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Cairn Energy

SNE larger but phased

Update | Oil & gas | 24 Aug 2017

Cairn Energy’s interim report revealed higher contingent resources at SNE of 563mmbbl, but a phased development plan targeting the lower reservoirs initially. Lower capex to first oil is balanced by a lower (and longer) plateau period of 75-125mb/d. Other offshore projects indicate that phase one will have low production rates (of perhaps 80mb/d), while we expect further phases to increase over time. As a result of these changes, and a number of other adjustments throughout our modelling (not least for the commissioning issues seen at Kraken), our contingent valuation remains broadly flat at 195p, but our RENAV increases to 205p (from 200p).

Cairn Energy

Exploration setbacks, but shares backed by core

Update | Oil & gas | 15 Aug 2017

We update our valuation to reflect the Druid and SNE North well results and lower long-term oil price assumption. We look forward to the half-year results on 21 August when Cairn plans to update the market on reserves estimates and the development concept for SNE, which will help to firm up potential value for the field. After adjustments and accounting for our lower long-term oil price assumption, the contingent NAV falls to 196p (from 225p/share).

Cairn Energy

Producer, developer, explorer

Update | Oil & gas | 24 Jul 2017

We refresh our view on Cairn Energy, focusing on key areas of interest for investors already familiar with the company. We examine a number of valuation approaches for SNE in Senegal, the potential for reserve upgrades and exploration value. We believe SNE is an outsized asset and assume Cairn seeks to farm-down. This will naturally affect long-term value upside, but would in our view drive a better balance of asset and financial risk. We also examine features of Catcher, Cairn's cost of capital and look at the Indian tax dispute. After a long period of value stagnation (as cash was invested to develop Catcher/Kraken), coming years could be a time when investors see a path to this investment steadily bearing fruit. Our core contingent NAV is 225p/share and our RENAV is 255p/share.

Cap Energy

Regional success continues

Update | Oil & gas | 15 Feb 2016

Cap Energy's portfolio in Guinea-Bissau and Senegal is ideally positioned to benefit from continued exploration success across the region. Cairn Energy has followed up its play-opening SNE-1 and FAN-1 discoveries in 2014 with an appraisal programme that has demonstrated commercial production rates in SNE. Meanwhile, Kosmos Energy has established the presence of 17tcf of gas in its Greater Tortue complex that straddles Mauritania and Senegal. Following a farm-out option with FAR, Cap will have access to 3D across its Djiffere block in Senegal, while we expect the final report on its 3D survey across Block 5B in Guinea-Bissau imminently.

African Petroleum Corporation

Equity placement completed

Flash note | Oil & gas | 22 Oct 2015

APCL has completed the private placement, raising NOK16.5m (c $2m). This capital injection allows the company to continue to fund itself, while finding partners for drilling across its extensive offshore African portfolio. The previously announced farm-down of an interest in CI-513 continues to progress, with completion expected following negotiation and government approval. The company is also in advanced discussions with several interested parties across the Senegalese and Gambian licences. Industry interest has been piqued by exploration success in Senegal (Cairn/FAR) and Kosmos (Mauritania) and we are hopeful of successful deals.

Cap Energy

Regional activity accelerating in next 12 months

Update | Oil & gas | 09 Sep 2015

Cap Energy's portfolio in Guinea-Bissau and Senegal has been de-risked by Cairn's exploration success in Senegal, home to the world's biggest offshore oil discovery in 2014 (SNE-1). This makes the next 12 months an exciting time, in particular the imminent release of Cap's 3D seismic results on its Guinea-Bissau deepwater Block 5B, as well as interesting read-across from Cairn's campaign on its Senegal shelf-edge blocks which bear similarities with Cap's acreage. Cap remains funded through shareholder loans and strategic equity investors; however, due to a lack of liquidity the company intends to de-list from ISDX in early October 2015. Farm-outs and/or an AIM (or equivalent) listing are likely to be required before drilling, although first drill commitments are not until 2018.

Cairn Energy

Exposure to Senegal exploration, at lower risk

Institutional Initiation | Oil & gas | 02 Jul 2015

Cairn's transformation over the last five years has given birth to a new full-cycle E&P company, with two projects under construction in the UK and a large exploration portfolio in the Atlantic Margin. The jewel in Cairn's portfolio is Senegal, where it made one of the world's largest offshore oil discoveries in 2014 (SNE). While the market will be closely watching Cairn's Senegal drilling campaign starting in Q415, an even more material valuation lever for the stock is the outcome of the $1.6bn Indian tax dispute. In an environment where many independents are struggling to secure funding, Cairn is in the comfortable position of being fully funded until first oil from Catcher and Kraken in mid-2017. Cairn's conservative strategy may reflect its mixed track record on past frontier exploration (outside Senegal) and M&A. Despite this, our RENAV of 216p/share offers reasonable upside at a much lower risk profile than many E&Ps.

African Petroleum Corporation

Gambia and Senegal audit report

Update | Oil & gas | 23 Mar 2015

African Petroleum (APCL) has released the results of an independent audit of prospective resources in its Senegalese and Gambian blocks. The results indicate best estimate net unrisked prospective resources of 1.2bnbbl across five prospects and 1.9bnbbl respectively across six prospects. Added to the prospectivity in its other blocks, APCL's unrisked gross mean estimated prospective oil resources over 10 blocks has increased from 7.3bnbbl to 11.6bnbbl. The proximity of these blocks to Cairn's successful FAN-1 and SNE-1 wells and the results from the recent seismic data should help APCL's negotiations to farm down the blocks with a view to firming up a drilling programme for 2016/17.

African Petroleum Corporation

Deep water West African explorer

Initiation | Oil & gas | 05 Mar 2015

African Petroleum (APCL) is a pure-play, offshore-focused explorer with 10 blocks across five countries on the West African transform margin. Significant discoveries in 2014 made by Cairn (with the SNE-1 and FAN-1 wells) and Total have significantly de-risked exploration in Senegal, Côte d'Ivoire and The Gambia. APCL is actively seeking farm-in partners, discussions have advanced following the third-party 2014 well results, and the company anticipates making announcements in H115. With no wells currently funded, it is too early to assign a RENAV, but we speculate that if successfully farmed out, the three blocks with drilling in 2015-16 may indicate a combined pre-drill valuation of NOK1.1/share. This implies upside, should the company be successful in farming down its portfolio. In addition, a commercial discovery should deliver further material upside.

Cap Energy

Second Senegal discovery

Update | Oil & gas | 13 Nov 2014

Cairn Energy's second well offshore Senegal, SNE-1, has discovered oil in the first of two target reservoirs and in quantities that are estimated to be significantly higher than in pre-drill estimates. Coming hot on the heels of last month's FAN-1 discovery, the results indicate the presence of a previously untapped oil province. SNE-1 is the more relevant of the two discoveries for Cap Energy, since it is more geologically analogous to its future prospects in Senegal. As such, the increased resource estimate, together with the good-quality reservoir and light oil reported, bodes well for Cap's Senegalese portfolio. Meanwhile, a 3D survey has begun across Cap's Guinea-Bissau acreage where the deepwater prospects are believed to be analogous to the FAN-1 well.

Cap Energy

Oil discovered offshore Senegal

Update | Oil & gas | 21 Oct 2014

The discovery of oil in Cairn Energy's FAN-1 well offshore Senegal has confirmed a proven hydrocarbon system in the basin and should boost the prospectivity of Cap Energy's assets in the adjacent Djiffere block. However, the second well in Cairn's campaign, the SNE-1 well currently drilling, will be more geologically analogous to Cap's future prospects in Senegal. In saying this, the FAN-1 well is relevant to the company's other key area of Guinea-Bissau, where a 3D seismic survey is planned to kick off in early November 2014 and will be used together with the application of Rex Virtual Drilling technology to identify oil-bearing prospects.

Genel Energy

Africa drilling: A defining year - Pan-African 2014 drilling in focus

Sector Commentary: | Oil & gas | 03 Mar 2014