Oil & Gas Daily Flow
Non-Independent Research; Marketing & Sales Commentary - MiFID II exempt information – see disclaimer below
Market Update: Wednesday 3 June 2020
Empyrean Energy (AIM:EME): CNOOC grants one-year contract extension
Energy Prices
Brent Oil US$40.0/bbl vs US$39.3/bbl yesterday
WTI Oil US$37.3/bbl vs US$36.2bbl yesterday
Natural Gas US$1.80/mmbtu vs US$1.76/mmbtu yesterday
Oil Price News
Oil prices have touched US$40/bbl for the first time since March on reports that OPEC+ is set to bring forward its meeting to this Thursday
Whilst US/China tensions continue to weigh on prices, an extension to the cartel’s production cuts will provide short term support
Market consensus suggests the group will extend the current output restrictions for one to three months
As it stands, without an extension the extraordinary cuts agreed upon in April – 9.7MMbopd will expire at the end of June
However, nothing has been agreed yet and there are conflicting signals over how unified the OPEC+ parties are on an extension
Saudi Arabia reportedly wants to extend the cuts until the end of the year, while Russia has characteristically shown reluctance
Russia may not want to extend beyond another month or two, which raises questions about what will occur later this year. At some point, there will be pressure to begin unwinding the production cuts
Gas Price News
Natural gas prices edged higher consolidating its recent decline after hitting a contract low on Monday
Demand was flat last week and despite a decline in the number of active rigs, prices continued to decline
The weather is expected to remain warmer than normal in the US mid-west and east coast for the next two weeks driving up cooling demand
A weaker than expected GDPNow growth forecast could put additional downward pressure on prices in our view
Company News
Empyrean Energy (AIM:EME): CNOOC grants one-year contract extension
Share price: 5p, Market Cap: 24m
Empyrean has confirmed that given the current climate and the resultant global control policies, the Company has proactively engaged with CNNOC and applied for a 12-month extension to the first phase of the exploration period for the petroleum contract for Block 29/11, China.
CNOOC has granted a 12-months extension to the first phase of exploration.
As a result, the first phase of the exploration period for the petroleum contract for Block 29/11 has been extended to 12 June 2022.
CNOOC has informed the company that the existing current contract will be suitably amended in due course.
Our take: The extension, whilst expected, allows Empyrean additional time to de-risk the prospect ahead of drilling what could be a transformational exploration well in a success case. It also highlights a positive relationship with CNOOC, with the Company not having to invoke its force majeure clause given recent unprecedented events.
Research – Oil & Gas
Sam Wahab - 0203 470 0473
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
Disclaimer Non-Independent Research
This note has been issued by SP Angel Corporate Finance LLP (“SP Angel”) in order to promote its investment services and is a marketing communication for the purposes of the European Markets in Financial Instruments Directive (MiFID) and FCA’s Rules. It has not been prepared in accordance with the legal requirements designed to promote the independence or objectivity of investment research and is not subject to any prohibition on dealing ahead of its dissemination.
SP Angel considers this note to be an acceptable minor non-monetary benefit as defined by the FCA which may be received without charge. In summary, this is because the content is either considered to be commissioned by SP Angel’s clients as part our advisory services to them or is short-term market commentary. Commissioned research may from time to time include thematic and macro pieces. For further information on this and other important disclosures please the Legal and Regulatory Notices section of our website Legal and Regulatory Notices
While prepared in good faith and based upon sources believed to be reliable SP Angel does not make any guarantee, representation or warranty, (either express or implied), as to the factual accuracy, completeness, or sufficiency of information contained herein.
The value of investments referenced herein may go up or down and past performance is not necessarily a guide to future performance. Where investment is made in currencies other than the base currency of the investment, movements in exchange rates will have an effect on the value, either favourable or unfavourable. Securities issued in emerging markets are typically subject to greater volatility and risk of loss.
The investments discussed in this note may not be suitable for all investors and the note does not take into account the investment objectives and policies, financial position or portfolio composition of any recipient. Investors must make their own investment decisions based upon their own financial objectives, resources and appetite for risk.
This note is confidential and is being supplied to you solely for your information. It may not be reproduced, redistributed or passed on, directly or indirectly, to any other person or published in whole or in part, for any purpose. If this note has been sent to you by a party other than SPA the original contents may have been altered or comments may have been added. SP Angel is not responsible for any such amendments.
Neither the information nor the opinions expressed herein constitute, or are to be construed as, an offer or invitation or other solicitation or recommendation to buy or sell investments. Opinions and estimates included in this note are subject to change without notice. This information is for the sole use of Eligible Counterparties and Professional Customers and is not intended for Retail Clients, as defined by the rules of the Financial Conduct Authority (“FCA”).
Publication of this note does not imply future production of notes covering the same issuer(s) or subject matter.
SP Angel, its partners, officers and or employees may own or have positions in any investment(s) mentioned herein or related thereto and may, from time to time add to, or dispose of, any such investment(s).
SPA has put in place a number of measures to avoid or manage conflicts of interest with regard to the preparation and distribution of research. These include (i) physical, virtual and procedural information barriers (ii) a prohibition on personal account dealing by analysts and (iii) measures to ensure that recipients and persons wishing to access the research receive/are able to access the research at the same time.
SP Angel Corporate Finance LLP is a company registered in England and Wales with company number OC317049 and whose registered office address is Prince Frederick House, 35-39 Maddox Street, London W1S 2PP. SP Angel Corporate Finance LLP is authorised and regulated by the Financial Conduct Authority whose address is 12 Endeavour Square, London E20 1JN.
Recommendations are based on a 12-month time horizon as follows:
Buy - Expected return >15%
Hold - Expected return range -15% to +15%
Sell - Expected return < 15%
