AUCTUS ON FRIDAY - 20/09/2024

AUCTUS PUBLICATIONS
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ADX Energy (ADX CN)C; Target price A$0.75 per share: Production boost at Anshof in October – The ANS-2A sidetrack well has encountered a 6.5 m net vertical oil column in high quality Eocene-aged sandstone reservoir. The reservoir quality encountered at ANS-2A is consistent with ANS-2 (porosity and permeability ~20% higher than at ANS-3). The oil-water contact was encountered very close to the top of the water wet reservoir encountered at ANS-2. Pressure data recovered from ANS-2A and the producing ANS-3 well confirms a continuous oil pool. These are two important positives. This is partially offset by the top of the structure being lower than expected, resulting in the net oil reservoir intersection at ANS-2A being “only” ~3 times that of ANS-3. The bull case was for ~12 m net pay, representing ~6x the net pay at ANS-3. The well will be tied into the adjacent Anshof permanent production facility after well completion operations expected to start early in October. Production performance will be important for assessing the impact of ANS-2A on reserves. The company is also planning to remap the field in the next 2-3 months to determine an optimal location for the next appraisal / development well. Incremental appraisal drilling will be required. ANS-2A is expected to be in commercial production at Ansfof by the end of October, adding 200-300 bbl/d (gross) to existing (110 bbl/d) production from ANS-3. The additional production would allow the company to have consistent positive operating cashflow. We are now assuming that ANS-1 will be drilled in 2H25 rather than 1H25.See website for full report

Chariot (CHAR LN)C; Target price £0.08 per share: Anchois-3 disappoints. All eyes on South Africa power, Morocco onshore & Namibia – The North Flank prospect at Anchois-3 is water wet (ReNAV: £0.03/sh), This has a negative impact on Anchois South (ReNAV: £0.07/sh). The B sands that were the main appraisal targets were thinner than expected and the deeper C & M sands were water wet, however these were drilled down-dip from the Anchois-2 well where the sands were found gas-bearing. The B sands will not be tested and the main hole will be plugged an abandoned. This has a negative impact on the size of the contingent resources. We are now assuming, pending further information from the data acquired in the campaign, only the 1C case (365 bcf gross resources) rather than the 2C case (635 bcf). This would suggest a smaller potential development than initially expected and we are now assuming production plateau of ~70 mmcf/d rather than up to 200 mmcf/d (in an upside case). While Energean carried the cost of Anchois-3, the smaller resources might not be material enough for Energean to take a near-term FID on the project. As we remove North Flank and Anchois South from our ReNAV, reduce the size of Anchois to 365 bcf and reduce our chance of development from 75% to 15% pending visibility on next steps (including the position of Energean), we have changed our target price for Chariot to £0.08/sh in line with our new Sum of the Parts valuation. The main sources of value creation are (1) the power business in South Africa (2) Morocco onshore, and (3) securing the new venture opportunity in Namibia.
See website for full report

Condor Energies (CDR CN)C; Target price C$5.80 per share: Further feed gas allocation in Kazakhstan is key step to derisking the 2nd high value LNG plant – Condor has received a second natural gas allocation to feed the second modular LNG plant near the Kuryk Port on the Caspian Sea. The natural gas allocation will allow the company to produce the energy equivalent of 565,000 litres of diesel per day (~400 t/d of LNG). This is line with the company’s targets and is a key milestone in derisking the Kuryk plant. This second allocation more than doubles the overall natural gas allocation to the company. Overall, the combined LNG production from both plants could power ~280 LNG locomotives. The first natural gas allocation was sufficient to feed the Alga plant (phase 1 + phase 2). We estimate that each phase of Alga will generate ~US$25 mm of free cash flow per year (total of ~US$50 mm per year for both phases) once online. Kuryk would add a further US$60 mm per year of free cashflow. The combined free cashflow per year potentially generated by both plants would represent 150% of the current market cap. Condor is now discussing offtake agreements with end users, a key step to taking FID on the first LNG plant. This is expected to take place in the coming months. First LNG production is expected in 2026. All new locomotives in Kazakhstan are expected to be LNG powered from 2027.
See website for full report

Pharos Energy (PHAR LN)C; Target price £0.50 per share: Very strong financials. Busy drilling programme in 2H24. Dividend up by 10% – 1H24 production of 5,851 boe/d had been reported previously. Pharos has re-iterated its FY24 production guidance of 5.2-6.5 mboe/d. The company expects to spend US$26 mm (net) capex in 2024 (US$27 mm previously). The highlight of this announcement is the strong financials. While the net cash of US$17.5 mm at the end of June is in line with what had been reported previously, the 1H24 operating cashflow had been negatively impacted by an inventory build of ~US$12 mm. This implies that the net cash position adjusted for this inventory build would have been ~US$12 mm above our forecasts. Because the inventory build is mostly associated with Vietnam, it is expected to be reversed in 2H24. In early 2H24, Pharos repaid all its outstanding bank debt. The company has declared an interim dividend of 0.363 p per share. This represents an increase of 10% compared to last year. Assuming a similar 10% increase in the final dividend would lead to a dividend yield of almost 5% in 2025.
The US$3 mm share buyback programme will provide support to the share price (only US$1.1 mm has been spent in 1H24).
See website for full report

Tethys Oil (TETY SS)C; Target price SEK80 per share: Take-over offer at SEK58.70 per share – Tethys has received a cash offer from Roc Oil to acquire the company at SEK58.70 per share. The offer is recommended by the independent bid committee of the board of directors of Tethys. Shareholders representing 16.86% of the outstanding shares have irrevocably undertaken to accept the offer. The offer represents a premium of almost 90% to Tethys’ share price on the day prior to the announcement and has a 90% acceptance condition. The acceptance period for the offer is expected to commence on or around 28 October and expire on 02 December. By then, the high impact Kunooz well will have been drilled. This is a very material well and in case of success, Tethys shareholders might seek a higher price to sell the company. We also note that if Tethys receives an alternative cash offer at a price 12.5% or more above Roc Oil’s, Roc Oil would have the opportunity to match this offer, failing which the shareholders who have provided undertakings would be entitled to withdraw their undertaking to accept Roc Oil’s offer. The Kunooz well is targeting 123.5 mmbbl unrisked prospective resources (unrisked NAV of ~SEK200 per share). We therefore view the offer by Roc Oil as a put option with a strike price of SEK58.70 per share if the Kunooz well is dry. Tethys’ shares currently trade below the this price , which suggests an asymmetric return in favour of existing shareholders. We have set our target price at SEK80 per share in line with the offer price (SEK58.70 per share) plus 50% of our risked value for Kunooz (50% of SEK44 per share). We believe that the main residual risk associated with the offer is Roc Oil obtaining any required Chinese foreign exchange control approvals.
See website for full report

IN OTHER NEWS
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AMERICAS

88 Energy (88E LN): Resources update in Canada – Project Phoenix is now estimated to hold 378 mmboe gross 2C resources (239 mmboe net). This represents an increase of 50% vs the previous estimates. Net 2U prospective resources are estimated at 153 mmbbl.

Ecopetrol/Petrobras: Injunction order to stop drilling in Colombia – Media reports highlighted that Petrobras and Ecopetrol have been issued an injunction order to stop drilling at Uchuva, a gas discovery offshore.

Mosman Oil & Gas (MSN LN): Equity placing for US helium – Mosman is raising £1.5 mm of new equity at a price of 0.035 p per share to progress helium opportunities in the USA.

Touchstone Exploration (TXP LN/CN): Offer to acquire Trinity E&P lapses – Touchstone is withdrawing its offer scheme to acquire Trinity E&P. Trinity is being acquired by Lease Operators at a higher price.

ASIA AND AUSTRALASIA

Jadestone Energy (JSE LN): 1H24 results – Production at Akatara has been recently curtailed by a small mechanical issue in the gas processing facility’s refrigeration compressors, with repairs underway. 2024 production to the end of August has averaged ~17,500 boe/d. The FY24 production is expected to be near the lower end of the 18,500 – 21,000 boe/d guidance range. The FY24 capital cash and other guidance is unchanged at US$142-172 mm. Net debt at the end of June was US$69 mm.

EUROPE

Equinor (EQNR NO): Discovery in Norway – 3-17 mmboe (recoverable) have been encountered at exploration well 15/3-13 S on the Gudrun field.

Europa Oil & Gas (EOG LN)/Union Jack Oil (UJO LN): Planning approval for UK project – Planning consent has been received from North Lincolnshire Council for the further development of the Wressle well site. The approved works will include extending the existing site to accommodate the drilling of two new wells, construction of gas processing facilities and an underground gas pipeline to connect Wressle to the local gas distribution network.

Horizon Petroleum (HPL CN): Raising new equity for Poland – Horizon has raised C$0.7 mm of new equity at a price of C$0.11 per share. Participants in the transaction will also receive a share warrant for each new share with a strike price of C$0.30 per share.

Jersey Oil & Gas (JOG LN): 1H24 results – With work at Buchan in the UK being slowed, the company is reducing cash costs from £3 mm a year to £1.5 mm a year. Jersey will extend its M&A search to areas outside of the UK. Net cash at the end of June was £13 mm.

Star Energy (STAR LN): 1H24 results – 1H24 production in the UK was 2,012 boe/d. Net debt at the end of June was US$1.9 mm.

MIDDLE EAST AND NORTH AFRICA

Capricorn Energy (CNE LN): 1H24 results – Capricorn has received payments of US$93 mm from EGPC in Egypt in 1H24. Egypt receivables due have reduced from US$169 mm at YE23 to US$155 mm at the end of Juine, with a further ~US$20 mm received to date in 3Q24. Net cash at the end of June was ~US$40 mm. The company is reiterating its FY24 production guidance in Egypt for 20-24 mboe/d with US$50-60 mm capex.
SDX Energy (SDX LN): Operating update in Morocco – SDX plans to drill a stratigraphic well onshore Morocco to progress a drilling campaign on a 47 bcf gas play. The company is also planning to commence drilling two wells in 4Q24 targeting 3 bcf gas in place potential.