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Today's Oil & Gas Update - Great Eastern Corporation, Genel Energy, Angus Energy and more...

Great Eastern Energy Corporation* (LON:GEEC): SP Angel site visit to India Genel Energy (LON:GENL) – Steve Whyte to be replaced by George Rose Angus Energy (LON:ANGS): OGA awards Saltfleetby Licence and Operatorship to Angus

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

Market Update: Thursday 5 December 2019

Great Eastern Energy Corporation* (LON:GEEC): SP Angel site visit to India

Genel Energy (LON:GENL) – Steve Whyte to be replaced by George Rose

Angus Energy (LON:ANGS): OGA awards Saltfleetby Licence and Operatorship to Angus

 

Energy Prices

Brent Oil US$62.9/bbl vs US$61.7/bbl yesterday

WTI Oil US$58.2/bbl vs US$56.9bbl on yesterday

Natural Gas US$2.44/mmbtu vs US$2.34/mmbtu yesterday  

 

Oil Price News

Oil prices surged yesterday ahead of today’s OPEC+ meeting in Vienna in anticipation of some type of extension of cuts, or perhaps even more of a cut coming down the road

However, the global economy continues to falter, so it’s not surprising that the market will see resistance at these levels

U.S. crude futures were up 1.2% at $63.1/bbl on the New York Mercantile Exchange

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 also ramped up yesterday ahead of today’s inventory report scheduled to be released by the Department of Energy

Expectations are for a 40Bcf draw in natural gas inventories according to survey provider Estimize. Inventories declined by 28Bcf last week as slowing demand buoyed stockpiles

Supply during the latest week was flat according to the EIA

 

M&A activity builds momentum across the sector

UK oil and gas continues to thrive this quarter, demonstrated by the recent £5m Union Jack* (UJO LN) placing which follows Reabold Resources’ (RBD LN) £24m fundraise announced in October, primarily for the same West Newton conventional field onshore UK

Further institutional support has been demonstrated by the £10m raise and IPO of Longboat Energy, or Faroe Petroleum mark II, to build a new full-cycle North Sea E&P

The past 12 months has seen the acquisition of Faroe Petroleum (FPM LN) by DNO (DNO ASA); a £380m bid for Eland Oil & Gas (ELA LN) by Seplat Petroleum (SEPL LN); and a £242m bid for Amerisur Resources (AMER LN) by Geopark

 *SP Angel acts as Nominated Advisor and Broker to Union Jack Oil

 

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

Great Eastern Energy Corporation* (LON:GEEC): SP Angel site visit to India

Share price: 25p, Market Cap: £31.6m

Earlier this week, SP Angel attended a site visit to GEEC’s Raniganj (South) block in West Bengal, India.

This impressive licence area comprises 156 wells which are connected by an internal MDPE pipeline network going into the company’s Gas Gathering Station which feeds gas into its dedicated external steel pipeline network.

GEEC’s extensive infrastructure base includes two mobile drilling rigs and six workover rigs, all fully functional for vertical and deviated drilling to maximise productivity and drainage capability.

This year GEEC has focussed on modernising its equipment, replacing a broad majority of pumps by June 2019, leading to a 17% increase in average production to 16.60MMscf/d in the second half of October 2019, against a May production of 14.13MMscf/d.

GEEC plans to replace an additional 50 pumps in early 2020 which will result in further incremental production increases and cash flows.

We were also encouraged by a series of meetings with internal and external management teams, which included broader discussions regarding the Indian economy. For example, India’s import terminal capacity is forecast to double by 2022, and this year the country imported 20.56MT of LNG – 3% higher than FY18, underlining a robust demand for gas resources.

The new gas pipeline, which runs adjacent to GEEC’s acreage, which will provide connectivity to the considerable Kolkata market, is in the final stages of completion, and is expected to be functional in the first half of 2020.

The company has reported a recent increase in consumer demand, as indicated by festival season turnover, further suggesting that economic conditions are improving in the country.

Encouragingly, net debt continues to fall, with the company reporting US$61.36m at the end of September 2019 (1H/19: US$73.28) – a 16% reduction yoy.

Management confirmed during the visit that they expect this number to continue to fall, and we would expect 2020 net debt to fall within the US$55m – US$57m range.

Shale gas and CBM reserves and resources in the Raniganj (South) block remain broadly unchanged, with discounted value of US$4.31bn.

In terms of GEEC’s considerable shale gas acreage position, the company is in the process of obtaining final approvals and expects to commence initial shale gas exploration work by drilling core wells once approvals are received.

Subject positive results from the core wells, the company intends to drill an optimum number of pilot production wells, leading to a material boost to production if successful.

Conclusion: We left India very impressed by the comprehensive infrastructure investment in GEEC’s asset base. The company has clearly demonstrated operational success across its CBM operations. The recent increase in production coincides with the steps being taken by the Indian government to accelerate the growth of the Indian economy. Demand for hydrocarbons in India will continue to grow in our view, as shown by a 4.9% yoy increase in LNG imports for September 2019, whilst cumulative imports for April to September 2019 were 7.9% higher than April to September 2018. The company’s shale operations will also ramp up on receipt of the required approvals, and therefore 2020 could represent a year of significant progression for the company. We would therefore expect increased investor focus in 2020 in what we believe to be a significantly undervalued company.

*SP Angel acts as Corporate Broker to Great Eastern Energy Corporation

Genel Energy (LON:GENL) – Steve Whyte to be replaced by George Rose

Share price: 189p, Market Cap: £523.7m 

Genel has confirmed that Chairman Steve Whyte, who announced that he was stepping down in April, is to leave with immediate effect.

He will be replaced as interim Chairman by Senior Independent Non-Executive Director George Rose.

Conclusion: Steve announced that he was stepping down in April and has decided that the end of 2019 is the right time to move on as plans are in place for a very exciting 2020. George Rose is clearly an able hand to step in until a permanent replacement is found. Elsewhere, shareholders enjoy a growing dividend that gives the shares a highly attractive yield of c.7%, whilst the company is still able to continually look at additions to the portfolio.

Angus Energy (LON:ANGS): OGA awards Saltfleetby Licence and Operatorship to Angus

Share price: 1p, Market Cap: £5.4m

Further to its announcement on 19 June 2019, the Oil and Gas Authority has given its consent to the assignment of a 51% share in Saltfleetby Energy's interest in the Saltfleetby Field blocks of PEDL005 to Angus ("AWB"), a wholly owned subsidiary of the Company. 

Key work to reconnect the field is already underway such as reconnecting to the Theddlethorpe grid entry point and coordinating long lead items.

Angus has also hired Oilfield International to produce a CPR, hopefully available in Q1 2020 and is also in discussions with an oil major for a ‘multi-year annual off-take arrangement which is expected to be between 17-19m therms based on last known and reported production rates of c. 50,750 therms per day in 2017.

Conclusion: This appears to be a very interesting deal for Angus in our view, with limited downside and potentially considerable upside, opening up a pathway towards real production and cashflow without the exploration risk. If for any reason flow is difficult or uneconomic Angus has been given the money to cover the abandonment liability. (Two of the existing 8 wells will be subject to abandonment to reduce overall liability). The field is in good condition and if Oilfield International’s upcoming CPR suggests material contingent gas resources/reserves then the upside could be significant just by working the field over.
 

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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