Oil & Gas Daily Flow
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Market Update: Thursday 3 March 2022
ATOME Energy PLC (AIM:ATOM) *: ATOME Mobility appoints AECOM to provide engineering consultancy
Eco (Atlantic) Oil & Gas Ltd (AIM:ECO, TSX-V:EOG): Drilling contact initiated for the Gazania-1 well, offshore South Africa
Energy Prices
Brent Oil US$119.1/bbl vs US$111.0/bbl yesterday
WTI Oil US$115.9/bbl vs US$109.5/bbl yesterday
Henry Hub Gas US$4.90/mmbtu vs US$4.72/mmbtu yesterday
UK NBP Futures 430p/therm vs 424p/therm yesterday
Oil Price News
- Additional sanctions targeting Russian refineries, disruptions to shipping and a fall in US crude stocks to multi-year lows has pushed benchmark oil prices to their highest in almost a decade
- As expected, OPEC+ has agreed to maintain an increase in output by 400kbopd in March despite the price surge, snubbing calls from consumers for more crude
- Following the conclusion of the 26th OPEC and non-OPEC Ministerial Meeting, held via videoconference on 2 March 2022, and based on internal consultation held exclusively by the OPEC and participating non-OPEC oil-producing countries in the Declaration of Cooperation, it was noted that current oil market fundamentals and the consensus on its outlook pointed to a well-balanced market, and that current volatility is not caused by changes in market fundamentals but by current geopolitical developments.
- The head of the International Atomic Energy Agency (IAEA) will visit Tehran on Saturday, suggesting this could help pave the way to a revival of Iran's 2015 nuclear agreement with major powers
- Elsewhere, US oil inventories continued to decline
- Inventories at Cushing are at their lowest since 2018, while US strategic reserves dropped to a near 20-year low
Gas Price News
- The benchmark Dutch front-month gas contract at the TTF hub hit a record intra-day high of €185/tn yesterday, just beating the previous high of €184.95 seen last December when Russian flows through the major Yamal pipeline began sending gas eastwards in reverse
- Russia supplies 40% of Europe’s gas supplies, and concerns that flows could be disrupted after Moscow’s invasion of Ukraine saw the price surge almost 70% on Thursday
- But prices cooled on Friday as traders analysed US president Joe Biden’s decision to include in his sanctions package a carve-out for energy payments, a crucial source of revenue for Moscow
- Russian forces fired missiles at several cities in Ukraine and landed troops on its coast after President Vladimir Putin authorised what he called a special military operation in the east
Company News
ATOME Energy PLC (AIM:ATOM)*: ATOME Mobility appoints AECOM to provide engineering consultancy
Share Price: 72.9p, Market Cap: £23m
BUY, 114p/share TP
- ATOME has provided an update on mobility operations in Paraguay.
- ATOME Mobility is dedicated to providing a clean energy solution for road transport and shipping, two hard-to-abate industries where battery alternatives cannot provide effective solutions using present technology.
- The Company has appointed AECOM to provide engineering consultancy services in respect of UK procurement of core equipment for ATOME Mobility.
- AECOM is a US based multi-national Fortune 500 infrastructure consultancy firm with nearly 50,000 employees worldwide.
- Significant progress is being made in the procurement of core equipment for ATOME Mobility, with the business on track to commence transport operations, initially in Paraguay, before the end of Q2 2023.
- At the same time, material progress is being made in discussions on the sourcing of non-equity funding for core equipment procurement and the Company has well-founded confidence that this can be put in place at the appropriate time.
- In parallel, discussions have taken place with a number of potential end users and the Company is clear that the significant interest being shown in ATOME Mobility can be converted into concrete offtake arrangements.
Our take: The appointment of AECOM as the provider of engineering services is an important step in maturing ATOME’s mobility business, with more substantive news to follow. ATOME Mobility aims to provide an integrated solution to accelerate the path for transition to zero emission green energy for all stakeholders. In addition, progress continues on the Company’s core projects now totalling 350 MW in Iceland and Paraguay, with the next key catalyst being FID potentially later this year. We reiterate our BUY rating and 114p/share TP.
*SP Angel acts as Corporate Broker to ATOME Energy PLC (AIM:ATOM)
Eco (Atlantic) Oil & Gas Ltd (AIM:ECO, TSX-V:EOG): Drilling contact initiated for the Gazania-1 well, offshore South Africa
Share price: 33.5p, Market Cap: £69m
- Eco has confirmed that the Joint Venture partnership of Block 2B, offshore South Africa, has entered into a drilling contract for the Island Innovator semi-submersible rig with Island Drilling Company AS for the upcoming drilling of the Gazania-1 well.
- The Block 2B JV partners are Africa Energy, with a 27.5% WI, a subsidiary of Panoro Energy, holds a 12.5% WI and Crown Energy AB indirectly holds the remaining 10%WI.
- Eco will become Operator and hold a 50% WI, subject to near completion of its 100% acquisition of Azinam.
- The Gazania-1 well is located in the Orange Basin in South Africa.
Our take: Success offshore South Africa could add transformational value to Eco’s portfolio, augmenting an already significant discovered resource base offshore Guyana. The Orange Basin straddles the offshore waters of Namibia and South Africa, where major discoveries on both the Graff-1 well, drilled by Shell, and the Venus-1 well, drilled by TotalEnergies, have recently been announced. Offshore Gayana, Orinduik continues to offer significant upside for investors, especially as the JV partners move into the crucial phase of prospect selection.
Research – Oil & Gas
Sam Wahab - 0203 470 0473 / 0784 385 5037
sam.wahab@spangel.co.uk
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Sources of commodity prices
Oil Brent, WTI
ICE
Natural Gas
NYMEX
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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%