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SP Angel – Oil & Gas View – Friday 13 09 19

Oil prices fall following recent shakeup in Saudi Arabia


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Regal Petroleum (LON:RPT): Strong 1H/19 financials

Sterling Energy (LON:SEY): Odewayne PSA extended, 2D repossessing should be available by the end of the year

88 Energy (LON:88E) – Interim results


Oil price:

  • Following a strong rally over the past 10 days, oil prices were tempered overnight following the recent shakeup in Saudi Arabia.
  • The full coalition of OPEC and non-OPEC partners will next meet in Vienna in early December to decide whether any further action to stabilize oil markets is required for 2020.
  • The biggest short-term driver for oil prices remains the US/China trade dispute and its implications for global economic growth and hence oil demand. According to API data, there is now a year-to-date draw of 8 million barrels, a significant correction to the 35-million-barrel build in mid-May and a positive sign for oil prices .

Energy prices:        

Brent Oil US$60.2/bbl vs US$61.9/bbl yesterday

WTI Oil US$54.7/bbl vs US$56.2/bbl yesterday

Natural Gas US$2.6/mmbtu vs US$2.6/mmbtu yesterday


Company News

Regal Petroleum (LON:RPT): Strong 1H/19 financials

Share price: 32p, Market Cap: £103m

A strong set of financials from Regal today, with revenues for the period up 27% to US$31.3m (1H 2018: US$24.6m) leading to an operating profit for the period of US$13.7m (1H 2018: US$44.5m, including one-off item of US$34.5m).

  • The company’s cash position remains strong with US$67.8m on the balance sheet at the end of June (31 December 2018: US$53.2m).
  • Aggregate average daily production from the MEX-GOL, SV and VAS fields during the first half of 2019 was 4,192boepd, a 50% increase on the 2,790boepd reported during the first half of 2018.
  • Development work for the remainder of 2019 at the company’s MEX-GOL and SV fields include the refinement of the geological model; testing and if successful, hook up of the MEX-119 well; hydraulic fracturing operations on MEX-120 well; commencement of SV-54 well; planning for further new well in SV field; assessment and workover of existing wells; installation of compression equipment; and continued investment in gas processing facilities, pipeline network and other infrastructure 

Conclusion: A solid set of figures reported from Regal today, with a healthy increase in cash flows stemming from a significant uplift in the company’s production base. On a more macro-level, the Ukrainian Government has implemented a number of reforms in the oil and gas sector in recent years, which include the deregulation of the gas supply market in late 2015, and more recently, reductions in the subsoil tax rates relating to oil and gas production and a simplification of the regulatory procedures applicable to oil and gas exploration and production activities in Ukraine. As a result, the Ukrainian oil and gas sector is becoming increasingly attractive in our view.


Sterling Energy (LON:SEY): Odewayne PSA extended, 2D repossessing should be available by the end of the year

Share price: 10p, Market Cap: £21.5m

The Government of the Republic of Somaliland has granted Sterling a continued extension to the current period of the Odewayne PSA.

  • The minimum work obligations for the exploration periods remain unchanged and include the acquisition of 500km of 2D seismic; and the acquisition of 1,000km of 2D seismic and one exploration well by May 2022.
  • Sterling holds a 34% interest in the PSA and will be carried by Genel (50% interest and Operator) for the costs of all exploration activities.

Conclusion: A positive update for Sterling, however the extension was as expected and never really in doubt. Focus will now centre on the reprocessing of the full 2D seismic dataset with the deliverables expected in Q4 2019.


88 Energy (88E) – Interim results

Share price: 7p, Market Cap: £43m

Following yesterday’s successful placing, 88 Energy announced its interim results today, and on the whole, reflect a difficult 2019 for the company operationally. The company reported a loss of US$29.3m (30 June 2018: US$3.2m loss). The loss was largely attributable to the impairment of the Winx-1, Icewine-1 and Icewine-2 exploration wells during the half-year

  • At the end of June, the company had cash on hand of US$6.7m (31 December 2018: US$21.7m), recently boosted by the A$6.75m placing announced yesterday.
  • The forward plan is to further evaluate and integrate the data acquired at Winx-1, reprocess the Nanuq 3D seismic (2004) in order to evaluate the remaining prospectivity on the Western Leases including the Nanushuk Fairway potential.

Conclusion: The key near term focus will be the Charlie-1 (Malguk-1 appraisal) well in our view, which will test multiple stacked conventional targets, as well as the HRZ shale, in Q1 2020. Charlie-1 will be funded up to US$23m by Premier Oil and has the potential to re-rate 88 Energy in a success case.


121 Oil & Gas Investment Conference, London, 28-29th October 2019

  • SP Angel is sponsoring the annual 121 Oil & Gas Investment Conference in London again this year
  • The event hosts some 25 exploration and production companies along with >160 investment funds and analysts over two days of 1-2-1 meetings. Click here to register to attend