Where next for Angus Energy as Bergen cuts its stake?
Oil and gas player Angus Energy has shot up from 7.3p to 12.4p this month following several large share disposals by Bergen Asset Management, the firm that provided it with a £3m convertible security earlier this year. With this particular overhang now minimised, we have broken down Angus’s operations and taken a look at recent newsflow across its assets in the UK’s Weald Basin.
Firstly, Angus is the operator and 65pc owner of the Brockham oil field, discovered by BP in 1987. Angus took a significant step forward here last year with the drilling of a sidetrack well called BR-X4Z from the original BRX4 parent borehole.
Shortly after drilling, the company submitted a planning application to Surrey County Council for operations associated with BR-X4. Following this, the firm received final approval for its development plan on Brockham in January, before resuming production in March from its Portland sandstone via a well called BR-X2Y.
Angus is also the operator and 60pc owner of the Lidsey field, where it drilled a conventional, horizontal production well called Lidsey-X2 last year. The well began producing in November last year at a rate below Angus’s initial expectations, wiping 46pc off its shares. A historical well called Lidsey-1 was brought back into production this March.
In January, Angus agreed to become 25pc owner and operator of the Balcombe licence near Crawley, where it also operator. The permit is positioned in the centre of the thickest section of the Weald Basin’s Kimmeridge Clay and contains a horizontal well called Balcombe-2Z, completed in 2013. The purchase completed in April, funded by a £2m private placement in February at 6p a share and an additional £3m unsecured convertible security with the Bergen Global Opportunity fund (Bergen Asset Management).
Finally, the business owns a 12.5pc stake in the undrilled Holmwood Prospect, which is operated by Europa Oil & Gas.
The last few months have seen Angus deliver operational updates across all of its assets.
Firstly, in July, the firm rose 6.9pc after announcing that it had performed an analysis of oil produced from the Kimmeridge layers in the Lidsey-X1 well. According to chief geologist Andrew Hollis, the assessment showed evidence of good quality oil generation on the outer perimeter of the basin. Managing director Paul Vonk added: ‘Demonstrating we have movable oil in the Kimmeridge at Lidsey is an important metric and, we believe, further de-risks our assets at Brockham, Balcombe and Holmwood.’
Then, in August, the business fell 4.5pc despite announcing that the Surrey County Council had finally granted it several planning approvals at Brockham. This included the retention of the BR-X4 well, the regularisation of the BR-X4Z side-track, and the appraisal of BR-X4Z at Brockham. It added that it would not begin this work until it had completed a seven-day flow test programme at Balcombe-2z.
The Balcombe flow test finally began in September, with the results following earlier this month. Angus said the well flowed at 853bopd and 1,587bopd during separate test runs. However, it added that the first flow test encountered 22.5pc water while the second featured 6.6pc.
It said the presence of water was unexpected, but added that it believes it came from a ‘small high-pressure water zone’ that was not from the main Kimmeridge Reservoir itself but through fractured communication. Despite the firm concluding that it can isolate the water producing zone and establish commercial production under normal pumped production conditions, shares dipped 2.2pc on the day of the news.
Also in September, Angus fell by 4pc after announcing that authorities had decided not to renew the lease at Bury Hill Wood, the proposed site for a temporary exploration well to test the Holmwood prospect. Despite the setback, operator Europa Oil and Gas said it will undertake an evaluation of alternative sites from which to target Holmwood and other plays in the broader PEDL143 licence.
Alongside this busy backdrop of mixed newsflow, a positive driver for Angus’s share price in recent months has been its relationship with convertible security provider Bergen Asset Management. Indeed, in July, the business shot up 34.9pc in one day after announcing that Bergen had exercised conversion rights of £400,000 in relation to the facility at a price of 0.43p a share. It rose a further 10pc several days later after announcing that Bergen had exercised a further £2.6m of conversion rights at 0.46p a share.
Bergen has gone on to reduce its stake in Angus massively this month, from around 9.4pc to below 3pc. The removal of this overhang has seen Angus’s shares rise from 7.3p to 12.4p so far in October.
It is worth noting that Angus’s focus on the Weald Basin – home of divisive firm UK Oil & Gas and a favourite area of controversial AIM character David Lenigas – will put some investors off, while attracting others.
If you are a believer in the Weald’s potential, then – speaking objectively – Angus’s biggest near-term updates could come from its work at Brockham and Balcombe. More long-term newsflow could come from Lidsey and, presumably, Holmwood.
Angus was floored at the tail-end of 2017 by operational disappointments, delays and a £3m fundraise. It has remained depressed since. With Bergen now mostly – if not wholly – out of the picture, will shares react differently to updates moving forward?
In an exclusive video interview with our friends at London South East, Angus Energy M.D Paul Vonk
The author was remunerated but does not hold shares in the company