Today’s Oil and Gas Update –

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Market Update: Wednesday 11 November 2020

Great Eastern Energy* (AIM:GEEC), STRONG BUY: H1 2021 results underline financial resilience

Jadestone Energy (AIM:JSE): Teikoku dispute settled

Lekoil* (AIM:LEK): Shell Trading prepayment facility fully repaid

Energy Prices         

Brent Oil US$44.9 vs 43.1/bbl yesterday

WTI Oil US$42.7bbl vs US$40.1bbl yesterday

Natural Gas US$2.97 vs US$2.89/mmbtu yesterday


Oil Price News

Shell will halve the crude oil processing capacity of its largest wholly owned refinery in the world, Pulau Bukom in Singapore, as part of its ambition to be a net-zero emissions business by 2050

Pulau Bukom hosts the largest Shell refinery globally in terms of crude distillation capacity, 500,000bopd, and it also has an ethylene cracker complex with a capacity of up to a million tons per year and a butadiene extraction unit of 155,000 tons annually.

As Shell is looking to cut carbon dioxide emissions and is transforming its refining business for the new future, it will cut the crude processing capacity at Pulau Bukom by 50%

In that new future, the Pulau Bukom Manufacturing Site will be one of Shell’s six energy and chemicals parks, and will pivot from a crude-oil, fuels-based product slate towards new, low-carbon value chains

The reduced refinery capacity in Singapore will result in fewer jobs at the site and would cut 500 jobs by the end of 2023

Currently, Pulau Bukom employs 1,300 people

Shell is implementing a new downstream strategy to reshape its refining business towards a smaller, smarter refining portfolio focused on further integration with Shell Trading hubs, Chemicals, and Marketing

As part of this strategy, Shell has sold the Martinez Refinery in California to PBF Holding Company for US$1.2bn

Shell is also set to shut down its 211,000bopd refinery in Convent, Louisiana, after failing to find a buyer for the site


Gas Price News

Natural gas prices edged higher during trading yesterday ahead of today’s inventory report from the Department of Energy

Expectations are for a 14Bcf build in natural gas stockpiles according to survey provider Estimize

Hurricane ETA is moving back into the Gulf of Mexico, forecast to generate supply disruptions

There is also another storm that is entering the Caribbean which has a 10% chance of forming a tropical cyclone in the next 48-hours according to NOAA

The weather is expected to be warmer than normal in the US and Europe over the next 8-14 days according to NOAA


Yesterday’s Risers and Fallers


Company News

Great Eastern Energy* (AIM:GEEC), STRONG BUY: H1 2021 results underline financial resilience

Share Price: 10.5p, Market Cap: £12.5m

Despite the challenging sector and indeed global backdrop, GEEC continues to benefit from a resilient business model that has withstood ongoing volatile market conditions.

Today’s H1 2021 results show revenues of US$13.1m (H1 2020: US$19.2m) on a constant currency basis with the YoY drop impacted by the national lockdown in India from 23 March 2020 until the end of June 2020, which has subsequently been gradually relaxed. 

Whilst this has had an adverse impact on sales in H2 2020 and H1 2021, the Company has taken appropriate measures to minimise the impact by optimising costs and increasing efficiencies, seeing a healthy US$6.9m reported EBITDA (H1 2020: US$11.15m) and a cash profit of US$3m in the period.

On this basis, we have updated our financial model, forecasting FY 2021 revenues of US$26.4m on a constant currency basis.

Bucking the trend of much of GEEC’s E&P peers, the Company maintains a prudent approach to capital discipline, continuing to pay down its debt position and not taking up the optional debt moratorium allowed by the Reserve Bank of India due to COVID-19.

Gross debt fell by US$6.6m in the period to US$68.3m, and net debt fell ahead of SPA estimates to US$58.9m (H1 2020: US$63.0m, SPA est. US$59.1m) resulting in a significant fall in GEEC’s net debt/equity ratio to 0.64 (H1 2020: 0.71).

On current market trends and additional revenues weighted to H2 2021, we forecast GEEC will end its financial year with a net debt position of c.US$55m.

The Company’s liquidity position remains robust given a stable pricing model and an unchanged receivable position relative to revenues which we expect to continue.

Management has confirmed that all customers continue to largely remain, and GEEC has even renewed some contracts at the same attractive selling price as previously.

Operationally, during the first half of the year, GEEC commenced the instillation of an additional 50 pumps which will result in further incremental production increases and cash flows.

In addition, construction of the much-anticipated GAIL gas pipeline is reported to complete in February 2021.

The pipeline will run adjacent to GEEC’s acreage and will result in increased connectivity to the considerable Kolkata market, enhancing project economics and acting as a springboard for the Company’s aggressive 144-well drilling campaign commencing next year.

The transportation tariff of this pipeline has been fixed at US$0.964/mmbtu including 12% for Goods and Services Tax.

Once completed, the pipeline will enable connectivity to four fertiliser plants in Gorakhpur, Sindri, Barauni and Panagarh, in addition to 25 others across areas where City Gas Distribution rights have been awarded.

The total demand in the region is envisaged at c.700MMscf/d allowing GEEC to significantly ramp up its operations at Raniganj (South) given the exponential demand.

Elsewhere, to commence its shale exploration programme, the Company is currently in the process of obtaining final approvals.

Subject to the results obtained and analysed from the core wells, the Company intends to drill an optimum number of pilot production wells to delineate the acreage.

GEEC’s shale gas resources can be explored and developed cost-effectively in tandem with its successful ongoing CBM development program through the sharing of surface and other infrastructure facilities.

Underlining the transformational value held within GEEC’s shale acreage, even on a conservative 2U base, ARI attributed 883Bcf of recoverable shale gas at Raniganj (South), which we value at an NPV10 of US$1.7bn net to GEEC (i.e. 1,118p/share).

On a macro level, the outlook for the Indian gas market remains extremely compelling in our view, highlighted by India’s LNG imports for September 2020 increasing 5% on September 2019 alone.

In addition, the latest available data suggests that the average delivered LNG price is currently $7.49/mmbtu – significantly above US and European pricing models.

With regards to the impact of the current pandemic, notwithstanding recent positive vaccine developments, India has seen a significant curtailment in virus cases in the last month which is having a visible impact in the unwinding of restrictions in the country.

With the gradual resumption of overall economic activities, operations of the Company effective second quarter started moving towards normalcy.

Given that GEEC is in the business of essential services it is therefore important to note that there is not much of a significant impact likely on its operations of the Company, liquidity position, recoverability of assets, etc due to this pandemic and it continues to maintain sufficient liquidity to meet all its obligations.

Our take: A positive set of figures released today, and shareholders will be encouraged by the financial resilience exhibited in challenging market conditions in our view. The Company’s strategy of optimising production, as well as pursuing further exploration continues, as is the exploitation of its potentially transformational shale acreage. More recently, the Indian Government has taken positive steps to accelerate growth in the country’s economy, and as a result, demand for hydrocarbons in India continues to grow, recently evidenced from rising LNG import data. Today’s results further highlight the Company’s compelling investment case in our view, outperforming much of its peer group. GEEC’s current valuation therefore remains deeply undemanding and we reiterate our STRONG BUY stance and 252p/share TP.

*SP Angel acts as Corporate Advisor to Great Eastern Energy Corporation


Jadestone Energy (AIM:JSE): Teikoku dispute settled

Share Price: 54p, Market Cap: £254m

In a positive update for Jadestone, Teikoku Oil, subsidiary of Inpex has agreed a full and final settlement with respect to the dispute regarding the notice of termination of the SPA for a 30% working interest in Block 05-1 PSC, offshore Vietnam. The Company delivered the notice of termination to Jadestone on the 18th of February 2018.

Jadestone has said it will not experience a significant increase in its cash position as a result of the settlement.

In August 2016 Jadestone through a wholly owned affiliate, signed a definitive sales and purchase agreement SPA with Teikoku, as seller, for the acquisition of a 30% working interest in Block 05-1 PSC. The agreement was a total cash consideration of US$14.3m.   

Following receipt of the notice of termination and prolonged negotiations Jadestone filed a notice of arbitration to the Singapore International Arbitration Centre in July 2020.

Blocks 05-1b and 05-1c are located in the Nam Con Son basin 300km south-east of Ho Chi Minh City offshore Vietnam. The blocks cover 1570km2 at a water depth of 120m.

Discovered petroleum initially in place at the blocks is estimated to be 75.7MMboe, 343.7Bcf of natural gas and 18.4MMbbl of natural gas liquids.

Our take: A welcome cash injection, and more importantly, a distracting episode now behind Jadestone. The Company’s balance sheet strength underpinned by its prudent approach to capital discipline has ensured it successfully navigated a difficult period for the sector. Preserving a healthy dividend this year will also ensure a happy shareholder base and differentiates Jadestone from many of its peers in our view.


Lekoil* (AIM:LEK): Shell Trading prepayment facility fully repaid

Share Price: 2.2p, Market Cap: £11.8m

Lekoil has confirmed that the Company has fully repaid the prepayment facility with Shell Trading (LSE: RDSA, RDSB).

The prepayment facility, repayable from crude oil liftings from Otakikpo, was fully repaid ahead of its maturity date.

Following this repayment, as at 9 November 2020, Lekoil has an outstanding balance of external interest-bearing loans and borrowings of c.US$15.6m, and a total cash balance of US$3.8m, with US$1.3m recognised as restricted cash.

Our take: Despite the macro-challenges across the sector this year, Lekoil has successfully navigated the period with steady production and cashflow generation from Otakikpo while implementing a range of significant cost reduction initiatives across its operations ensuring a timely repayment of its facility with Shell Trading. Earlier this year, Lekoil executed definitive agreements for the next phase of the Otakikpo marginal field development. These definitive agreements are made up of service agreements with Schlumberger which cover the comprehensive infrastructure upgrades and field management services in relation to the planned upstream drilling programme.

*SP Angel acts as Broker to Lekoil


Research – Oil & Gas

Sam Wahab – 0203 470 0473

[email protected]



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



+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


Natural Gas




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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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