Today’s Oil & Gas Update – Mosman Oil & Gas and more…


Market Update: Wednesday 17 February 2021

PetroTal (AIM:PTAL): US$100m bond successfully secured

Mosman Oil & Gas*, BUY, (AIM:MSMN): Operations update, active drilling programme slated for FY21

Oil & Gas Daily Flow

Non-Independent Research; Marketing & Sales Commentary – MiFID II exempt information – see disclaimer below

 

Market Update: Wednesday 17 February 2021

PetroTal (AIM:PTAL): US$100m bond successfully secured

Mosman Oil & Gas*, BUY, (AIM:MSMN): Operations update, active drilling programme slated for FY21

 

Energy Prices         

Brent Oil US$63.7/bbl vs US$63.1/bbl yesterday

WTI Oil US$60.3/bbl vs US$59.7/bbl yesterday

Natural Gas US$3.07/mmbtu vs US$3.01/mmbtu yesterday

 

Oil Price News 

Please see SP Angel’s Oil Market outlook for 2021: https://youtu.be/T222JHGzokI

  • Oil prices continue to track higher as many investment banks are calling for the next super-cycle
  • Goldman Sachs and JPMorgan are the latest names to point to a prolonged rise in the price of oil as high as US$80/bbl, or even US$100/bbl
  • The reason for supercycle predictions is simple: stimulus packages, most notably the stimulus package that the US government is expected to roll out, are expected to boost consumption
  • As a point of reference, global oil demand sank c.10MMbopd as a result of the pandemic in 2020
  • If, however, oil demand was to pick up steam by as much as 1.4MMbopd, a supercycle may follow, which typically last a decade
  • Elsewhere, the robustness of Asian demand remains a key gauge for Middle Eastern NOCs
  • China and India have been leading the continent with fuel consumption almost returning to pre-COVID levels in both
  • On the other hand, insular economies such as the Philippines, Indonesia or Taiwan have been running their refineries below maximum capacity or temporarily halting several units amidst poor margins
  • At the same time, turnaround season is just around the corner and Japan’s month-on-month import drop in February is the first of many to come
  • Albeit smaller in terms of overall output, refinery maintenance in Thailand, Taiwan and Sri Lanka will also tighten the markets a bit
  • February turnaround will blaze the path for next month’s large-scale works, China alone will have at least 0.9MMbopd of refinery capacity going offline in March 2021
  • Currently, the oil market is in backwardation, which occurs when spot prices are higher than further-dated contracts
  • Backwardation does suggest however a near-term bullish market structure with tightening inventory levels
  • This may encourage refiners to tap deeper into storage as they ramp up production to take advantage of higher prices

 

Gas Price News

  • US gas prices also continue to rally strongly as the cold weather in Texas and throughout the US midwest has generated an enormous demand for natural gas for heating and electricity
  • Prices in some areas of Oklahoma saw natural gas prices surge to US$600/mmbtu
  • Spot prices are likely to remain volatile over the next few days as many facilities had to close and cannot produce natural gas
  • The EIA expects total natural gas consumption to be down by 1.9% year over year in the coming year

 

Company News

PetroTal (AIM:PTAL): US$100m bond successfully secured

Share Price: 17.5p, Market Cap: £139m

  • PetroTal has confirmed the Company has completed its 3-year US$100m senior secured bond issue with a fixed coupon of 12% and a borrowing limit of US$125m.
  • The new bond issue will now be the Company’s only interest bearing debt and will be used to retire the existing derivative liability with Petroperu, continue development of the Bretana oil field, support the Company’s crude oil price hedging strategy, and finance potential acquisitions. 
  • Details of the 2021 capital budget will be released tomorrow.
  • Early last month the Company announced that, coincident with full commencement of Petroperu’s Northern Oil Pipeline (ONP) operations, PetroTal’s production was approximately 9,500bopd and was expected to increase as operations returned to a stabilised level. 
  • Oil production has since increased to an average of 10,025bopd, with optimisation continuing.
  • Additionally, as PetroTal continues to ensure it has export optionality, the Company has now signed an agreement for a second pilot shipment through Brazil in February 2021, of up to 220,000bbls of oil. 
  • The increased volume of this shipment over the initial pilot export is expected to improve overall economics and lead towards the establishment of regular exports, complementing sales into the ONP and to the Iquitos refinery.
  • Proceeds from the Bond Issue will allow PetroTal to resume development drilling at Bretana in March 2021. 
  • In anticipation of expected higher oil production, the modular processing equipment for expansion of the second phase of Central Processing Facilities (CPF#2) is complete and is currently en route to Bretana.

Our take: This financing significantly enhances PetroTal’s liquidity and will immediately lead to a return to development activity at the Bretana oil field, with the next well expected to commence drilling by the end of Q1 2021. The recent reopening of the Bretana oil field operations will invariably lead to a step change in the Company’s cash flow position notwithstanding a much stronger oil price globally. Shareholders will also be encouraged that the Company has chosen to finance the next phase of its development without equity dilution in our view, and with near term drilling activity slated for Bretana during March 2021, there are a number of significant valuation catalysts ahead this year.

 

Mosman Oil & Gas*, BUY, (AIM:MSMN): Operations update, active drilling programme slated for FY21

Share price: 0.18p, Market Cap: £5m

BUY – TP: 0.42p  

CLICK FOR INITIAION REPORT

  • In light of the widely reported extreme weather conditions in Texas, Mosman has provided a comprehensive operational update with regards to this short-term impact.
  • At Stanley, the Operator has recently recompleted Stanley-1 in a zone that has been productive in Stanley-2, and initial flow rates (3-day average) are 47bopd gross.
  • Stanley-2, 3 and 4 (MSMN 16-18% WI) continue to produce oil, with a total project production (including Stanley 1) of c.260bopd (3-day average) gross.
  • Water production is managed by on-site water injection that has not been affected by recent unusual cold weather conditions.
  • At Falcon (MSMN 50% WI), minor equipment upgrades have been installed at the Falcon-1 well.
  • The well has been temporarily shut-in since 15 February due to the weather conditions, to avoid water vapour freezing in the gas lines.
  • Oil production and produced water is stored in tanks and has to be trucked off site.
  • The Operator expects to have the well back on production once freezing conditions end, which are forecast to improve and warm up by the weekend.
  • Elsewhere, Mosman has not been advised of any effect of the weather on other facilities such as Greater Stanley and Arkoma.
  • As previously announced, Mosman intends to participate in the drilling of multiple wells during FY21.
  • The candidates for drilling include wells at the Stanley project (where four wells have already been drilled with a 100% drilling success rate) and other wells in East Texas, including wells at Greater Stanley, Cinnabar and Galaxie.
  • Of these projects, Mosman only has control of the timing of operations where it is the Operator, at the Cinnabar lease.
  • The Cinnabar lease acquisition is considered a potential cornerstone of the Challenger Project to re-develop the proven oil producing area.
  • Mosman has 97% working interest (reducing to 85% upon drilling of the first well) in the Cinnabar lease.
  • The initial review of existing data has led Mosman to commit to a full field redevelopment study that will be based on technical work.
  • The successful drilling of Falcon-1 means there are several prospects to be drilled in the Falcon (MSMN 50% WI) and Galaxie (MSMN 60% WI) lease area (Champion Project).
  • The Falcon-1 well production data will be used to estimate the size of that gas field, and to update the geological model, before a decision is made where to drill the next well in the Champion Project.
  • There are several potential wells in the Greater Stanley area that require further work before being ready to drill.
  • The work includes leasing, gaining well spacing approval and technical work to determine optimal target locations.
  • The zone that is producing at Stanley-1 and 2 is thought to extend into the Duff (MSMN 20% WI) lease and is a candidate for recompletion of the Duff-2 well.

Our take: Given the extreme weather conditions that have been reported in Texas, it comes as little surprise that there has been a very short term impact to a proportion of Mosman’s production base as the Company ensures the safety of its employees and integrity of its operational infrastructure. We also note the positive increase in production at Stanley-1, 2, 3 and 4 (MSMN 16-18% WI) of c.260bopd (3-day average) gross. This is a material increase in the gross production rate announced earlier this month of 210bopd, and a substantial uplift from the daily average gross production for the six months ending 31 December 2020 of 139bopd.The Company continues the implementation of its successful production led growth strategy against the backdrop of a commodity price recovery in the US. Mosman will embark on an aggressive drilling programme in 2021, with an ambitious target of drilling one well per quarter. This will include further wells on the Champion and Challenger leases in the US, with the intention to replicate the production success at Falcon-1. BUY.

 

*SP Angel acts as Nominated Advisor and Broker to Mosman Oil & Gas

Research – Oil & Gas

Sam Wahab – 0203 470 0473 / 0784 385 5037

sam.wahab@spangel.co.uk

 

Sales

Richard Parlons – 020 3470 0472

Abigail Wayne – 020 3470 0534

Rob Rees – 020 3470 0535 

Grant Barker – 020 3470 0471  

 

SP Angel                                                            

Prince Frederick House

35-39 Maddox Street London

W1S 2PP

 

+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

 

 

Disclaimer   Non-Independent Research

This note has been issued by SP Angel Corporate Finance LLP (“SP Angel”) in order to promote its investment services and is a marketing communication for the purposes of the European Markets in Financial Instruments Directive (MiFID) and FCA’s Rules. It has not been prepared in accordance with the legal requirements designed to promote the independence or objectivity of investment research and is not subject to any prohibition on dealing ahead of its dissemination.

SP Angel considers this note to be an acceptable minor non-monetary benefit as defined by the FCA which may be received without charge.  In summary, this is because the content is either considered to be commissioned by SP Angel’s clients as part our advisory services to them or is short-term market commentary.  Commissioned research may from time to time include thematic and macro pieces.  For further information on this and other important disclosures please the Legal and Regulatory Notices section of our website Legal and Regulatory Notices 

While prepared in good faith and based upon sources believed to be reliable SP Angel does not make any guarantee, representation or warranty, (either express or implied), as to the factual accuracy, completeness, or sufficiency of information contained herein.

The value of investments referenced herein may go up or down and past performance is not necessarily a guide to future performance. Where investment is made in currencies other than the base currency of the investment, movements in exchange rates will have an effect on the value, either favourable or unfavourable. Securities issued in emerging markets are typically subject to greater volatility and risk of loss.

The investments discussed in this note may not be suitable for all investors and the note does not take into account the investment objectives and policies, financial position or portfolio composition of any recipient. Investors must make their own investment decisions based upon their own financial objectives, resources and appetite for risk. 

This note is confidential and is being supplied to you solely for your information. It may not be reproduced, redistributed or passed on, directly or indirectly, to any other person or published in whole or in part, for any purpose. If this note has been sent to you by a party other than SPA the original contents may have been altered or comments may have been added.  SP Angel is not responsible for any such amendments.

Neither the information nor the opinions expressed herein constitute, or are to be construed as, an offer or invitation or other solicitation or recommendation to buy or sell investments. Opinions and estimates included in this note are subject to change without notice. This information is for the sole use of Eligible Counterparties and Professional Customers and is not intended for Retail Clients, as defined by the rules of the Financial Conduct Authority (“FCA”).

Publication of this note does not imply future production of notes covering the same issuer(s) or subject matter.

SP Angel, its partners, officers and or employees may own or have positions in any investment(s) mentioned herein or related thereto and may, from time to time add to, or dispose of, any such investment(s).

SPA has put in place a number of measures to avoid or manage conflicts of interest with regard to the preparation and distribution of research. These include (i) physical, virtual and procedural information barriers (ii) a prohibition on personal account dealing by analysts and (iii) measures to ensure that recipients and persons wishing to access the research receive/are able to access the research at the same time.

SP Angel Corporate Finance LLP is a company registered in England and Wales with company number OC317049 and whose registered office address is Prince Frederick House, 35-39 Maddox Street, London W1S 2PP.  SP Angel Corporate Finance LLP is authorised and regulated by the Financial Conduct Authority whose address is 12 Endeavour Square, London E20 1JN.

 

Recommendations are based on a 12-month time horizon as follows:

 

Buy – Expected return >15%

Hold – Expected return range -15% to +15%

Sell – Expected return < 15%



Source link

Add a Comment