Oil price, SDX, Falcon, Cairn, Wentworth, Empyrean, Block, Egdon, Lekoil/San Leon And finally…
WTI $62.87 +85c, Brent $72.62 +85c, Diff -$9.75 n/c, NG $2.64 +4c
The oil price remains firm with the Saudis taking action against the Houthi rebels who they consider to be responsible for recent drone attacks on their ships. Whilst geopolitics remain to the fore I suspect that any other influencing factors, including trade wars will remain by the by.
Unexpected news from SDX this morning as the company reduces guidance and parts company with its CEO. Q1 production was 3,715 boe/d, up 22% on the equivalent quarter last year but 5% down on Q1 due to an increased water cut at NW Gemsa which is still declining. Work on the CPF at South Disouq continued in the quarter but first gas is now expect in 4Q 2019.
The company has ‘robust’ operating cash flow of $7m after spending $13m on capex in the period so SDX is still in a strong position. It leaves them with cash of $11m at 31/3/19 and with the $10m EBRD facility undrawn. The company has brought down sales guidance for Morocco to 6.0-6.5 MMscf/d (from 9-11) citing fewer new customers and one existing client scaling down usage which is the only disappointing number, should it manifest itself. Accordingly CEO Paul Welch has fallen on his sword which will appease those who have been-correctly- bearish on the shares but I am confident that particularly ironically in Morocco there is solid business for the longer term and that this guidance change may have been on the conservative side.
Where does that leave SDX? Mark Reid who has taken over as interim CEO will do an excellent job, he is one of the best CFO’s in the sector and could certainly step up for as long as is needed and the rest of the team is first rate. The shares have fallen a long way even before today and whilst there will be understandable short term concern, a business such as this with a market cap of only around £50m seems to be potentially very good value.
Falcon Oil & Gas
FOG has announced a placing to raise $10m at 14p in order to fund its share of stages 2 and 3 at the Beetaloo project in Australia. General feeling in the market is that with a huge carry and $7m of cash in the bank why is this raise necessary, not irrational though. Speaking to CEO Philip O’Quigley this morning indicates it is more of a ‘belt and braces’ approach but that whilst none of the spending over the next two years is not overrunning it is going to be around $5-6m net to FOG above the existing carry so wise to top up now.
The raise is at a discount of around 15% which is disappointing to PO’Q but it is 6 years since the last raise and this has brought in a number of new institutions to the register and it is still only a modest 5% of the equity. With the company now well funded through to the end of 2020 and with two big seasons of drilling to come, the ever patient shareholders now have good reason to be excited.
An AGM statement today from Cairn where all is proceeding as expected at the moment. Production guidance remains at 19-22 kbopd with unexpectedly Catcher being the star of the show. The Nova and SNE developments in Norway and Senegal are both on track and exploration wise the company is drilling six wells this year. The company has nothing to report on India at the moment, also as expected.
For various reasons blog space this week has been at a premium but the Wentworth update on Wednesday is worth commenting on as although there isn’t a deal to talk about yet (statement indicating still looking for a deal) work continues as planned elsewhere. Production guidance of 75-85 MMscf/d is maintained despite the recent months of the rainy season seeing hydro-electric competition but this ends at the end of this month. As one might expect the company is expecting demand to be ‘increasing’ in the 2nd half with progress from its customer base across the board.
Elsewhere both TPDC and TANESCO are paying monthly albeit 3 months in arrears and the Ziwani-1 carry was finally settled in January. Bit by bit the decks are being cleared, the Tembo block in Mozambique exit is nearly gone and as I mentioned at the top the space for that acquisition is being made…
The 3D seismic on Jade and Topaz prospects offshore China confirm the presence of ‘well defined’ gas clouds which legend states, (at least CNOOC legend) a higher propensity of an oil discovery. As I have written before I really like the look of Empyrean’s Chinese acreage but think I would like a touch more than a gas cloud on seismic. I am promised that Tom and Gaz are over here soon and I may get a meeting…
I notice that Block has raised £12m at 11p, a 15.7% discount which would have surprised many investors not long ago. Readers will know that I am a big fan of Block which is already delivering the goods, this money will help upgrade facilities, drill more side-tracks and even do some 3D seismic work. I’m scheduled a meeting with Paul Haywood soon and will further update after that.
Also raising money is Egdon who raised slightly less, £2.17m at 5p at a tighter discount but mainly thanks to 29.9% shareholder Petrichor who are not only buying their corner but underwriting most of the issue. If they get left with it they would own 38% of the company but seem to have a waiver so they don’t have to bid…
In an unusual piece of transfer news I notice that Lisa Mitchell has left Lekoil as CFO to go to San Leon in the same position replacing the evergreen Ewen Ainsworth. Now it’s not really out of the frying pan as they say but i’m looking forward to hearing the reasons for this financial merry go round…
It’s the FA Cup Final tomorrow and the Noisy Neighbours are after a third piece of silverware this season against the Hornets at Wembley. Elsewhere in football Middlesboro have sacked Tony Pulis after failing to get promotion.
In rugby union it might be interesting as the Saints and the Quins can still get 4th place I think and the former go to the Chiefs and the latter are at Wasps…
The 4th ODI game between England and Pakistan is at Trent Bridge today, without Captain Morgan who is banned for a slow over rate in the last match.
And it’s the US PGA where yet again Brooks Koepka is showing the way but Tommy Fleetwood is hanging only 4 shots behind.