sent prices sharply higher on Friday. Firmer spot market prices in California, the Pacific Northwest and the Northeast also underpinned prices
  • 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

Longboat Energy to list on AIM

  • The old Faroe Petroleum team (minus Graham Stewart) is back together forming another full-cycle North Sea oil and gas company, which is due to list on AIM over the coming weeks
  • The company will initially raise £10m and list at 100p/share. Early signs indicate that the book is well covered and will close today
  • It is no surprise that this well-regarded team are seeking to replicate the success of FPM, following DNO’s hostile takeover earlier this year and we would expect to see similar intuitional backing on the register

M&A activity builds momentum across the sector

  • The past 12 months has seen the acquisition of Faroe Petroleum (LON:FPM) 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. 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

Cluff Natural Resources (LON:CLNR): Multiple applications submitted in the 32nd UK Offshore Licence Round

Share price: 1.3p, Market Cap: £18.7m

  • Cluff has today provided an operational update with regards to its existing UK portfolio and potential acquisitions through the 32nd UK Offshore Licence Round.
  • Following success in the previous major offshore licensing round in 2018 when Cluff was awarded six licences, the company has confirmed that it has submitted multiple applications for additional licences in the UK Oil & Gas Authority’s latest round.
  • The company’s applications are focussed on its current core operational areas in the Southern Gas Basin and Central North Sea.
  • At the company’s Pensacola prospect (CLNR – 30%), the company completed the 70% farm-out of Licence P2252 to Shell, which is estimated to contain gross P50 prospective resources of 309Bcf of gas, with additional upside on the block associated with the Lytham and Fairhaven prospects.
  • The new 3D seismic survey acquired over the Pensacola prospect in August of this year, along with legacy 3D data over the Lytham and Fairhaven prospects, is currently undergoing pre-processing before being delivered to Shell’s in-house processing team early in the new year for further expert analysis and interpretation.
  • Elsewhere, Cluff has been running a farm-out process on the Dewar Prospect (CLNR – 100%) which is located close to (<5km) the="" bp="" operated="" eastern="" trough="" area="" project="" etap="" central="" processing="" facility="" in="" north="" sea="" span="">
  • Management confirms that the prospect has generated a significant amount of interest and there are a number of established operators currently in the project dataroom. 
  • Now that the 32nd OGA Licensing Round is complete, management expects this process to gather momentum and will aim to draw this process to a close in the coming months.

Conclusion: Cluff continues to build out its UK focussed portfolio with further applications in its core areas of the Southern North Sea and Central North Sea. The blocks applied for contain a number of drilled discoveries, undrilled prospects and leads and, if awarded, will build scale, further diversifying the company’s investment portfolio in our view. The market’s focus remains on the timing of a firm well commitment on Selene and Pensacola alongside Shell, where Cluff retains material exposure to considerable upside in a success case.

 

PetroTal (LON:PTAL) – Another upgrade to production guidance

Share price: 24.1p, Market Cap: £141.2m

  • PetroTal has confirmed that drilling of the company's second horizontal well ("5H"), located on the Bretaña field, Peru, is progressing according to budget and timeline. 
  • The well reached the target Vivian formation at the prognosed vertical depth of 2,696m and 700m of the planned 870m horizontal section have been drilled, which is inside the main productive oil reservoir. 
  • Completion of the well, tie-in, and initial production tests are expected to commence on or before 15 December 2019.
  • The company also expects to complete commissioning of the Central Production Facilities ("CPF-1") during the week of 22 December 2019, increasing the nominal production facility capacity to 10,000bopd and 40,000bwpd.
  • In light of management's confidence that the 5H will behave similarly to the 4H well, which produced 200,000bbls of oil in 35 days, and that the CPF-1 will handle more than its nominal oil processing capacity, the company has increased its year-end production guidance from 10,000bopd to 11,000 - 13,000bopd.

Conclusion: A bullish announcement from PetroTal today, and one would assume that the 5H horizontal well is exhibiting strong hydrocarbon shows during drilling for the company to increase production guidance ahead of completion and testing. Investors are also typically buoyed by today’s announcement with the company’s shares gaining c.20% at open. The company will exit 2019 with a strong and stable production base, throwing off material cash flows in the current stable oil price environment.

Mosman Oil & Gas* (LON:MSMN) – 16% increase in production at Stanley

Share price: 0.24p, Market Cap: £2.1m

  • Mosman has reported a 16% increase in gross production at its Stanley Project at c.290bopd (on 1 November 2019 production was c.250bopd as previously reported).
  • The operator recently recommended at Stanley-1 a gas lift; a gravel pack installation; and a new separator.
  • These tasks have now been completed, and in the very short-term operational efforts are now focussed on
  • optimising lifting parameters in order to maximize production from this well.
  • Oil production from Stanley-2 continues at c.50bopd (gross), whilst Stanley-3 is producing c.200bopd (gross).
  • Current production at each of the three Stanley wells is from one of several potential production zones contained within each well and the longer-term plan remains to recomplete wells as required once lower zones are depleted, at which point the well will be recompleted in higher zones.
  • Going forward, Mosman does not plan to release individual well production rates which is consistent with the manner that other projects are reported. New wells will be reported separately whilst initial production is stabilised.
  • Production at Welch and Arkoma have remained steady and no significant changes are reported. 
  • The Stanley-4 development well planning is now complete and is expected to be drilled in February 2020.  It is currently planned that Stanley-4 will use the same surface facilities as the other Stanley wells but with some upgrading required, including additional tank/s and a separator.
  • Mosman's participating final interest in the planned Stanley-4 will be similar to the other Stanley Project wells, adjusted should there be any non-participating working interest partners.
  • The Falcon-1 well preparations in the Champion Project are also progressing.  Shortly the operator is expected to perform on-site work to determine if an existing well located on the lease is suitable for re-use to drill Falcon-1. This well would be acquired with relevant equipment and it is believed to provide the lowest cost means to access the Falcon target reservoir.
  • Mosman's strategic partner, Baja Oil and Gas, is currently and actively reviewing potential additional development opportunities for acquisition, utilising a similar evaluation model to that which has proven particularly successful at the Stanley Project.
  • As reported last week, Mosman has executed a MOA and a Heads of Agreement with parties in respect to the Amadeus Project in Central Australia. Mosman was recently advised by the relevant Minister in the Northern Territory Government that he has approved a 12-month suspension of the Year 3 work programme commitments for the permit, and a corresponding extension of the permit term.

Conclusion: Another positive update from Mosman today following two encouraging updates last week. A material increase in output at the company’s Stanley Project demonstrates that the company and its partner are developing the optimal productive solution for this large field. Elsewhere, the company recently attended and participated in presentations in China on the invitation from the Northern Territory Government. The objective of the presentations was to seek joint venture funding on EP-145 in order to enable seismic work to be completed during the 2020 year and subsequently drill a well.

 

*SP Angel acts as Nominated Advisor and Broker to Mosman Oil & Gas

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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