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The oil prices topped three-months high last week; however, the weak demand and oversupply concern continues to trouble the market. Following were the major highlights of the oil-producing industry today (as on 10th June 2020, before the market close)
- The Brent oil price fell around 1.2 per cent to USD 40.68 a barrel.
- As per National Oil Corporation, production has been shut at Libya’s El Feel oilfield.
- The oil tankers turned back from Venezuela as the US set to blacklist several ships.
Considering the above market conditions, we will discuss two oil and gas producers - Empyrean Energy PLC (LON:EME) and Lansdowne Oil & Gas PLC (LON:LOGP). As on 10th June 2020 (before the market close at 2.06 PM GMT+1), both the stocks (EME and LOGP) were surging around by 14.58 per cent and 7.87 per cent, respectively, against the previous day close. In order to understand the jump in stock price movements, we will deep dive through their financial and operational positions in light of the recent regulatory updates, to conclude over the possible outlook scenario.
Empyrean Energy PLC (LON:EME) – Received One-year Extension for Exploration at Block Offshore China
Empyrean Energy PLC is a FTSE AIM All-Share listed Oil and Gas Explorer, which has been admitted to the London Stock Exchange since 27th July 2005. The Company has a diversified portfolio in Indonesia (Duyung PSC offshore Indonesia), China (Block 29/11 offshore), and the United States (Sacramento Basin, California).
(Source: Annual Report, Company Website)
Recent Developments of 2020 – Extended Deadline for First Phase of Exploration
3 June 2020: The Group provided the twelve-month extension to the first phase of exploration on Block 29/11, offshore China, which has been extended to 12 June 2020.
26 May 2020: The Company released the results of an independent resource audit by GCA (Gaffney Cline and Associates) of the Mako gas field.
Company Update – Preserving the Resilience of Business
On 29th April 2020, the Company provided the following general update on operations. In Indonesia, the Company reported that further substantial progress had been made with the operator of the project (Conrad Petroleum Limited) successfully being able to present all aspects of the project to GCA. Despite the challenges presented by travel restrictions and other COVID-19 related measures, this progress has been attained. Other Highlights are:
- The Group also reported that decent progress had been made on the seismic inversion work.
- On 22nd April 2020, the Company announced that it had launched an Open Offer to qualifying investors to apply for up to 57,417,375 new ordinary shares at a price of 3.5 pence per share. If fully taken up, the Open Offer will raise gross proceeds of GBP 2.01 million.
- Empyrean has reduced its director fees and salaries by around one-third in the financial year 2017.
- The Company upholds a keen focus on costs and continues to operate with general and administrative costs (FY2019: USD 0.973 million) below many of its AIM (Alternative Investment Market)-quoted peers and will continue to ensure that it is appropriate and competitive.
Share Price Performance Analysis
(Source: EODHD/Others, Thomson Reuters) -1-Year Chart as of June 10th, 2020, before the market close
EME’s shares were quoting at GBX 5.445 on 10th June 2020 (before the market close at 2:36 PM GMT+1). Stock's 52 weeks High is GBX 10.75 and Low is GBX 2.75. Total outstanding M-Cap. (market capitalization) stood at approximately GBP 22.61 million.
Business Outlook
The Company anticipates that there are no major impediments to GCA being able to accomplish its update of resources for the Mako Gas Field over the upcoming weeks. Despite the higher rainfall and nation-wide lockdown, EME is well-placed. Along with these, fluctuation in commodity price and exchange rates could affect the profitability of the company. The Group expected that operational improvements would help it to achieve its stated guidance for the year. The Company has the potential to grow its business in the near term.
Lansdowne Oil & Gas PLC – Focus on exploration and appraisal activities
Lansdowne Oil & Gas PLC (LON:LOGP) is an Oil & Gas Producers company, which is engaged in the exploration and appraisal activities for reserves of oil and gas in the Ireland region. The group holds an interest in Helvick Exploration License and Barryroe Exploration License. LOGP strategy is based on evaluation of discoveries related to oil & gas using Contingent Resources. Lansdowne Oil & Gas is focused on developing and appraising its North Celtic Sea basin based Barryroe Field in Ireland’s south coast.
Recent Developments Related to Barryroe field
On 6th April 2020, Lansdowne Oil & Gas announced that it was invited by Providence (Providence Resources Plc) in a meeting to raise USD 3 million through proposed conditional fundraising and signed a non-binding term-sheet with a Norwegian company SpotOn (SpotOn Energy Limited). As per the term-sheet, Providence has granted SpotOn rights to collaborate with Providence until 31st October 2020 on the development on Barryroe field.
Corporate Governance
The Group’s corporate governance is based on several principles ranging from generating long-term value for stockholders, meeting social responsibilities, ethical behaviour to implementing improvement procedures.
Financial Highlights – H1 Financial Year 2019 (30th June 2019, GBP, thousand)
(Source: Interim Report, Company Website)
For the financial year ending 31st March 2020, the company remained in the development phase and did not generate any revenue. The operating loss stood at GBP 71 thousand in the first half of the financial year 2019 versus an operating loss of GBP 99 thousand in the first half of the financial year 2018. The group’s LBT and LAT (loss before tax and loss after tax) stood at GBP 98 thousand in the first half financial year 2019 versus an LBT and LAT (loss before tax and loss after tax) of GBP 156 thousand in the H1 financial year 2018. The company’s basic and diluted loss per share stood at 0.01 pence in the H1 financial year 2019 versus a basic and diluted loss per share of 0.02 pence in the first half of the financial year 2018. The group’s cash balances stood at GBP 29 thousand as on 30th June 2019 versus a cash balance of GBP 71 thousand as on 30th June 2018. The group’s total assets stood at GBP 15,629 thousand as on 30th June 2019 versus total assets of GBP 15,478 thousand as on 30th June 2018.
Share Price Performance Analysis
Daily Chart as of 10th June 2020, before the market close (Source: EODHD/Others, Thomson Reuters)
On 10th June 2020, shares of Lansdowne Oil & Gas Plc were trading at GBX 0.809, before the market close at 2:22 PM GMT+1. Stock's 52 weeks High price is GBX 2.64 and Low price is GBX 0.20. Total outstanding market capitalization (at the time of writing) stood at around GBP 6 million.
Risks Impacted the Financial Performance and reduced Operational Performance
Since the Company is in the development phase, it does not generate any revenues, and all the operations are financed through its cash reserves and grants. The profitability margins have remained in the negative zone but had significantly improved as compared to the last year data. The Company rely heavily on the renewal of its licenses from the Irish Government and other regulatory authorities. The Company operates in a challenging environment, which requires continuous investment, sometimes at the cost of profitability, to stay ahead of competitors. The group’s business is prone to several risk factors, including market risk (including foreign exchange risk and interest rate risk), credit risk and liquidity risk. The group does not use derivatives to mitigate interest rate risk and believes in holding cash in fixed and floating lines. With the outbreak of Covid-19, many countries-imposed restrictions on travel and resulted in a sharp fall in the stock markets globally.
