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Today's Oil and Gas Update - IGAS Energy plc; Mosman Oil & Gas and more...

Market Update: Monday 26 October 2020  President Energy (AIM:PPC): Positive strides amid difficult climate IGAS Energy plc (AIM:IGAS): Partnership with Bayotech to produce hydrogen   Mosman Oil & Gas* (AIM:MSMN): Significant additional interest acquired in the Cinnabar Lease

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Oil & Gas Daily Flow

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

 

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Market Update: Monday 26 October 2020 

President Energy (AIM:PPC): Positive strides amid difficult climate

IGAS Energy plc (AIM:IGAS): Partnership with Bayotech to produce hydrogen  

Mosman Oil & Gas* (AIM:MSMN): Significant additional interest acquired in the Cinnabar Lease

 

Energy Prices         

Brent Oil US$41.7/bbl vs US$40.7/bbl on Friday

WTI Oil US$39.4/bbl vs US$40.4bbl on Friday

Natural Gas US$2.99/mmbtu vs US$3.02/mmbtu on Friday

 

Oil Price News

US futures extended their downward trajectory from Friday in early trading today as New York futures have fallen to US$39/bbl

The chances of a deal on fiscal stimulus in the US looks slim as both sides accuse the other of moving the goalposts

Caseloads in the US were at record highs for the second day running

In Europe both Italy and Spain have moved to tighten restrictions while France continues to report record infections numbers

Traders viewing increasing caseloads as major determinant of weak gas demand, particularly in Western Europe and the US 

Suggestions Brent Crude could remain around US$40/barrel until a COVID-19 vaccine is ready

​Traders looking to OPEC+ next move, it is suggested the cartel will cut production by 5.7MMbopd in January, down from the initially agreed 7.7MMbopd 

Putin's pledged to support crude oil prices if the need arises restoring some confidence in the market

Libya's National Oil Corp ended its forced majeure on exports from two key ports Ras Lanuf and Es Sider ports on Friday, the country expects production to return to 1m bpd in the next 4 weeks, far quicker than analysts expectations

Global coronavirus cases have now passed 40m, and a number of European countries have re-entered stricter lockdowns in a bid to slow the growing number of cases as we move into the Northern Hemisphere winter

The White House announced it is ‘cautiously optimistic’ that Speaker Pelosi may be edging closer to agreeing a deal on the new coronavirus bill

China’s Q3 economic GDP Growth came in below expectations at 4.9% YoY and 2.7% QoQ

The Joint Ministerial Monitoring Committee (JMMC) met on Sunday under the Chairmanship of the Saudi Minister of Energy

Production data for September 2020 showed overall conformity was 102% across OPEC and non-OPEC countries, the highest level since May 2020

The committee reiterated the commitments of all participating countries to achieve full conformity and to make up for shortfall under compensation plans

There was also emphasis on the ongoing positive contribution of the DoC in supporting rebalancing of the global oil market

Looking to out to next year the IMF said on Monday that they expect oil prices to stay in the US$40-50/bbl into next year, putting pressure on oil exporters in the Middle East

The IMF projects GDP in the region will fall 4.1% in 2020, with oil exporters in the Middle East and North Africa expected to suffer a 6.6% decline this year

Oversupply and an inventory glut remain concerns in the short to medium term with reduced air traffic volumes negatively effecting demand

The Aire Travel Association expects the global passenger traffic to return to pre-COVID levels by 2024, 12 months further out than initially thought

Short haul travel is expected to come back online faster, returning to levels resembling pre-pandemic footfall by 2023

 

Gas Price News

Natural gas futures prices retreated on Friday despite lower natural gas production and stronger export demand

These two factors are likely to be the forces that drive prices higher throughout the winter heating season, but not until the weather starts to cooperate

Increasing export demand and supportive government storage data should’ve underpinned prices, but a warmer turn in the latest weather forecast capped gains, encouraging bullish traders to trim their lofty long positions

Multiple reports were showing hints of warmer weather creeping up in some models, and on Friday, both the American and European datasets trimmed demand from the back of the 11-to-15-day outlook

Bespoke Weather Services said the models moved toward strong upper-level ridging anchored over the Midwest, suggesting that risks to the current forecast still were to the warmer side after the first couple of days of November 

Friday’s Risers and Fallers

Top 10 Risers

Top 10 Fallers

Borders & Southern Petroleum 15.4%
Tlou Energy Ltd 12.9%
Serica Energy PLC 10.9%
Zephyr Energy PLC 7.4%
Empyrean Energy PLC 5.6%
Lansdowne Oil & Gas PLC 5.4%
UK OIL & GAS PLC 5.1%
Enwell Energy PLC 4.0%
Jadestone Energy Inc 3.1%
Bahamas Petroleum Co PLC 3.1%

Chariot Oil & Gas Ltd -6.4%
Star Phoenix Group Ltd -5.6%
Wentworth Resources PLC -5.5%
I3 Energy PLC -5.4%
Pantheon Resources PLC -5.1%
Rockhopper Exploration PLC -3.8%
Savannah Energy PLC -3.5%
Caspian Sunrise PLC -2.9%
Mosman Oil & Gas Ltd -2.8%
Plexus Holdings PLC -2.8%

 

Company News

President Energy (AIM:PPC): Positive strides amid difficult climate

Share Price: 1.55p, Market Cap: £31m

Average daily production increased to 2,747boepd, up from 2,461boepd in H1’2019. This is also an improvement on FY2019 when the average daily production was 2,415boepd.

On current trading the company estimates average production for the full year to end 2020 to be 2,800 to 3,000boepd with an approximate split of 70% oil and 30% gas

Well operating costs per boe fell 17% YoY.

New reserves report for the Group indicates proven reserves of 15MMboe and proven and probable reserves of 26MMboe.

Rio Negro proven and probable reserves increased 20% compared to the previous 12 months. Since December 2017 the Company has replaced all of its production at Rio Negro and increased total proven reserves by 67% and 2P reserves by 42%.

A further 16k sub-surface 6” steel gas pipeline has been constructed in Rio Negro as the Company drills its second well Estancia Vieja North-x1. Preliminary results are expected to be available in Min-November.

The first well, Las Bases-1001 was drilled on time and on budget, it has been successfully tested and production is expected to begin in by the end of November. Initial production rate is expected to be 588boepd.

The workover in Rio Negro continues with an additional 440boepd gas production expected to be placed into production by the end of the November in the interim.

President has avoided shut ins at any of its wells and exported from Argentina for the first time.

The company did relinquish its 20% interest in the Jefferson Island project, Louisiana due to depressed oil price making the project uneconomic.

Revenue fell 41.1% vs H1’2019, corresponding with a 43% decline in realised pricing.

Cost cutting led to a reduction in both administrative expenses per boe down 37.5% YoY.

The Company’s net debt fell substantially to US$11.3m, down 59% YoY and 48% YTD.

Our take: Another positive update from President despite a challenging backdrop. Although overshadowed by the new drilling, the workover campaign in the Rio Negro Province continues with generally positive results. A review of all the results will be announced once the present cycle of work comes to an end at or near the end of this year. In the interim it is estimated that an additional 75,000 m3/d (440boepd) of new gas production arising from this work will be able to be placed into production by the end of November ie at the same time as Las Bases LB-1001 comes on stream The Company continues to progress its low-cost production led growth strategy working over old, uneconomic wells to establish the material gas potential in Estancia Vieja. The Company is clearly looking to repeat its recent successful flow and pressure rates further adding low cost production to its portfolio.

 

IGAS Energy plc (AIM:IGAS): Partnership with Bayotech to produce hydrogen  

Share Price: 10.59p, Market Cap: £13m

IGas has entered into a heads of terms agreement with Bayotech to produce hydrogen from certain of IGas’ existing gas resources.

The Company has identified two if its existing sites in the South East of England where the gas will been reformed into hydrogen to be sold to local or national customers.  

IGas is an onshore hydrocarbon producer in the UK, developing and producing oil and gas reserves at onshore locations for delivery to the British energy market.

Bayotech provides on-site hydrogen solutions, including rental, leasing, sales and gas-as-a-service to a global customer base. The Company manufacturers steam methane reformers for hydrogen production which are more efficient than legacy steam methane reformers.

Bayotech is headquartered in New Mexico where R&D, engineering and operations are all housed under one roof. The Company has a manufacturing partnership with PESCO which has been providing solutions for on-shore oil and natural gas players since the 1970’s.

Our take: IGas continues to evolve its green strategy with an agreement with Bayotech. Preliminary engineering work has confirmed that gas at these sites is suitable for BayoTech's innovative, modular system and could therefore represent another carbon limited revenue stream in the medium term.

 

Mosman Oil & Gas* (AIM:MSMN): Significant additional interest acquired in the Cinnabar Lease

Share price: 0.14p, Market Cap: £2m

Further keeping up the momentum, Mosman has announced the acquisition of a significant additional interest in the Cinnabar Lease in East Texas for a cash consideration of US$62,500.

The deal adds an additional 80.83% interest in the lease, increasing Mosman's WI to 97% and Operatorship.

The Cinnabar Lease is a 348.83acre lease ‘Held By Production’, which forms part of the Challenger Project in which Mosman has a 16.17% WI.

The Challenger Project is located in East Texas, between Mosman's Stanley and the Champion Projects where drilling has just been completed at the Falcon-1 well.

Mosman acquired 32.33% WI from NADSOILCO, 32.33% WI from Mr Clendon B. Claire and 16.17% from Baja Oil & Gas.

The remaining 3% WI is held by a third party and Baja is in the process of acquiring that 3% WI.

Completion of that third party transaction is anticipated to take a few weeks.

There are four development drilling locations on the Cinnabar Lease identified using nearby wells and 3D seismic methods. 

These are the same methods used to identify the targets at Stanley and Falcon.

There are two wells drilled in the Lease which have produced significant quantities of oil but are now shut-in.

The current Operator, NADSOILCO, maintains the Lease as "Held By Production" by periodically opening one of these wells to produce a few barrels of oil.

As a result, in recent years there has been no material production, profit or revenue from this Lease.

Mosman will review operations and the possible workover of one or both of the wells to increase production.

In exchange for providing these services on the Cinnabar Lease, the service provider (Contour) may earn a 12% WI in the Lease when a well is drilled, carried by Mosman to a cap of USD 96,000.

This acquisition will enable Mosman to continue to build the Company's production base in Texas. In parallel, the immediate priorities are to bring the Falcon-1 well on production, to proceed with the workover at Duff and to plan and prepare for drilling the Galaxie well.

Our take: Mosman continues to build out its enviable portfolio in Texas with another shrewd acquisition in our view.  The Company continues to focus on its production led growth strategy and the additional interest in this mature lease suggests further development upside is possible given recent analogous success. With the highly encouraging drilling results at the Falcon-1 well on the Champion project, our move to higher equity in larger prospects accelerates Mosman’s strategy in our view.

*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 

Grant Barker – 020 3470 0471  

 

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Prince Frederick House

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+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

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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.

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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%

 


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