Oil & Gas Daily Flow
Non-Independent Research; Marketing & Sales Commentary - MiFID II exempt information – see disclaimer below
Market Update: Wednesday 9 March 2022
Longboat Energy PLC (AIM:LBE): Drilling operations commence at the Kveikje exploration well
Trinity Exploration & Production PLC (AIM:TRIN): Trinity receives environmental certificate ahead of FID, Trinidad
Energy Prices
Brent Oil US$129.8/bbl vs US$126.5/bbl yesterday
WTI Oil US$124.9/bbl vs US$122.5/bbl yesterday
Henry Hub Gas US$4.57/mmbtu vs US$5.70/mmbtu yesterday
UK NBP Futures 477p/therm vs 485p/therm yesterday
Oil Price News
- Crude prices remain elevated after President Joe Biden announced the US would ban imports of Russian fossil fuels, while the UK said it would phase out Russian oil products (not gas) by the end of this year
- Gasoline prices have reached record highs in the US, according to the American Automobile Association, as broken supply chains exacerbate what were already tight product markets.
- Russia is the world's top exporter of crude and oil products combined, at around 7MMbopd or 7% of global supply
- Such a ban would be unprecedented, fuelling already elevated prices and risking inflationary shock
- Russian oil export flows, according to media reports, have now fallen by 3MMbopd this week (from 2.5MMbopd last week) because of Western sanctions, together with buyers reluctant to assume the risk in taking Russian cargoes.
- Prices have rallied c.30% since Russia invaded Ukraine on 24 February, and has led to another shock to global price pressures already at their highest levels in decades
- European Central Bank policy makers meeting later this week to discuss the ramifications on consumers
- 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
- According to the latest report from the EIA, US energy consumption is forecast to grow set 5-30% by 2050 under a range of scenarios, with parallel growth forecast in domestic supply for both oil (for transportation) and natural gas (for LNG export)
- Renewables will be the fastest growing energy source, but still contributes a smaller share to US energy needs in 2050 than oil or gas, out with a significant change in policy
- US energy-related CO2 emissions are forecast to be stabilised over the next 15 years before emissions begin to trend upward as increasing energy consumption outpaces continuing reductions in energy intensity and CO2 intensity
Gas Price News
- European gas prices subsided on positive sentiment that Russian gas supplies would not be targeted by official sanctions in Europe
- Deputy Prime Minister Alexander Novak warned European leaders that Russia could “place an embargo on gas transit via Nord Stream 1” in retaliation for their calls to sanction Russian oil and gas
- Chancellor Olaf Scholz rejected talk of an embargo on Russian energy exports, saying that the supplies were of "essential importance" to the Europe’s economy, and that heating, transport and electricity could not be otherwise secured
Company News
Longboat Energy PLC (AIM:LBE): Drilling operations commence at the Kveikje exploration well
Share Price: 51.7p, Market Cap: £29m
- Longboat has commenced drilling operations on the Kveikje exploration well (Company 10%).
- Kveikje is the primary prospect in licence PL293B, which lies in an area north of the giant Troll field in the Norwegian North Sea with many producing fields and significant infrastructure.
- The Kveikje well will be drilled close to recent discoveries, lying c.8km from the Swisher discovery and c. 10km from the Toppand discovery.
- If successful, Kveikje could potentially form part of an area cluster development.
- The prospect is an Eocene Balder Formation injectite with seismic amplitude support.
- Injectite reservoirs are typically characterised by excellent reservoir properties, with recent exploration successes of this type including the King and Frosk discoveries in the Balder and Alvheim area respectively.
- The exploration well has further potential upside in the underlying Paleocene Rokke and Late Cretaceous secondary prospects.
- Kveikje is estimated to contain gross mean prospective resources of 36MMboe with further potential upside estimated at 79MMboe on a gross basis.
- The chance of success associated with the Kveikje prospect is 55% with the key risks being trap presence and seal integrity.
- Rokke and n'Roll have an additional 127MMboe of gross mean prospective resource with chances of success in the range of 14%-34% which have not been reviewed by ERCE and are based on Operator estimates.
- The drilling of the Kveikje well 35/10-8S is being undertaken by the Deepsea Stavanger semi-submersible drilling rig and operated by Equinor and is expected to take up to four weeks to drill.
Our take: In light of elevated commodity pricing and critical concerns regarding European energy self-security, Longboat’s 2022 exploration programme offers shareholders the opportunity to gain exposure to a drilling portfolio of three wells targeting net mean prospective resource potential of 69MMboe with an additional 256MMboe of upside.
Trinity Exploration & Production PLC (AIM:TRIN): Trinity receives environmental certificate ahead of FID, Trinidad
Share price: 148p, Market Cap: £57m
- TRIN has confirmed that the Company has received the final Certificate of Environmental Clearance (CEC) for the Galeota Asset Development (GAD) Project from the Environmental Management Authority of Trinidad and Tobago (EMA).
- This now completes all required environmental clearances for the Echo Field Development, which has the potential to achieve peak annualised gross production of c.7,000bopd.
- Receipt of the CEC is another important step on the path to achieving Final Investment Decision (FID) for the Echo Field Development.
- The timetable to FID will ultimately be subject to the outcome of the farm-down process for Galeota, which encompasses the current Trintes production, the matured Echo Field Development and the Foxtrot and Golf appraisal areas.
Our take: Shareholders will be encouraged by this latest development as acquiring the CEC for the Echo Field Development is a required step on the path to FID. The Company also confirms that the Galeota farm-down process continues with ‘healthy levels of engagement’ from interested parties. Furthermore, the anticipated reform of the taxation regime should create a more attractive environment for Trinity and potential partners to deploy investment capital into GAD and similar projects.
Research – Oil & Gas
Sam Wahab - 0203 470 0473 / 0784 385 5037
sam.wahab@spangel.co.uk
Sales
Richard Parlons – 020 3470 0472
Abigail Wayne – 020 3470 0534
Rob Rees – 020 3470 0535
Grant Barker – 020 3470 0471
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%