WTI $56.22 +59c, Brent $63.26 +79c, Diff -$7.04 +20c, NG $2.31 +6c
Oil actually did well to hold up yesterday although tensions in the Gulf override pretty much everything else at the moment. With that in mind a report that Iranian oil is building up ‘in bond’ technically offshore China could on another day be perceived as a bearish build waiting to be released. Likewise the re-opening of El Sharara bringing those 290/- barrels of Libyan crude onto the market might have hit Brent, both are flat this morning.
Rockhopper has announced the disposal of Abu Sennan in Egypt to United Oil & Gas for $16m of which not less than $11m is to be paid in cash. United has secured an $8m prepayment financing structure from BP and is planning an equity placing to fund the balance of the transaction and any shortfall of up to $5m can be taken by RKH in UOG shares. Whilst this is an ‘interesting’ funding challenge, the presence of BP in a small company like this is a vote of confidence and the company should be congratulated on that. The rest will involve some equity, after BP there is another $8m to find although this falls to $3m if RKH take the full $5m in UOG shares. With predominately retail investors the company are probably looking for a small number of institutions to join the raise.
Last year on 813 b/d it gave revenue of $6.2m and a loss of $2.2m and UOG will carry 2.64mmboe net 2P Reserves plus large remaining infill and exploration upside in addition to rising production. For UOG they are now a full cycle E&P company, last week’s Crown deal and now this show that they are constantly busy looking at potential opportunities.
For Rockhopper this has been a good asset but given a chance to crystallise real value ahead of the formal loan application this was a no-brainer. The company have made a ‘profit’ of some $8m on a $12m investment in 2 1/2 years and putting the money into Sea Lion which will unlock transformational value makes a lot of sense.
For United this is a major piece of business buying an asset for $16m with a market cap of only £14m. As CEO Brian Larkin states ‘this is a truly transformational deal for United. Not only will it deliver our first production, positive cashflow and significant reserves it also offers very promising infill and exploration upside’.
Overall this is one of those deals that appears genuinely good for both sides, RKH has shown an ability to buy low and sell high and has delivered ahead of the crucial Sea Lion denouement. UOG has, in one step, really grown the company, as advertised.
Erratum, as pointed out by readers yesterday, England won the bronze medal in the netball World Cup, my apologies…