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Today's Oil and Gas Update - Block Energy; Eco (Atlantic) Oil & Gas and more...

Market Update: Tuesday 24 November 2020 Block Energy (AIM:BLOE): Acquisition of SRCL confirmed, further US$1.5m boost to inventory Eco (Atlantic) Oil & Gas* (AIM:ECO): Interim results, robust financial position   Victoria Oil & Gas Plc (AIM:VOG): Matanda Block license extension approved, Cameroon

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

 

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Market Update: Tuesday 24 November 2020

Block Energy (AIM:BLOE): Acquisition of SRCL confirmed, further US$1.5m boost to inventory

Eco (Atlantic) Oil & Gas* (AIM:ECO): Interim results, robust financial position  

Victoria Oil & Gas Plc (AIM:VOG): Matanda Block license extension approved, Cameroon

 

Energy Prices         

Brent Oil US$46.3/bbl vs US$45.9/bbl yesterday

WTI Oil US$44.2/bbl vs US$43.2bbl yesterday

Natural Gas US$2.73/mmbtu vs US$2.72/mmbtu yesterday

 

Oil Price News 

Oil prices tick up on further progress in vaccine development and expectations that OPEC+ will decide in less than two weeks to roll over the current cuts for three months instead of easing them from January 2021

This has in turn given bulls hopes that the oil market will regain some semblance of a balance next year

Currently, the general consensus among analysts and agencies is that oil prices will indeed see an upside in 2021 as above-average inventories will draw down with a global economic and oil demand recovery

Several bullish signals in recent weeks have made oil market participants and analysts more optimistic about the oil market next year, despite the current second wave of COVID-19 infections sweeping across Europe and the world’s biggest petroleum consumer, the US

Crude oil and petroleum inventories in the US are still above five-year average levels, but they have dropped from their peaks earlier this year

In addition, oil demand in Asia has visibly strengthened in recent weeks, giving the oil market hope that at least in one region, demand is strong in the fourth quarter

Hope of a vaccine receiving FDA approval soon also instil hopes that life could return to some form of normality at some point in 2021

 

Gas Price News

Natural Gas prices moved higher yesterday, rebounding 2.72%, as colder than expected weather is expected to cover most of the south for the next two weeks

There is one storm in the Atlantic that has a 10% chance of turning into a tropical cyclone but it’s not expected to impact any natural gas infrastructure

Demand rose in the latest week pushing LNG demand in the US

 

Yesterday's Risers and Fallers

 

Company News

Block Energy (AIM:BLOE): Acquisition of SRCL confirmed, further US$1.5m boost to inventory

Share Price: 5.1p, Market Cap: £22m

Following last week’s announcement, as anticipated Block has confirmed the completion of its acquisition of Schlumberger Rustaveli Company (SRCL).

The completion of the acquisition means Block now holds licences for Georgian onshore blocks IX and XIB.

Management has confirmed that as well as significantly increasing production, the acquisition will provide several development and exploration opportunities for the Company in the coming months.

Block will now begin the integration process and will implement a cost reduction plan to ensure the new assets are operated efficiently.

Throughout the due diligence and acquisition process, Block has continued its subsurface technical studies of SRCL's assets, yielding economically attractive short and medium-term opportunities.

Following a technical evaluation of the XIB licence area, which combined production data from over 150 wells, modern 3D-seismic and well logs, Block will shortly apply for permits for a workover and drilling programme across the XIB and West Rustavi licence areas.

Our take: A transformational acquisition for Block in our view adding further production to the Company’s portfolio and considerable development upside. The inventory alone represents a further c.US$1.5m boost to Block’s balance sheet and underlines the strength of the relationship with Schlumberger. The acquisition of producing Block XIB (615km2) and exploration Block IX (1,925 km2) represents Georgia's most productive acreage, with over 180MMbbls of oil produced from the Middle Eocene, peaking in the mid-1980s at 67,000bopd. The deal will serve to boost Block’s 2P reserves by 64MMboe and initial production by 245bopd. In addition, the deal offers further 600Bcf of initial-gas-in-place in the Lower Eocene and Upper Cretaceous, following Schlumberger's recent appraisal drilling. SRCL also benefits from a cost recovery pool of c.US$133m on Block XIB, underlining the attractive fiscal terms available once production ramps up. All in all, this low-cost acquisition represents ‘company maker’ potential for Block in our view and it is no surprise to the shares trading up over 40% at the time of writing.

 

Eco (Atlantic) Oil & Gas* (AIM:ECO): Interim results, robust financial position  

Share price: 21.2p, Market Cap: £39.9m

STRONG BUY – 110p TP

Eco’s interim results further highlight the Company’s robust financial position and exposure to two exciting hydrocarbon provinces.

As at 30 September 2020, the Company had cash and cash equivalents of US$17.2m with zero debt.

Eco remains fully funded for its share (15% WI net) of its planned two exploration wells at Orinduik Block offshore Guyana.

As at 30 September 2020, Eco had total assets of US$18.4m, total liabilities of US$471k and total equity of US$18m.

The Company also saw a 70% reduction in G&A expenses, including travel costs reduction of 82% and office cost reductions of 90% in line with previously reported COVID-19 cost discipline measures.

Multiple light sweet drilling prospects remain under review at Orinduik; high grade candidates are being considered for the next drilling program. 

The Company and JV partners have approved a US$5m (Eco: US$750k) budget through to December 31st for 3D reprocessing based on regional results and high grading of target selection. 

The Company is monitoring drilling activity in offshore Namibia where there is due to be a number of near-term high impact exploration activity.

Up to five exploration wells drilled on behalf of ExxonMobil, Total, Maurel & Prom, Shell and ReconAfrica in the next 12 months will see offshore Namibia return to sector focus.

Our take: Cash reserves of US$17m should enable them to take advantage of opportunities as they arrive as they continue to monitor the situation in Namibia and explore the prospects at the Orinduik Block.  Shareholders will be encouraged by the Company’s strong financial position and strict approach to capital discipline in our view. Eco remains fully funded for a further drilling programme on the Orinduik Block and, subject to JV partner approval, anticipates drilling at least two exploration wells into light oil cretaceous targets in 2021. We therefore reiterate our STRONG BUY rating and 110p/share TP.

*SP Angel acts a research provider for Eco (Atlantic) Oil & Gas

 

Victoria Oil & Gas Plc (AIM:VOG): Matanda Block license extension approved, Cameroon

Share Price: 4.5p, Market Cap: £12m 

VOG’s wholly owned subsidiary Gaz du Cameroun (GDC) has received operator approval from the Minister of Mines, Industry and Technologic development for the Matanda Block License extension. 

The exploration phase has been extended by a further 12 months from 17 December 2020. 

The Company expects the first well to be onshore, close to wells in the Bomono License which have de-risked the shallower plays.

This would also put the well in proximity to the GDC-operated gas distribution infrastructure. 

Prospective Resources on the block increased materially to 1,196Bcf (903Bcf previously) following an ERCL Consultants Evaluation in July of this year. 

19 gas prospects were identified in the shallower Tertiary-aged reservoirs along with a further 7 prospects in the deeper Cretaceous prospect.

Prospective resources are estimated to be 65Bcf with a GoCS of 40%. 

Our take: Positive news for GDC and VOG as they will now be able to progress with the first well on the Matanda Block. ERCL evaluation shows the blocks has significant potential which will be well received by investors in our view in addition to near term drilling catalysts in close proximity to existing infrastructure.

 

Research – Oil & Gas

Sam Wahab - 0203 470 0473 / 0784 385 5037

[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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+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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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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