WTI $39.22 +$2.17, Brent $41.29 +$2.02, Diff -$2.07 -15c, NG $2.62 +18c

Oil price

President Trump returned to the White House after having conquered the virus and back on the campaign trail soon we are informed. Will it be enough to turn around that 14% Biden lead but remember a state wide lead is not always a guaranty of success.

But what really turned the gas on under the oil price was the strike by Norwegian oil workers that shut in a number of oil & gas fields and somewhat over 300,00 b/d of production. And with hurricane Beta having moved on, the new kid on the block named Delta is threatening the GoM…

Retail gasoline data showed a very small increase on the week to $2.172 but little change has been noted recently in gasoline demand, let’s see what the inventory stats say.

Premier Oil- Harbour Master…

Premier, 1973-2020, has announced a merger with Chrysaor which in reality is a takeover or indeed a reverse takeover as Chrysaor are keeping the London listing. The deal will create the UK’s largest listed Independent Oil & Gas company with some 254,000 b/d of production and over 650 mmboe of 2P to be increased as soon as the upcoming CPR is published. Premier also looks easy on the eye with sumptuous tax losses that can be used. Finally, the BP deal which started all this has gone by the board which is somewhat ironic.

As for how it will look, then the merged company will have an enviable portfolio of UKCS assets and the rest of the Premier portfolio creates a starter pack for Chrysaor in Asia, Latin America and of course the Falklands. All of these are very attractive and Mexico can now probably leave the sales process. Asia speaks for itself and reflects the high cost of gas in Singapore with decent size developments feeding it. As for Sea Lion, whilst $40 oil may not yet be quite enough at least the company can say to the UKIF that they are now probably ‘of investment grade’…NB Rockhopper will at least enjoy having a stronger partner…

The new company will carry a board of 11 directors of which 6 will be NED’s and Linda Cook currently CEO of Harbour Energy will take the CEO job and Phil Kirk from Chrysaor will become President and CEO of Europe.

Ownership of the company is less than certain as initially creditors will have to take an amount of equity, as part of the debt paydown, but assuming they grab all they can they will own some 10.6% of the company with modest lock-ins. Premier shareholders will own just 5.5% of the group (Ouch!) and other Chrysaor shareholders will have 44.9% and Harbour Energy 39%.

In terms of valuation we are being led to Aker BP and Lundin, both excellent companies but Premier will stack up very favourably against both of those companies particularly with the tax breaks it is gaining. Rather ironically the group will be highly cash generative  and will expect to deliver on a significant international growth strategy for which it will be fully funded. However small, and arguments about carrying so much debt for so long will go on, Premier’s existing shareholders are going to end up with a stake, albeit modest, in a huge, well financed and highly attractive company which just may, pay a divvi in the longer term.

Solo Oil

Solo has announced the completion of the second closing of the previously announced investment facility for up to $5,000,000 with Prolific Basins LLC a US based specialist energy focused investor. In addition as permitted by the terms of the SSD, G.P. Jersey Limited, a Channel Islands-based, family office fund and private shareholder in Solo, has elected to invest on similar terms as the Subscriber for the maximum amount permissible under the SSD, being US$500,000.

GP Jersey’s investment will be made as a prepayment for ordinary shares in the Company, the number (and price) of which will be determined at the time GP Jersey elects to receive such GP Jersey Shares. Upon issue of the GP Jersey Shares, which can occur in single or multiple tranches at the election of GP Jersey, application will be made for the GP Jersey Shares to be admitted to trading on AIM and they will rank pari passu in all respects with all existing ordinary shares in the Company.

Commenting, Tom Reynolds, Chief Executive Officer of Solo, said:

“We are pleased to announce the closing of the second tranche of this facility which bolsters our cash position and gives the Company the flexibility to support its business development activities as it progresses discussions with counterparties to acquire cash generative assets in the European energy space and meet its short-term obligations.

In addition, we have agreed with an existing shareholder in the company, GP Jersey, to participate in the investment structure for the maximum investment of US$500,000. We thank GP Jersey for their continued support and believe their investment is a clear reflection of our investment case at this time.”

Bahamas Petroleum 

A bit of catching up on BPC as last week, hot on the heels of other recent announcements they announced a £9.5m placing at 2p, the proceeds enhance the Company’s overall funding capacity, including in particular for the anticipated costs of the Company’s 100% owned and operated Perseverance #1 well, expected to spud prior to the end of 2020, targeting a recoverable P50 prospective resource of 0.77 billion barrels of oil.

The rational for this Placing, in the lead up to drilling of Perseverance #1, is the continuing drive to optimise BPC’s funding strategy, so, as previously announced, ‘to achieve lower cost of capital / less aggregate dilution / greater certainty’. Interestingly, based upon the proceeds from this Placing, in combination with the Company’s existing cash balance and the amount available from the existing Conditional Convertible Notes, (and assuming no change to the anticipated cost of Perseverance #1), the Company now does not expect to have to draw further on the previously announced £16 million zero-coupon.

Simon Potter, Chief Executive Officer, commented:

Since mid-2019 we have been diligently implementing a funding strategy designed to ensure we  have access to the funds we need, as and when we need them, such that we can efficiently discharge our licence obligation and the technical objectives for the Perseverance #1 well.

Today’s placing is another milestone in the implementation of that funding strategy. The placing proceeds, being certain, immediately available and at a known dilution compared to other existing funding options, give us the opportunity to simplify the capital structure of the business whilst leaving us in a much stronger overall financial position. With the success of the placing we are also able to materially reduce the need to rely on other previously announced financing instruments, without affecting our overall ability to proceed with Perseverance #1 or other aspects of our recently enlarged business.

At the same time, with a view to continually seeking to strategically enhance the overall financial and operating capacity of the Company, we continue to consider a wide range of other funding options. Many of these are newly available to us consequent on the broadening of our asset base in recent months.

I look forward to advising shareholders of our progress in this regard – the next few months will continue to be both a busy and exciting time for our Company.

I have quoted Simon Potter in his entirety as I feel that it is important to understand how the company are thinking about this placing and the relevance of an equity raise ahead of the drilling of P#1. In my view the company had repeatedly been told that shareholders had disliked the variable price convertible and that with a high quality of institutional demand for equity, albeit at a discount, it was worth adding a bit more equity into the funding mix.

BPC is a changed beast, not long ago it was deemed to be a one well, all or bust play and to a certain extent that was how the fundings went. Bringing in new management and then taking over Columbus has made the difference and not just in the portfolio. Granted it can now boast one of the highest potential returns with the drill bit in the near future but it now has a broad, multi-country spread of production, impending development and exploration outside of the Bahamas.

With that has come chance of renewed and better structured financing, yes it still has the debt but now it can start to develop an institutional shareholder base and not just those who don’t always stay the distance. It can go into the Perseverance process knowing that it will have cash in the bank, just in case, and the Australian and Bahamian facilities should they wish to keep them. Also with production in Trinidad being pepped up one might expect a CPR and possibly success in Suriname both of which might appreciate an RBL or similar.

So, BPC are displaying hitherto unknown opportunities to exert a disciplined and broad spectrum of choice in their financing which shareholders should find most gratifying. All they need to happen now is…