Today’s Oil and Gas Update – Serinus Energy and more…

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




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Market Update: Monday 13 October 2020


Europa Oil & Gas (AIM:EOG): FY 2020 results, further portfolio expansion


Sound Energy (AIM:SOU): Two-year licence extension granted at Sidi Moktar


Serinus Energy (AIM:SENX): Adapted work commitment approved for Satu Mare Concession


Pantheon Resources (AIM:PANR): Positive prospective resource estimates from Talitha project


Enwell Energy (AIM:ENW): Improved production volumes




Energy Prices


Brent Oil US$41.7/bbl vs US$40.5/bbl yesterday


WTI Oil US$39.4/bbl vs US$40.4bbl yesterday


Natural Gas US$2.83/mmbtu vs US$2.89/mmbtu yesterday




Oil Price News


Oil prices ticked up as continuing disruption to US production following Hurricane Delta


US energy companies were returning workers and restarting operations at storm-swept production facilities along the Gulf Coast on Sunday, two days after Hurricane Delta went through the area


Chevron, Shell and BHP have reported that workers were headed back to production platforms in the US regulated northern Gulf of Mexico


BHP expects to complete the return of workers to its Shenzi and Neptune production platforms and resuming flows will depend on how quickly pipelines return to service


It can take several days after a storm passes for energy producers to evaluate facilities for damage, return workers and restore offshore production


The companies that operate oil and gas pipelines and process the offshore output also shut ahead of the storm


On Sunday, the US Bureau of Safety and Environmental Enforcement confirmed that 91% of offshore crude oil production remains shut in the US regulated northern Gulf of Mexico following Hurricane Delta, which made landfall on Friday night


In addition, 62.2% of natural gas output remains shut in the Gulf following the storm that made landfall near Creole, Louisiana, and weakened into a low-pressure system over Mississippi on Saturday


A cumulative total of 8.8MMbopd production and 8.3Bcf/d of natural gas output from the Gulf has been shut because of Hurricane Delta




Gas Price News


Natural gas prices remain volatile as there is a disturbance moving across the Caribbean Sea which has a 30% chance of becoming a tropical cyclone in the next 48-hours according to NOAA.


The weather is expected to be colder than normal throughout the mid-west for the next 6-10 and 8-14 days according to NOAA which should increase heating demand.


The highly volatile US natural gas benchmark prices are set to trend higher in the coming months amid lower domestic production, higher demand in the winter, and recovering global gas prices in Europe and Asia–America’s key export destinations for LNG


The coming winter season and the end of the hurricane season that has disrupted LNG operations and exports along the US Gulf Coast, coupled with recovering gas demand for industrial activities in Asia and Europe, are likely to send natural gas prices to above US$3/mmbtu in the winter months, the natural gas futures curve and EIA estimates show


The impending winter heating season, however, is about to change the fundamentals


Demand is expected to rise with the fall in temperatures in the northern hemisphere, supporting US and global natural gas prices


Higher prices at the key European and Asian hubs will make LNG exports to those destinations viable and profitable again


This week’s volatile natural gas prices were indicative of a demand/supply picture in a ‘shoulder season’ when power demand for air conditioning begins to wane, but demand for heating is not there yet


So prices reacted to the immediate drivers–storage, feed supply for LNG, and storm-induced shut-ins


Yesterday’s Risers and Fallers


Top 10 Risers


Top 10 Fallers


Solo Oil PLC 105.4%


IGas Energy PLC 27.8%


TomCo Energy PLC 14.3%


Rockhopper Exploration PLC 13.3%


Reabold Resources PLC 12.7%


Tlou Energy Ltd 11.1%


Sound Energy PLC 10.2%


Bahamas Petroleum Co PLC 9.7%


Eco Atlantic Oil & Gas Ltd 4.9%


Chariot Oil & Gas Ltd 4.9%


Victoria Oil & Gas PLC -16.7%


Caspian Sunrise PLC -11.8%


Angus Energy PLC -6.5%


ADM Energy PLC -6.4%


Verditek plc -6.4%


Empyrean Energy PLC -5.4%


Lansdowne Oil & Gas PLC -5.2%


Serica Energy PLC -4.9%


Zephyr Energy PLC -4.0%


I3 Energy PLC -3.2%




Company News


Europa Oil & Gas (AIM:EOG): FY 2020 results, further portfolio expansion


Share price: 0.83p, Market Cap: 4m


Europa has reported a yoy fall in revenues for FY 2020 to GBP1.2m (2019: GBP1.7m) as a result of a material drop in it recognised average oil price of US$48.0/bbl (2019: US$66.7/bbl).


The Company reported average production for the year of 92boepd (2019: 91boepd) from its three UK onshore fields. Production was down at West Firsby, relatively flat at Crosby Warren, but increased at Whisby.


Europa’s pre-tax loss before exploration write-off / write-back was GBP1.2m (2019: GBP0.9m), whilst the Company’s pre-tax loss of GBP5.4m including write-offs taken following relinquishment of Irish (2019: pre-tax loss GBP0.7m).


Net cash from operations remained strong at GBP0.8m (2019: GBP0.7m), and the Company ended its year with a cash balance of GBP0.8m (31 July 2019: GBP2.9m).


The year saw a strategic augmentation of its portfolio, particularly offshore Morocco Offshore Morocco where it was awarded the 11,228km2 Inezgane licence in the Agadir Basin.


The area is equivalent to about 50 UKCS North Sea blocks and includes 14 prospects and 16 leads with the potential to hold in aggregate close to 10Bnbbls of unrisked oil resources mapped in the Lower Cretaceous fan sand play, a prolific producer in West Africa.


The 14 prospects each have mean resources in excess of 150MMboe which add up to total resources in excess of 5Bnboe.


The 827MMboe Falcon and 204MMboe Turtle prospects have been assigned a geological chance of success of 20-35% by Europa.


The Company has also confirmed that the licence attracting interest from a number of operators looking to farm-in.


Shell, ENI, Repsol, Hunt, Chariot, SDX, Sound, Schlumberger and Genel are currently active in the area.


In terms of outlook, a key area of focus will be on the Wressle development onshore UK (Europa 30% WI) which is due to come onstream this year at a 500bopd constrained rate.


The estimated break-even oil price (excluding Europa’s corporate overheads) is US$17.6/bbl – well below current oil prices.


Our take: Despite the challenging market backdrop, it has been an active year for Europa from an operational standpoint in our view. This has included the award of the Inezgane permit offshore Morocco, the granting of planning consent for the Wressle oil field, and the refocus of the Offshore Ireland portfolio onto the proven gas play of the Slyne Basin following the acquisition of FEL3/19 and the 1.2Tcf Edge prospect. While the ongoing pandemic and volatility in oil and gas prices may impact exact timings of planned activity, there is clear momentum across the Company’s portfolio in our view.




Sound Energy (AIM:SOU): Two-year licence extension granted at Sidi Moktar


Share price: 18p, Market Cap: GBP31m


Sound has confirmed a 24-month extension to the initial period of the Sidi Moktar Permits, onshore Morocco.


The Sidi Moktar Permits cover 4,712km2 in the Essaouira basin, central Morocco which the Company was awarded for an initial period of 2 years and 6 months in early 2018.


Sound holds an operated 75% position in the permits with the remaining 25% held by ONHYM.


Due to further disruption caused by the impact of the COVID-19 pandemic, during which the Company has been in regular dialogue with the regulatory authorities, ONHYM has approved a 24 month extension to the initial period of the Petroleum Agreement in order for the Company to complete the committed work programme.


Subject to the issuance of the Joint Arrete signed by the Minister in charge of Energy and Minister in charge of Finance, the length of the initial period will now be 4 years and 6 months, commencing 9 April 2018.


The work programme commitments for the initial period remain unchanged.


The lengths of the first and second complimentary periods, which would commence upon the successful completion of the recently extended initial period, remain unchanged at 3 years, and 2 years and 6 months, respectively.


Our take: The ongoing pandemic has given rise to additional flexibility to operators in the region and shareholders will welcome the additional time to seek the required funding necessary for Sound to develop this key acreage in its portfolio.




Serinus Energy (AIM:SENX): Adapted work commitment approved for Satu Mare Concession


Share Price: 5p, Market Cap: GBP12m


Serinus has received approval in Romania from the National Agency for Mineral Resources (“NAMR”) to amend the last outstanding work commitment as part of the third exploratory phase in the Satu Mare Concession.


The NAMR has also granted a 12-month extension to the work commitment, the new exploratory phase now ending on 27 October 2021. A further extension corresponding to the duration of the Romanian “State of Emergency/State of Alert” will be added once the COVID-19 related “State of Emergency/State of Alert” has been lifted.


The NAMR has accepted the Company’s proposal to modify the final work commitment to drill two exploration wells.


The first well Moftinu-1008 will be drilled to a depth of 1,000m into the producing Moftinu structure and is expected to intersect three proven gas-bearing sand formations and two additional untested formations. Surface preparation work has begun and the well is expected to be spudded in January 2021.


Upon success the Moftinu-1008 well will be tied into the Moftinu gas plant via a 1.5km flowline for processing and sale.


The second planned well will be drilled into the Sancrai structure to a depth of 1,600m. The completed Santau 3D seismic program (2013) highlighted the prospectivity of this structure. A subsequent reprocessing of legacy 2D lines has demonstrated structural closure with AVO processing showing bright amplitudes consistent with a gas bearing reservoir. Spud date is expected to mid-2021.


Our take: Another positive update from Serinus today securing further extensions in Romania. In terms of outlook, operations in Romania and Tunisia are so far unaffected by COVID-19 and Serinus continues to produce at pre-virus rates. It is also worth noting that Moftinu 1004 continues to flow at commercial rates and provides additional gas production to the Moftinu Gas Plant, against the backdrop of very attractive fiscal terms in Romania. Additional near-term low-risk exploration potential has been identified in areas immediately adjacent to the Moftinu development, which share the same reservoir, trap, seal and charge characteristics as Moftinu, and a 12-month extension to the exploration phase will allow further breathing space to exploit this potentially prolific acreage.




Pantheon Resources (AIM:PANR): Positive prospective resource estimates from Talitha project


Share Price: 47p, Market Cap: GBP230m


Pantheon has completed its resources assessment of the Kuparuk formation at its Talitha project, the deepest of the three geological horizons is estimated (on a 100% basis) to contain 1.4Bnbbls of oil in place (OIP) and a Prospective Resource (recoverable) of 341MMbo as a most likely case.


The Company’s modelled illustrative development plan for the zone, includes 62 wells, exploiting 247MMbo of the resource, using the WTI forward price curve yielding a potential of US$1.48bn.


Pantheon intends to drill a well at Talitha in early 2021 to test Kuparuk and the two other shallower target horizons:


The Company is nearing completion a resource estimate for the “Shelf Margin Deltaic” (SMD) the shallowest horizon which is the primary objective of the Talitha project due to its attractive reservoir qualities. A recent Independent Expert Report (IER) certified a Prospective Resource of 302MMBO (100% basis).


The middle horizon, the “Slope Fan System” was found to have oil throughout when the original Pipeline State #1 well was drilled. The Company is currently in the process of a resource assessment which is expected to be completed by the end of the year.


Our take: An impressive update reported by Pantheon today, further validating the transformational potential at Kuparuk. The Company has substantially increased its estimates of total prospective resources at Talitha. Importantly, Talitha has scope for further resource improvement as Pantheon matures its work over the coming weeks and months to include the Slope Fan System, and the entire structure across the SMD, which will now include the downdip section.




Enwell Energy (AIM:ENW): Improved production volumes


Share Price: 16p, Market Cap: GBP50m


Production volumes increased c.19% in Q3 compared to Q3 2019, positively impacted by the SV-54 (SV Fields) well commencing production testing.


VAS-10 well saw production overhangs, a result of a decline in production rates in late 2019. Compression equipment was installed in Q1 2020 to stabilize production, with a longer-term plan to undertake a workover well to access an alternative reservoir horizon.


Appraisal well SV-25 has reached a depth of 4,875m, with a target depth of 5,320 m. Drilling is expected to be completed by the end of Q1’2021 with a production hook up in Q2’2021 subject to successful testing.


The well’s primary targets are B-20, B-22 and B-23 horizons in the Visean formation.


A further well is planned along with the possible sidetracking of an existing well in the SV field in 2021.


Planning is underway for a new well to explore the Vvdenska (VED) prospect with the VAS license area.


In September the Appellate Administrative Court ruled in favour of Arkona in their dispute with NJSC Ukrnafta over irregular procedures when the SC exploration license was granted to the Arkona. They overturned the earlier decision of the First Instance Court which was in favour of NJSC Ukrnafta.


Legal proceedings challenging the Order for suspension related to the production license at the VAS field remain ongoing, the Company is confident it will be successful in the legal proceedings.


The Company’s cash resources are currently c.US$55.7m.


The Company reports there have been no operational disruptions linked to the COVID-19 pandemic with no material impact to its prospects.


Our take: Enwell continues to see strong production levels, albeit in a lower gas price environment than 2019. The focus will now centre on the drilling of the SV-25 well, which could be hooked up in Q2’2021 subject to successful testing, adding further material barrels to the Company’s production base.




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




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






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