Oil & Gas Daily Flow
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Market Update: Tuesday 15 October 2019
Eland Oil & Gas (ELA); Seplat Petroleum (LON:SEPL) – Seplats £382m bid for Eland accepted by Directors
Tower Resources* (LON:TRP): Tower successfully raises £1.5m
Coro Energy (LON:CORO) – Successful appraisal well at Duyung
Energy prices
Brent Oil US$59.1/bbl vs US$59.8/bbl yesterday
WTI Oil US$53.3/bbl vs US$54.2bbl yesterday
Natural Gas US$2.2/mmbtu vs US$2.2/mmbtu yesterday
Oil Prices
Crude oil markets pulled back again yesterday, with more predictions of sluggish global growth and demand
All eyes will be on Vladimir Putin and Salman bin Abdulaziz Al Sauds meeting today where a discussion on “measures to stabilise oil prices” will be at the forefront
However, the Russian Energy Ministers comments last night that there is no intention to change the terms of the existing deal served to temper expectations at todays open
U.S. crude futures were down 0.3% at $54.1/bbl on the New York Mercantile Exchange, underlining uncertainties in the global economy
Longer term, US-China trade tensions and the outlook for Fed policy remain the single largest drivers of oil prices in our view
Gas Prices
Natural gas prices rallied yesterday, rising more than 3% recapturing resistance, before pulling back again this morning
There are two tropical storms in the Atlantic one with a 90% chance that it will turn into a tropical cyclone. There is also one storm in the Gulf of Mexico with a 10% chance of becoming a tropical cyclone.
Prices are likely to hover at the current levels as demand will likely remain subdued during the shoulder season
The weather is expected to remain normal for the next 8-14 days, keeping natural gas heating demand subdued
The EIA reported that demand declined last week driven by the power generation sector. Total US consumption of natural gas fell by 3% compared with the previous week
Sector Backdrop
Despite a tough capital market environment, UK equities in the Oil & Gas sector remained flat YTD (2018: -16%) wiping out Septembers 8% gains
AIM Oil & Gas indices were also flat YTD despite some volatility, yet stabilising 2018s 13% decline
These indices have largely tracked the oil price, and with the futures market also remaining steady
The small/mid cap constituents of the sector are due to engage in an active year of operational activity in 2020, with a number of high impact drilling catalysts
Company News
Eland Oil & Gas (LON:ELA) – Seplats £382m bid for Eland accepted by Directors
Share price: 1.66p, Market Cap: £279m
Seplat Petroleum (LON:SEPL)
Share price: 106p, Market Cap: £600m
The boards of Seplat and Eland have announced that they have reached agreement on the terms of a recommended cash acquisition of the entire issued and to be issued ordinary share capital of Eland
Under the terms of the acquisition, each Eland Shareholder will receive 166p/share – a premium of 29% on yesterdays closing price, and a 33% premium on the companys 3-month VWAP.
The acquisition values the entire issued and to be issued ordinary share capital of Eland at £382m on a fully diluted basis
In addition, Elands shareholders on the register at the close of business on 18 October 2019 will be entitled to receive and retain the interim dividend of 1p/shr to be paid on 31 October 2019.
Elands directors have accepted the offer and have recommended that Elands Shareholders vote in favour of the acquisition.
The cash consideration payable is being wholly funded through a combination of existing cash resources of Seplat and a new loan facility available to the company
Conclusion: We believe the acquisition makes a lot of sense for both companies. Elands shareholders receive a healthy premium (higher than any price since IPO); whilst the combined business will be one of the largest independents operating in the region. Along with Elcrest, Eland acquired interests in OML 40, a non-producing asset, and achieved record production on this asset to become a significant independent producer in Nigerias E&P landscape. If accepted, the acquisition further consolidates Seplats position in Nigeria and offers value accretive near-term production with further cash flow and reserves potential.
Tower Resources* (LON:TRP): Tower successfully raises £1.5m
Share price: 0.375p, Market Cap: £2.6m
Tower has raised £1.5m through the issue of 512m shares (including 51m shares in lieu of fees) at a 0.325p/shr placing price.
The companys Chairman, Jeremy Asher, heavily participated in the placing, subscribing for 215m shares (£700k), increasing his stake from 14.8% to 18.7% on a fully diluted basis.
The injection of funds will allow the company to cover ongoing operational costs, pay creditors, and secure the services of Geoquip Marine's MV Investigator rig in Cameroon.
The company will now undertake a site survey and drill boreholes, which is the final step needed prior to being able to bring the drill rig itself to the site.
On full completion, the company's enlarged issued share capital will be just over 1bn shares in issue with voting rights.
The bridging loan facility restructuring agreed with Pegasus Petroleum, will see Pegasus advance further funds to the company as part of the facility to allow it to repay the other facility lenders their US$375k principal in full.
Pegasus will then hold 100% of the facility, amounting to US$750k and the terms of the facility will be amended with the repayment date extended to 30 June 2020, and the threshold for preferential right of repayment from future financing raised to US$2.5m in respect of any single fundraising and US$5m.
Tower also confirmed that in consideration for the extension, it has been agreed that Pegasus will receive a possible additional consideration, contingent upon the company itself receiving cash flow arising from the Thali license, comprising a royalty of up to 10% of the contractor's share of production.
Conclusion: Todays placing provides Tower will more breathing space to focus on progressing its opeRead More – Source
