Market Update: Tuesday 9 June 2020 

Bahamas Petroleum (LON:BPC): Award of petroleum licence offshore Uruguay

Hague and London Oil (LON:HNL): FY19 represented a challenging year


Energy Prices         

Brent Oil US$40.1/bbl vs US$42.7/bbl yesterday

WTI Oil US$37.3/bbl vs US$39.9bbl yesterday

Natural Gas US$1.82/mmbtu vs US$1.77/mmbtu yesterday


Oil Price News

Oil prices are off slightly this morning, despite the weekend announcement by OPEC+ that historic production cuts of 9.6MMbopd across the group would continue through July as the coronavirus pandemic continues to weigh on demand  

The move spurred hopeful talk of a recovery for oil prices, which are down about 30% year-to-date after a 56% recovery for Brent in of May

However, we note that data from refineries across several regions shows weak margins, or “crack spreads” — the difference between the price of crude that refiners buy versus the price that the market is paying for the refined products

Higher crude costs without increased returns for the products refineries are selling suggests demand growth is not in line with the growth in prices, and could force refineries to buy lower crude volumes, translating into lower crude prices 

Morgan Stanley and Goldman Sachs have also issued bearish commodity forecasts today, adding further negative sentiment to outlook


Gas Price News

Natural gas prices are up on news that Baker Hughes has reported that the number of natural gas rigs declined by 1 in the latest week

This compares to a 16-rig decline in oil

The weather is expected to be cooler than normal over the next two weeks through the mid-west of the country

US jobs numbers surged higher last week buoying riskier asset, but this failed to buoy natural gas prices


Company News

Bahamas Petroleum (LON:BPC): Award of petroleum licence offshore Uruguay

Share price: 3p, Market Cap: £76m

BPC has announced that in its efforts to expand the Company’s portfolio options, it has been awarded the AREA OFF-1 petroleum licence offshore Uruguay.

Management estimate that the licence could contain up to 1bnboe, based on current mapping from multiple exploration plays and leads in relatively shallow waters with ‘significant running room’.

Management also believes the OFF-1 licence play system is directly analogous to the Cretaceous turbidite discoveries currently being evaluated/developed offshore Guyana and Suriname.

OFF-1 has an initial 4-year exploration period, with a work obligation limited to reprocessing and reinterpretation of selected historical 2D seismic data – there is no drilling obligation, and the licence includes staged no-cost exit points at BPC’s sole election.

OFF-1 is thus comparable to the “low cost option” represented by BPC’s licences in The Bahamas when they were first awarded – a modest work commitment over 4 years that secures a sizeable, technically high quality, frontier play, with regional seismic available and exciting exploration upside.

Uruguay is a stable, well-regulated operating environment with an attractive, internationally comparable fiscal regime.

BPC believes that OFF-1 has the capacity to generate similar value uplift to the Company’s existing licences in The Bahamas, where the Company’s primary focus remains commencement of exploration drilling on Perseverance #1, expected to spud in late 2020 / early 2021, and targeting recoverable P50 oil resources 770MMbbls, with an upside of 1.44bnbbls.

Our take: We are always in favour of portfolio diversification, and BPC has opted for new country entry buy with very similar characteristics as its entrance into The Bahamas in 2007. Whilst still early stage, there has been some historical activity on and adjacent to the OFF-1 block, including 2D seismic (approximately 12,000 line-kilometres acquired from the early 1970s to 2015). However only two historic wells have been drilled to-date in the area (in 1976 by Chevron), with no 3D coverage. We would assume BPC will adopt a similar strategy in Uruguay, working up the asset through the use of modern technology and look to attract a partner ahead of any drilling activity.

Hague and London Oil (LON:HNL): FY19 represented a challenging year

HALO’s FY19 results show a drop in gas sales to £22.5m (2018: £31.1m) as a result of a material drop in gas production and unhedged commodity price exposure.

The Company reported cost of sales of £19.8m (2018: £21.9m), giving rise to gross profit of £2.7m (2018: £9.2m).

HALO recognised significant non-cash impairment charges to the Andromeda and Pegasus licences amounting to £20.8m (2018: £1.30m), leading to a FY19 loss after tax of £14.30m (2018: £0.56m loss) and a loss of 47.85p/share (2018: 2.33p).

At the end of December 2019, cash resources stood at £3.74m (2018: £11.34m).

Operationally in the Netherlands, there was limited activity for the Joint Development Area (JDA) in 2019, but the partners are scheduling up two development infill targets in the L13-FF and FG fields for drilling to expand production in the JDA in 2021.

New licenses were awarded to HALO for the F5 and F4a Blocks offshore, the Netherlands, within a partnership, of other 3 other entities; exploitation activity of these new licenses is expected to commence in 2021 .

In the UK, HALO participated in the Andromeda North well during the period.

Whilst the well encountered natural gas and better reservoir quality than expected, however, the volumes were at the low end of expectation and the decision was taken not to test the well.

Subsequently, the well was plugged and abandoned pending further review.

In addition, FDP for the Greater Pegasus Area (GPA) was deferred in 2019.

The GPA partnership has subsequently worked within the recommendations of the NBDR: conducting Concept studies for alternatives, continuing dialogue with all parties within the NBDR and working towards a final FDP, pending commercial agreements for transportation of the GPA gas via existing (or planned) facilities.

Our take: 2019 was a challenging year or HALO, not least with an unsuccessful exploration well combined with subdued commodity pricing. Clearly 2020 has started worse with the upstream energy industry having to respond to extremely low commodity prices and operating within the reduced capacity resulting from the COVID-19 situation. Nevertheless, with a stable balance sheet and strong working interest partners, we are of the view that HALO can financially navigate this uncertainty for the medium term.


Research – Oil & Gas

Sam Wahab – 0203 470 0473


Richard Parlons – 020 3470 0472

Abigail Wayne – 020 3470 0534

Rob Rees – 020 3470 0535  


SP Angel                                                            

Prince Frederick House

35-39 Maddox Street London



+SP Angel employees may have previously held, or currently hold, shares in the companies mentioned in this note.


Sources of commodity prices

Oil Brent, WTI


Natural Gas