SP Angel . Morning View. Oil prices fall on latest API data

 Jadestone Energy (JSE LN): Q1 2020 results, balance sheet continues to strengthenTullow Oil (TLW LN): CNOOC doesn’t take up pre-emption rights in UgandaEnergy Prices         Brent Oil US$33.8/bbl vs US$35.7/bbl yesterdayWTI Oil US$31.6/bbl vs US$34.1bbl yesterdayNatural Gas US$1.87/mmbtu vs US$1.80/mmbtu yesterdayOil Price NewsOil prices came off yeste

Market Update: Thursday 28 May 2020 

Jadestone Energy (JSE LN): Q1 2020 results, balance sheet continues to strengthen

Tullow Oil (TLW LN): CNOOC doesn’t take up pre-emption rights in Uganda

 

Energy Prices         

Brent Oil US$33.8/bbl vs US$35.7/bbl yesterday

WTI Oil US$31.6/bbl vs US$34.1bbl yesterday

Natural Gas US$1.87/mmbtu vs US$1.80/mmbtu yesterday

 

Oil Price News

Oil prices came off yesterday as the API forecasted a large inventory build, of 8.731MMbbls for the week ending 22 May 22

Market consensus had predicted an inventory draw of 2.5MMbbls compared to a 4.8MMbbls draw in the previous week

WTI is also trading down given underlying capacity issues, however the market seems to have found a floor at US$30/bbl

The outlook for a rebalanced oil market is more positive, with many US states easing lockdown restrictions and the world’s largest oil producers, including Saudi Arabia and Russia, cutting production by more than many market analysts had predicted would be the case

 

Gas Price news

Natural gas prices had a volatile session yesterday initially moving higher but then reversing into the close

The weather is expected to remain much warmer than normal throughout most of the US mid-west for the next two weeks, and as the pattern moves west to east, the warm weather is expected to head toward the east coast

It appears that the slow drop in natural gas active rigs is making a dent in the volume of natural gas that is currently produced.

Hedge funds added to long position in futures and options according to the CFTC

The increase was approximately 16K contracts, while nothing was added to short positions

Currently the open interest shows that managed money is 16K longer futures and options

 

Company News

Jadestone Energy (JSE LN): Q1 2020 results, balance sheet continues to strengthen

Share price: 52.7p, Market Cap: £243m

Jadestone’s Q1 2020 results show net revenue of US$74.2m, down 19% from Q4 2019, and up 32% on Q1 2019.

The Company achieved a realised oil price of US$64.09/bbl, 7% lower than Q4 2019, and 5% lower than Q1 2019.  Realised prices reflect an average premium over Brent of c.US$11.50/bbl.

Costs of production were US$26.5m for Q1 2020, excluding non-recurring costs and workovers, remaining fairly stable compared to Q4 2019, and down US$1.9m from Q1 2019.

Positive cash generated from operations, before changes in working capital, of US$36.0m in Q1 2020, compared to US$58.0m in Q4 2019, and US$27.5 million in Q1 2019.

Adjusted EBITDAX was US$30.9m, 48% lower than Q4 2019, and 34% higher than Q1 2019.

The Company’s cash balance was US$119m at the end of Q1, compared to US$99.4m at year end.

Operationally, Jadestone produced an average of 11,665bbls/d, 21% lower than Q4 2019 due to weather downtime and increased maintenance in Q1 2020, and 11% lower than Q1 2019.

Management has also confirmed that 2020 production guidance remains at 12,000-14,000 bbls/d for the year.

Elsewhere, the Company completed its 3D seismic acquisition across the Montara area and the Maari acquisition on track to complete in H2 2020.

Our take: As expected, Jadestone’s financial performance saw a decline relative to Q4 2019 given a drop in asset investment and a natural decline in its producing assets. Nevertheless, the Company has continued to strengthen its balance sheet, ending the quarter with net cash of US$72.1m versus net cash of mUS$39.3m at year end.  Prices realised for the Company’s production remain well above the Brent benchmark and are further bolstered by downside price protection through its hedging programme.

Tullow Oil (TLW LN): CNOOC doesn’t take up pre-emption rights in Uganda

Share price: 24.2p, Market Cap: £340m

Tullow has confirmed that CNOOC not pre-empt the sale of its assets in Uganda to Total.

CNOOC had rights of pre-emption to acquire 50% of these assets on the same terms and conditions as Total.

As such there are no changes to the previously announced transaction or timeline and Tullow continues to expect the transaction to complete in the second half of 2020.

The transaction remains subject to a number of conditions, including approval by Tullow’s shareholders, customary government and other approvals and the execution of a binding tax agreement with the Government of Uganda and the Uganda Revenue Authority that reflects the agreed tax principles previously announced. 

Tullow will now look to progress the tax agreement following CNOOC’s decision not to pre-empt. 

Our take: Tullow set out plans earlier this year to sell off US$1bn worth of assets, andthe Uganda agreement would represent a major step in this plan, although it is something of a climbdown with a consideration of US$575m in our view. In January 2017, Tullow agreed to sell a 21.57% stake in Uganda for US$900m, which would have left the Company with 11.76%.

Research – Oil & Gas

Sam Wahab – 0203 470 0473

[email protected]

Sales

Richard Parlons – 020 3470 0472

Abigail Wayne – 020 3470 0534

Rob Rees – 020 3470 0535  

 

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+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

ICE

Natural Gas

NYMEX

 

 

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