The Harland & Wolff Group Holdings (LON:HARL), which owns the Islandmagee gas storage project in County Antrim in Northern Ireland, has just issued the findings of a report into the development of its important project.
The company believes that the study and the Report’s findings takes it one step further in future-proofing the project and preparing it for the transition from a natural gas to a hydrogen-led economy.
In due course, it is expected to provide 25% of the UK’s natural gas storage capacity.
The pioneering facility is a low-cost fast cycle operation aimed at providing safe, secure and flexible gas storage that will serve the island of Ireland and mainland UK.
It plans to create up to seven salt caverns, which when fully developed the facility will be capable of storing up to a total of up to 500m cubic metres of gas in Permian salt beds approximately 1,500 metres below Larne Lough.
Storage caverns will be developed in a natural salt structure below the seabed and will enable gas to be delivered, stored and then returned to the UK’s national transmission system.
The Islandmagee facility will support the growing demand for gas-fired power development and renewable energy generation throughout the UK and the Irish Republic.
The project would provide security of supply during peak demand for up to 14 days
Continuation of good group news
The good news keeps on coming from this group.
It recently announced a positive Business Update and Management Outlook for this current year and into 2024.
Its order backlog of over £900m covers contracts over the next seven years, while its new order pipeline is swelling with prospects of over £3.6bn in the next five years.
Apart from owning Islandmagee, the group operates through five markets: commercial, cruise and ferry, defence, energy and renewables and six services: technical services, fabrication and construction, decommissioning, repair and maintenance, in-service support and conversion.
Its Belfast yard is one of Europe’s largest heavy engineering facilities, with deep water access, two of Europe’s largest drydocks, ample quayside and vast fabrication halls.
The group also has two Scottish-based yards, focused upon work for the renewables, energy and defence sectors.
In addition, it also has a sizeable undercover drydock at Appledore.
Analyst Opinion – looking for trebled sales this year and reduced losses
Analyst Peter Renton at the group’s NOMAD and Joint Broker Cenkos Securities has a Buy recommendation out on the company’s shares.
His estimates for the current year to end December look for a 350% rise in group revenues to £100m but he then goes for a 2024 doubling of that figure to £200m.
On the basis of those figures, he looks for a pre-tax loss this year of £34.1m falling to £20.0m next year.
Conclusion – share price to double
The group’s shares at just 15.5p, up 2% on today’s news, look to be very capable of doubling in price in the next year or so.
Of course, this is only a personal view, and not investing advice. The high-risk notice is made for a reason. They’re speculative and volatile but come with the chance of exceptional returns for patient investors.
3. Greatland Gold (LON: GGP)
GGP shares have fallen significantly over the past year, but the gold explorer could be one of the best small-cap opportunities by dint of its 30% ownership of the world-class Havieron Project in Western Australia.
The other 70% is owned by mining titan Newcrest, who also owns the nearby Telfer gold mine and associated processing plant. The plan for some time has been to develop Havieron using Telfer’s infrastructure.
However, a spanner has recently been thrown into the works. Newmont has approached Newcrest with an improved offer $19.5 billion merger offer, which would create the world’s largest gold miner by some margin. Given the cost synergies, the companies’ shared history, and rudderless Newcrest leadership, I think this will now go through.
The implications for GGP are stark — they might be about to be in partnership with the world’s gold titan, though they may also look for a way to buy out the remaining 30% of the $1.2 billion project and also negotiate access to Telfer.
Regardless, a Newmont-Newcrest tie-up could act as a near-term price catalyst.
4. Premier African Minerals (LON: PREM)
PREM has been one of the best FTSE AIM performers in recent years, with its share price rising from lows of 0.02p less than four years ago to over 1p today — yielding a market cap over £220 million.
The Zimbabwe-based miner is the 100% owner of the Zulu Lithium Project, which is widely regarded as one of the largest undeveloped lithium reserves in the world. And it’s just cleared up the last couple of hiccups before production — including a missing reagent and government approval.
CEO George Roach has already noted that ‘with plant commissioning already complete, we are now going through the final stages of process control implementation with the plant designers with first concentrate expected shortly and first shipments now targeted for the end of the month.’
With investor Canmax holding circa 13% of shares and rights to 50% of offtake — and Chinese titans investing heavily in the country — investors are feverishly considering the prospect of a full buyout at a high premium.
If not, first sales could be enough by itself to catalyse the share price higher — though I’d caution that there are nearly always small problems when a plant first switches on.
5. Avacta (LON: AVCT)
Avacta is currently proceeding with clinical trials of its flagship AVA6000 — which it hopes will deliver ‘chemotherapy without the side effects.’
The company recently announced that the first patient of the fifth cohort of the flagship AVA6000 Phase 1a Dose Escalation Study has been dosed with the treatment in the UK — this first in-human phase I trial includes MHRA approval for higher dosages — at a level of 250mg/m2. The idea is to find out the maximum tolerable dose for further clinical trials.
CEO Alastair Smith notes that ‘the recent confirmation of release of active chemotherapy in the tumour tissue and the safety data being generated in the ALS-6000-101 study are providing detailed insights.’
The company has also opened two US Clinical Investigator Sites for AVA6000 Phase 1, one at the Memorial Sloan Kettering Cancer Center and the second at the Fred Hutch Cancer Center. Enrolment for soft tissue sarcoma patients has begun, with trials led by globally renowned oncologists Dr William Tap and Dr Lee Cramer.
Avacta has hinted that phase 1B may be conducted initially across the pond, claiming that stateside is ‘uniquely positioned’ for further research. CDO Neil Bell has highlighted the recent ‘major milestone,’ and plans to ‘build the clinical evidence base for the safety and tolerability of AVA6000.’
Further clinical success could see the share price rocket — and a buyout or US listing — could come at any time.
This article has been prepared for information purposes only by Charles Archer. It does not constitute advice, and no party accepts any liability for either accuracy or for investing decisions made using the information provided.
Further, it is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.
UK intellectual property investment group Tekcapital has secured additional funding to accelerate growth at their portfolio companies.
Tekcapital raised £2m by way of a placing at 15p per share. The funds will be allocated primarily to the growth of MicroSalt and Guident, with £1m designated to MicroSalt inventory.
“We are pleased to announce this oversubscribed offering to facilitate the further significant progress of our portfolio companies,” said Clifford M. Gross PHD., Executive Chairman of Tekcapital plc.
Tekcapital said MicroSalt were preparing for ‘significant forthcoming orders,’ suggesting the capital is required to build out inventories to meet demand.
MicroSalt has recorded several commercial achievements, including their SaltMe crisps being available in over 2,000 Kroger stores and inking deals with food manufacturers.
Having appointed Zeus Capital as their NOMAD late last year, investors will eagerly await further MicroSalt commercial updates, and this morning’s developments suggest momentum is gathering.
Guident will receive a £500k share of the funding raised to develop their Remote Control Monitoring Centre further and conduct additional testing of their regenerative shock absorbers for clients.
Shares in Beacon Energy were readmitted following the acquisition of Rhein Petroleum. This brings with it a producing oilfield with potential production of up to 4,000 barrels of oil per day in the coming years.
A drilling rig has been contracted for the onshore Schwarzbach-2 well and it should mobilise in June. Drilling should take 25 days to reach a depth of 2,255 metres and then there will be 12 days of testing. A tie-in to existing production facilities would take 12 days. The cash raised will finance this drilling.
The share price dropped 34.3% to 0.115p following the reversal. The produc...
PanGenomic Health (LON: NARA) joined the Access segment of the Aquis Stock Exchange on 12 April. The shares were already listed on the Canadian Stock Exchange, so the company was able to join the market without a new prospectus.
Management wants to tap the potential UK shareholder base interested in digital health investment. No new money was raised when the Aquis quotation started. Novum is corporate adviser.
The share price has stayed at 4.5p during the week and no trades have been reported. The Canadian share price is C$0.07 and it has fallen from C$0.25 since trading commenced last July. T...
Guanajuato Silver Company Ltd (LON: GSVR) was the best performer of the week with a 31.5% gain to 35.5p, which is its highest level since trading started on the Aquis Stock Exchange. The silver explorer announced positive drilling results at the San Ignacio mine Some of the drilling has encountered high grades. There could be a new area of thick mineralisation. This will help to extend the mine life.
Cannabis supplier Ananda Developments (LON: ANA) says preparations are underway for a medicinal cannabis flower processing facility. The MRX1 cannabidiol medical cannabis oil will be launched commercially in June and it may be used in two randomised controlled trials. The share price is 30.6% ahead at 0.64p.
NFT Investment (LON: NFT) has announced a general meeting on 26 May to gain shareholder approval for a proposed tender offer by April 2024. The tender will be for up to 857.1 million shares and the price will be the greater of 3.5p a share or NAV for each share. The share price is 23.3% higher at 1.85p.
Invinity Energy Systems (LON: IES) has been awarded an £11m grant from the UK government under phase 2 of the Longer Duration Storage Demonstration competition. This will deploy a 30MWh vanadium flow battery. The share price is 18.8% higher at 41p.
The Gunsynd (LON: GUN) share price improved by 14.3% to 0.4p on the back of limited share trading. Investee company Omega Oil and Gas (ASX: OMA) says initial results from the Canyon-2 well in Queensland have exceeded expectations.
Cadence Minerals (LON: KDNC) investee company Evergreen Lithium joined the ASX on 11 September. Cadence Minerals, whose share price is 6.96% higher at 10.375p, has 8.74% stake in Evergreen Lithium and the share price nearly doubled to A$0.57 during the week.
After the market closed on Friday Arbuthnot Banking (LON: ARBB) announced a £12m share issue at 925p a share. Prior to that the share price had risen by 0.3% to 965p. Chairman and chief executive Henry Angest will invest £6.75m of that money. The cash will be used to grow the loan book.
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Fallers
Marula Mining (LON: MARU) has entered into commercial agreements for its investments in Tanzania projects. Takela Mining is the partner for the Nyorinyori and Bagamoyo graphite projects and Kusini Gateway Industrial Park Ltd for the Bagamoyo graphite project. The share price fell 10.8% to 11.375p.
Shareholders in Apollon Formularies (LON: APOL) have agreed to the disposal of selling IP assets to Canada-listed Global Hemp Group for $250,000 in cash and 10 million shares in the acquiror at C$0.015 each, as well as a new investing strategy. Global Hemp is continuing its due diligence. The share price declined by 9.76% to 0.185p.
EPE Special Opportunities (LON: EO.P) had an NAV of 309.57p a share at the end of March 2023. The share price slipped 5.88% to 160p.
Spectral MD (LON: SMD) reached its highest level for more than 18 months following the news that it is merging with Nasdaq-listed SPAC Rosecliff Acquisition Corp 1. The share price is 57.1% higher at 44p. The deal values Spectral MD at $170m, or 101p a share. In June 2021, the AIM flotation price was 59p. The AIM quotation will be cancelled. There is likely to be a $15m placing. This will provide additional cash to finance the commercialisation of the DeepView woundcare analysis technology. The transaction should complete in the third quarter.
Kodal Minerals (LON: KOD) has risen 55.9% to 0.795p on the week following the announcement that Hainan Mining has received approvals from the Chinese authorities for its proposed £82m funding package for the Bougouni lithium project in Mali and the £14.6m share subscription in Kodal Mining. A $7m deposit has already been achieved. This is the highest the share price has been since 2014.
Immupharma (LON: IMM) will hold a meeting with the FDA in the US concerning a phase 2/3 trial study protocol on 16 May. The protocol is for P140 in chronic idiopathic demyelinating polyneuropathy. This is a rare autoimmune disorder affecting around 50,000 individuals in the UK and Europe. The share price moved up by 51.5% to 2.95p.
Ocean Harvest Technology (LON: OHT) continued its share price rise following last week’s placing that raised £6m, or £4.5m after expenses, at 16p. This week the share price rose 37.3% to 24.2p, even though Terence Butler Holdings sold one million shares at 22.97p each. Ocean Harvest Technology produces ingredients for animal feed using seaweed under the OceanFeed brand name. Its main facility is in Vietnam.
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Fallers
Circle Property (LON: CRC) shares have gone ex-entitlement for the £16.1m return of capital. That is equivalent to 55p a share. The share price is 63.6% lower at 20p. Once the remaining property sales are completed there will be another pay out.
In-content advertising technology company Mirriad Advertising (LON: MIRI) admits that there is not ging to be a bid. The share price has slumped 42.2% to 0.94p. There was £7.5m in the bank at the end of March. Management is seeking a source of more funding, but there is no certainty that more cash will be secured. Mirriad is partnering with broadband and video delivery services provider Harmonic Inc to help broadcasters to target audiences.
Shares in Beacon Energy (LON: BCE) have been readmitted following the acquisition of Rhein Petroleum. This brings with a producing oilfield with potential production of up to 4,000 barrels of oil per day in the coming years. Beacon Energy has certified 2P net reserves of 3.85mmbbl across four assets in Germany. The share price dropped 34.3% to 0.115p.
Kibo Energy (LON: KIBO) is repricing 1.13 billion warrants to 0.1p, the loan notes will be convertible at 0.14p a share and the bridge loan has been amended to a 24-month loan. For each warrant exercised before the end of June 2023, there will be one incentive warrant issued that is exercisable at 0.25p. This could help to fund the spinning-out of Ultimate Sustainable Energy as a separate AIM company. The share price has fallen 28.2% to 0.07p.
The FTSE 100 added to a consistent week of gains as the index briefly touched 7,900 on Friday following the release of US retail sales data and upbeat US banking earnings.
The FTSE 100 was trading at 7,896 at the time of writing.
Strong results from US banks helped lift sentiment early on Friday, with Citigroup, Wells Fargo and JP Morgan all beating analyst estimates. JP Morgan shares rose over 7%.
However, shortly before the US open, mixed US retail sales data sapped some enthusiasm from investors and again raised questions about the underlying health of the US economy.
“Headline numbers were weaker than expected, coming in 1% down MoM and continuing the recent market theme of softening US data. Excluding autos, gas and the control group, the numbers were stronger than expected, which may cloud the market reaction and potential positioning squaring into the weekend by market participants,” said Ryan Brandham, Head of Global Capital Markets, North America at Validus Risk Management.
In a sign of underlying interest for stocks, the S&P 500 rebounded quickly from a lower open and was closing in on the highest levels since August.
UK banks
The plethora of upbeat earnings results from US banks sparked a rally in FTSE 100 banks on hopes US strength would be evident in the next round of updates from UK counterparts.
Standard Chartered was the FTSE 100’s top riser with a 4% gain. HSBC and Barclays were not far behind, adding 3.8% and 3.2%, respectively.
Barclays shares are now only about 10% away from recovering all losses incurred since the beginning of the SVB saga. Standard Chartered – the heaviest hit FTSE 100 bank during the mini-crisis – needs around a 25% rally.
John Bennett, Portfolio Manager of the Henderson European Focus Trust explains why big oil companies are essential for an orderly transition to a low carbon economy.
It is a simple fact that society cannot go cold turkey on hydrocarbons, as much as the more extreme ends of the green lobby would like to believe. While we agree with the sentiment behind ‘Stop Oil’, any attempt to do this must happen in an orderly fashion that takes society with it. Such a journey will take time. The oil & gas industry has in place the infrastructure, technology, cash flow and ability to fund new investment, which makes the industry essential for change to happen.
Big oil sets ambitious climate targets
In recent years big oil has aggressively pivoted to align corporate strategy to a net zero world, setting increasingly ambitious emissions targets; yet as recently as 2019, none of the three largest European oil majors had set a 2030 emissions target. We should note, however, that these targets are not set in stone. Rather, they are likely to shift as the realities of achieving an ‘orderly’ transition sets in. This was most recently the case in February when BP moderated its climate targets to meet immediate energy requirements in response to limited supply from Russia. It would not surprise us to see other oil majors scale up and down the intensity of their climate targets as required. Disclosure and consistency (different base years for example) will also remain a challenge for comparing ambitions. Regardless, the direction for oil companies is clear.
Oil & gas companies environmental targets tend to come in two forms:
absolute carbon emissions targets (in MtCO2e) using Scope 1, 2 &/or 3; and
carbon intensity targets of products (in gCO2e/MJ) which considers the company’s absolute carbon emissions emitted per MJ of energy provided from its defined products.
Scope 1 emissions are generated directly through a company’s own operations. For oil firms, the main ways to reduce these emissions involve reducing flaring (capturing excess gas rather than burning it or simply managing the oil field more efficiently) and exiting from carbon-intensive projects. Scope 2 emissions include those indirectly produced from power consumption. In this case, many oil companies are using electricity provided from low carbon sources, fuel switching, recycling heat and increasing energy efficiency.
Focusing on emissions reduction from the companies’ own operations is usually considered the easiest win and it is therefore these first two scopes that we have seen the most aggressive targets. By 2030, Shell and BP have targeted a 50% reduction in scope 1 and 2 emissions, and TotalEnergies a 40% reduction.1 However, while these emission reductions should be material by 2030, they are somewhat limited and comprise a relatively small portion of overall emissions– chart 1.
Scope 3 emissions are those associated with the consumption of products sold. These represent the vast majority of ‘well to wheel’ emissions and are those where a longer transition is required. By their nature, scope 3 reduction targets are more difficult to control and therefore make up a much smaller portion of overall reduction targets.
Chart 1: Scope 3 emissions versus scope 1 & 2 for big oil
Source: MSCI, Janus Henderson, as at 30 December 2022. References made to individual securities do not constitute a recommendation to buy, sell or hold any security, investment strategy or market sector, and should not be assumed to be profitable. Janus Henderson Investors, its affiliated advisor, or its employees, may have a position in the securities mentioned.
As is the case for many sectors, the method to calculate scope 3 emissions is not consistent across the oil & gas industry. Regardless of the exact methodology, we know that scope 3 represents a significant portion of emissions and is therefore key to long term decarbonisation.
The driver of scope 3 emission reductions lies in the company’s sales and production mix. The main ways for oil companies to reduce scope 3 emissions include:
shifting production from oil to gas (liquified natural gas releases approximately 20-25% less emissions than traditional fossil fuels)
expanding downstream integration in gas (with production refining, retail marketing and power supplied from gas)
increasing sales of biofuels and carbon capture
natural sinks to reduce net emissions
replacing fossil fuel sales with renewables
Renewables roll out
The scale and commitment of energy companies to increase solar and wind in their production mix often gets overlooked due to its low base versus traditional fuels. However, in absolute terms the shifts are far more dramatic.
In 2022, Shell, Total Energies and BP had a combined low-carbon capital expenditure (capex) in the region of $9bn, and these numbers are set to grow, with targets of 20-50% capex by 2025/2030.2 This expenditure translates to the oil majors having some of the largest renewable energy growth plans in Europe; chart 2 shows big oil growth plans compared to the incumbent developers, utilities.
Chart 2: European players have big growth plans
Source: MSCI, Janus Henderson, Exane BNP Research, Credit Suisse Research, as at 30 December 2022. Orange bars indicate oil company; black bars indicate utilities company. References made to individual securities do not constitute a recommendation to buy, sell or hold any security, investment strategy or market sector, and should not be assumed to be profitable. Janus Henderson Investors, its affiliated advisor, or its employees, may have a position in the securities mentioned.
In addition, these companies have become disciplined when it comes to exploring/extracting for new oil projects which will see the percentage of renewables increase in the mix even further. To supplement this renewable-led electrification of our energy supply we are also seeing companies with large retail networks committing to charging point roll outs – Shell targets 2.5m by 2030 aiding the demand side of the equation as well as the supply side.3
Solutions for hard-to-abate sectors
While electrification is often touted as the main solution to reduce dependence on hydrocarbons, the energy density of electricity is far less than hydrocarbons which could prove troublesome in some instances. Currently, the battery size required for a plane to reach take-off speed would hinder the ability to take off at all. Other hard-to-abate sectors alongside aviation include steel, shipping, cement and similar chemical processes. The solutions, some of which are noted below, also look likely to heavily involve the oil majors.
Carbon Capture, Utilisation and Storage (CCUS) involves the capture of CO2 from large point sources that release emissions – such as power generation, oil wells or industrial facilities – and has been used by energy companies for many years to reduce their own emissions. CCUS can also capture CO2 directly from the atmosphere. If not utilised on-site, captured CO2 is compressed and transported to be used in a range of applications or injected into deep geological formations which trap the CO2 for permanent storage. Until recently, this process was considered a cost of doing business. Many oil majors are now looking to increase their CCUS capabilities to start selling the service externally by charging per tonne of CO2 captured for external carbon emitters. Given their history in this area, oil companies are uniquely positioned for this opportunity.
Biofuels are created using an organic material (‘feedstock’), typically blended with traditional diesel/aviation fuel. While these fuels still release emissions on combustion, they are considered sustainable because of the carbon captured during the growth of the organic material. Although biofuels might not be the ultimate solution, they could certainly be part of the transition, especially as the primary feedstocks (sugar-starch crops and oils from rapeseed or palm oil) can put the process at odds with food security. Other feedstocks being explored include agricultural waste (cow manure) and sea algae. Both European pulp and paper company UPM and Neste have been pioneering technology in this area, but it is also a significant element of the oil majors transition strategies.
Hydrogen could be considered the ultimate solution. Green hydrogen (produced using purely renewable energy and electrolysis) has no emissions at point of use and can be stored for long periods and transported large distances compared to electricity. The main problem is that much of the existing property, plant, equipment and devices for hydrogen production are currently running on fossil fuels and will need to be completely replaced. Again, oil companies’ experience in the operation of upstream and midstream infrastructure necessary to deliver a gas to market will be vital in this transition.
For us, how these processes can interact in tandem is where the scale of the oil majors shows their benefit. Through their trading businesses, oil firms could be a one-stop shop for a company’s energy needs – working with them to reach the best combination to meet their specific energy needs.
Conclusion
The complexity of the carbon chain in society means that the transition to lower carbon solutions cannot happen overnight. The good news is that the technology is either ready (the cost of wind and solar is competitive with traditional fuels) or fast approaching (hydrogen and biofuels). Oil majors are committing huge amounts of capital to aide this shift, thus far in a way that largely aligns all stakeholders. Ultimately, these companies are fast moving from being major oil companies to integrated energy companies with whom the energy transition is totally reliant. We prefer those names that exhibit strong capital discipline whilst showing a strong commitment to a transformational shift within their businesses.
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