Oil price, SDX Energy, EnQuest, Bowleven, And finally…
WTI $53.18 +43c, Brent $55.44 +21c, Diff -$2.26 -22c, NG $3.28 +4c
Boring is the correct word to be frank as crude lifts gently on the back of global supplies tightening and stocks slowly falling. After the close the API numbers were in line with forecasts at +2.93m barrels but Cushing was down which was ok but gasoline stocks were still very high.
SDX has announced – finally- that it has acquired the Egyptian and Moroccan assets of Circle oil from a pre-packed bankruptcy and raised $40m at 30p to pay for it. When the company came to London last year it vowed to become a mid-tier E&P in North Africa and this takes the company some way down the track to doing just that. It has picked from the shelves the assets in Egypt and Morocco which fit with the current portfolio and the plans. The licences come debt free for $30m which SDX say is 39 cents in the dollar for the debt. With an average net back of $24.11 the deal seems to promise a swift return to shareholders.
The Egypt asset gets them 40% of the NW Gemsa concession in which they already have a 10% stake, this means that without any further cost, the extra income drops through to the bottom line with ease. 2P reserves here go up by 3.77 mmboe. In Morocco they get 75% of Sebou and LM concessions which adds 4.5 MMscf/d of production and 2P reserves of 1.45 mmboe, so in total SDX adds 5.22 mmboe to the book. Infrastructure in Morocco obviously includes 75% of the pipeline which takes gas to market and has significant spare capacity.
SDX also has an interesting existing portfolio and I am excited about prospects for South Disouq in particular which is due to spud shortly and following 3D seismic now has both oil and gas plays. Overall I feel that SDX has successfully transited during its time in London, it has built a solid base and now is becoming a bigger player with this acquisition and raise, in which existing and new shareholders made the issue very well oversubscribed, does the bucket list beckon?
I have done an interview with Paul Welch, CEO of SDX in which he discusses the deal, the link is here.
Time prevented me from writing about EnQuest yesterday but it looks like a pretty sensible deal to me, from both sides. For EnQuest, buying a 25% stake in Magnus is fairly cheap and in fact, through paid through cash generated by the field itself. No worries about decommissioning either as BP retain the liability subject to further deals on that front. We are going to see a bit more in respect of late life assets as the majors tidy their portfolios and their liabilities, they may well be attractive to smaller players if terms are like this.
The FT reports what has been significant gossip in the sector lately about a Monaco-based investor who is amassing a stake in the company in order, one presumes to snaffle the cash. Crown Ocean Capital is asking for virtually all the board’s heads on a platter and has two directors ready to take over. I am grappling with my recommendation on BLVN at present ahead of the bucket list changes but although I know there is discontent I am not quite so sure that it is well directed. The company took a huge cheque in farming-out in Cameroon in recent years and is set pretty well as a result. It is not their fault that the new owners havent spun the drill bit yet but $250m gets you over a lot of things. I have personally said that I would have done some things but in general am not pointing my guns at the BLVN board even if I sometimes wish they might be a bit more proactive.
Sad to see that Johanna Konta lost her game in Australia to Serena Williams but in the mens side both Federer and Nadal are holding up the standards for the old brigade.
And Cheltenham gets a bit more open as Annie Power withdraws from the festival…