OGV Energy - Oil and Gas Update

RockRose Energy: FY19 results underline year of significant growth

Columbus Energy Resources: Goudron IPSC extended to June 2020

Energy Prices         

Brent Oil US$33.0/bbl vs US$32.0/bbl on Friday         

WTI Oil US$27.8/bbl vs US$25.7bbl on Friday

Natural Gas US$1.63/mmbtu vs US$1.52/mmbtu on Friday

Oil Price News

Global oil prices remain volatile after Saudi Arabia and Russia postponed a meeting about a deal to cut output as COVID-19 hits demand

The two countries have been locked in an oil price war for the past month, however we saw material gains last week after US President Donald Trump suggested that an agreement was imminent

At the start of Asian trade today, Brent fell 12%, but recovered some of this ground, whilst WTI dropped more than 10% before stabilising to sit 3.5% lower

Saudi Arabia and Russia were scheduled to meet today, but the meeting has now been pushed back to Thursday. Prices are expected to remain volatile until then

Measures in countries across the world to slow the spread of the Coronavirus, including the US, UK and much of mainland Europe and Asia, have seen global energy demand fall sharply

Gas Price News

Natural gas futures closed lower last week after hitting another multi-year low earlier in the week

The weakness was primarily driven by worries over demand destruction due to the impact of COVID-19 on the global economy and forecasts calling for milder temperatures

Last week’s EIA report was bearish, outlining that domestic supplies of natural gas fell by 19Bcf for the week-ended March 27

Estimates ahead of the EIA report ranged widely from a withdrawal as small as 16Bcf to as large as 31Bcf.

Last year, the EIA recorded a 6Bcf injection for the similar week, while the five-year average stands at a withdrawal of 19Bcf.

Total stocks now stand at 1.986Tcf up 863Bcf from a year ago, and 292Bcf above the five-year average

Company News

RockRose Energy (RRE): FY19 results underline year of significant growth

Share price: 781p, Market Cap: £103m

FY19 was a year of significant growth for RockRose, with the Company’s Dutch assets contributing a full year of production for the first time and the Marathon transaction completed at mid-year.

Average production increased by 117% from 6,389boepd in 2018 to 13,866boepd, in line with guidance, on a working interest basis.

Pro forma production was up by 80% to 19,356boepd despite Foinaven being shut down for 34 days longer than anticipated.

Through the Marathon UK transaction, RockRose became the operator of the Greater Brae Area, which includes three platforms in the Central North Sea.

Revenue from crude oil sales in 2019 totalled US$173.8m, 36% higher than 2018 (US$127.7m).

The increase of US$46.1m was driven by H2/19 crude sales from Brae and Foinaven of US$62.4m (FY18: nil) offset by the impact of lower realised oil prices of US$16.3m across the portfolio.

Revenue from the sale of gas in 2019 was US$62.0m (FY18: US$24.6m), reflecting higher production following the acquisition of Dyas partially offset by lower wholesale gas prices.

Overall FY19 revenues increased 64% to US$251m (FY18: US$153m), generating a 116% increase in PBT to US$84m (FY18: US$39m).

At the year end, total cash was US$376m (FY18: US$121m), of which US$59.7m (FY18: US$53.3m) was restricted.

The Company’s hedging position remains strong with c.63 million therms hedged at €0.53/therm in 2020, 54 million therms at €0.41/therm in 2021, and 54 million therms at €0.45/therm in 2022.

Our take: As expected, RockRose has reported a very robust set of FY19 figures. The Company represents one of the most undervalued E&P’s in the small/mid cap sector in our view, currently trading at only 32% of cash. The Company remains well placed to navigate the current economic climate, with the business underpinned by a strong balance sheet, hedging, and management’s ability to reduce capital expenditure.

Columbus Energy Resources (CERP): Goudron IPSC extended to June 2020

Share price: 1.3p, Market Cap: £11m

Columbus has updated the market with regards to its Goudron Incremental Production Service Contract with Heritage Petroleum that was due to expire on 3 April 2020.

The Company confirms that it has reached an agreement with Heritage to extend the term to 30 June 2020, allowing time for the Company and Heritage to finalise the agreements for the longer-term extension.

Our take: Columbus is in the final stages of negotiations with Heritage to agree the terms and conditions for a long-term extension of the Goudron IPSC which we expect to be confirmed on the same terms.

Source: Proactive Investors