AUCTUS ON FRIDAY - 24/05/2024

AUCTUS PUBLICATIONS
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Chariot (CHAR LN)C; target price of £0.50 per share: Drilling at the second well onshore Morocco has commenced – Chariot has started to drill the Dartois prospect onshore Morocco. The well is targeting a different reservoir system and trapping style than the Gaufrette prospect. The main target at Dartois is estimated to hold 12 bcf of gross prospective resources. Success would de-risk a total of 20 bcf of gross prospective resources (+8 bcf) in the Dartois area. A rig-less well test would be run in case of success. Our unrisked NAV for the well is £0.05 per share with a ReNAV of £0.02 per share. The key near-term news flow remains the Anchois East well expected to spud in 3Q24.
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Criterium Energy (CEQ CN)C; target price of C$0.35 per share: Signing a binding sale agreement for Bulu for US$7.75 mm. Initial US$0.5 mm already received - Criterium has signed a binding sale agreement for its interest in the Bulu PSC for US$7.75 mm in cash. The price is in line with previous indications. This is a very important announcement as it provides more clarity on the divestment, the proceeds of which will boost the company's balance sheet and allow it to accelerate its investment program and grow production faster. The total proceeds from the divestment are greater than the company's current market capitalization. Pending the completion of the transaction, we are keeping our capex and production profile unchanged. Criterium could decide to repay some additional debt in exchange for a write-down. This could reduce the amount of cash interest by a significant amount (the debt currently carries an 8.6% interest rate per annum). As an illustration, Criterium had previously indicated that repaying US$5.5 mm of debt would trigger a US$3.8 mm additional debt write down and therefore reduce interest payments by US$0.8 mm per year (representing >10% of the current market cap). The FY24 capex could also be increased from the current guidance of US$4.8-5.5 mm. US$10 mm capex could boost production from 1.2-1.3 mbbl/d to 2 mbbl/d. As we incorporate the proceeds from the divestment of Bulu into our financial forecasts, we are revising our target price from C$0.30 per share to C$0.35 per share in line with our new ReNAV..
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GeoPark (GPRK US)C; target price of US$30 per share: Dividend distribution boosted by share buyback. Additional details on Argentina - 1Q24 production had been reported previously. GeoPark held US$151 mm in cash at the end of March. Adjusting for a negative working capital movement of ~US$20 mm in 1Q24, this would have been in line with our forecast. Gross production at CPO-5 of ~30 mbbl/d continues to be very high. The Cisne 1 exploration well is expected to reach TD by the end of May. GeoPark will then drill another exploration well on the block. Given the reduced share count following the share buyback resulting from the Dutch auction, the dividend per share has increased to US$0.147 per share (the quarterly dividend distribution of US$7.5 mm is unchanged). The current dividend yield is ~6%. GeoPark has reiterated its commitment to the current dividend distribution, even in the context of higher capex in Argentina as the incremental cash flow will cover a large proportion of the additional spending.
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Panoro Energy (PEN NO)C: target price of NOK50 per share: Likely reserves increase at Hibiscus following better than expected drilling results – The DHIBM-7P pilot vertical well encountered 24 metres of net pay in an overall hydrocarbon column of 37 metres. The well was drilled from the pilot hole of the recently drilled Hibiscus South well that had already encountered 5-6 mmbbl recoverable resources. The bottom part of this well had been plugged ahead of drilling a horizontal producer in the area (this horizontal well will be drilled next). One of the producing wells at Hibiscus continues to deliver a very high flow rate without requiring a pump. This very strong performance suggests that this area of the field could hold more volume than initially expected. The DHIBM-7P pilot well has confirmed that theory, encountering oil beyond the expected boundary of the field. The hydrocarbon column also extends across the boundary between the Gamba and the underlying Dentale formation. This is the first time that the Gamba and Dentale have been found in the same well at Hibiscus main. Panoro is now reworking its model of the field which is now larger than expected. Panoro will drill a production well in the newly proved northern flank area once the upcoming Hibiscus South horizontal well is completed. The development of Hibiscus/Hibiscus South/Ruche is now expected to include 8 wells rather than 6 as initially expected (there are four spare well slots on the platform), which would extend the duration of the 40 mbbl/d gross production plateau. Pending further details, we have added 8 mmbbl gross recoverable resources (Panoro WI: 17.5%) to our valuation. This is slightly above the 5-6 mmbbl encountered at Hibiscus South.
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Panoro Energy (PEN NO)C; target price of NOK52 per share: NOK100 mm share buyback – The 1Q24 production of 9,605 bbl/d, the cash position of US$22.4 mm and the debt position of US$80.6 mm had been reported previously. The 1Q24 operating cash flow of US$25 mm was impacted by US$5.4 mm of negative working capital movement and US$3.6 mm negative inventory movement. This suggests an underlying operating cash flow of US$34 mm for the period. While the yearly maintenance shutdown period at Dussafu is now expected to be three weeks rather than two, the FY23 production guidance of 11-13 mbbl/d has been re-iterated. The highlight of the announcement was the launch of a NOK100 mm share buyback programme to be completed by the end of September. Overall, assuming no change to the quarterly dividend of NOK50 mm, the total shareholder distribution as it stands for 2024 would be up to NOK300 mm. With increasing free cash flow due to higher production and lower capex in 2H24, the actual shareholder distribution in 2024 could be higher (Panoro has guided for total shareholder returns of NOK400-500mm as per its 2024 shareholder returns policy). As we increase the amount of share buyback in 2024 and incorporate the drilling success at the Northern Flank of Hibiscus main, we increase our target price from NOK50 per share to NOK52 per share.
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Pulsar Helium (PLSR CN)C: target price of C$1.80 per share: New helium legislation in the USA – The State of Minnesota has enacted a new legislation that includes helium exploration, production and for leasing on state lands following advances made by Pulsar at its Topaz helium project. The new legislation came into effect on 22 May. The new regulatory framework allows the State of Minnesota to issue leases for exploration and production of non-hydrocarbon gases (including helium), with Pulsar already having lodged an application for new leases in areas of interest for helium and hydrogen. This could allow Pulsar to materially increase its footprint.

Tethys Oil (TETY SS)C: target price of SEK100 per share: Production update in Oman – WI production from Blocks 3&4 was 7,705 bbl/d in April. As previously communicated, the April production was significantly impacted by extreme weather conditions with heavy rain and floods.

IN OTHER NEWS
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AMERICAS

Seacrest Petroleo (SEAPT NO): 1Q24 results – 1Q24 production in Brazil was 8,377 boe/d. Net debt at the end of March was US$364 mm.

Trinity E&P (TRIN LN): FY23 results in Trinidad – FY23 production was 2,790 bbl/d with YE23 net cash of US$5.4 mm.

ASIA AND AUSTRALASIA

Indus Gas (INDI LN): Corporate and strategic update in India – Gross 2P reserves from the PSC under the intended development plan, across the SGL, SSF and SSG fields are estimated at 1.9 tcf. Given the recent share price collapse, the company is investigating a range of strategic options.

EUROPE

Chevron (CVX US): Exiting the UK North Sea? – Media reports highlighted that Chevron could initiate a sales process of its UK North Sea business.

Equinor (EQNR NO): Oil discovery in Norway? – Well 25/11-H-1H has encountered 0-0.6 mmbbl of recoverable oil at the Svalin field. The licensees will consider whether the discovery is sufficiently profitable for production.

Orcadian Energy (ORCA LN): Potential farm-out of UK asset – Orcadian has signed a heads of terms agreement to farm out the SNS licence awarded in May. The SNS licence contains the Earlham discovery, with a P50 contingent resource of 114 bcf of sales gas, a potential redevelopment project to blow down the now decommissioned Orwell gas field, which Orcadian believes can deliver over 30 bcf of gas and the Clover prospect which has a P50 prospective resource of 153 bcf of gas. On completion of the transaction, the potential partner will pay Orcadian a fee and will fund all the Earlham and Orwell development costs, the SNS Licence work programme and other licence costs until first gas production. The potential partner has agreed in principle to loan Orcadian US$1.4 mm for a period of up to two years.

Union Jack Oil (UJO LN): FY23 results – YE23 gross 2P reserves at Wressle in the UK were estimated at 2.4 mmboe. The company held £5.2 mm in cash at YE23.

FORMER SOVIET UNION

Block Energy (BOE LN): FY23 results in Georgia – FY23 production was 543 boe/d. Block held US$0.7 mm in cash at YE23. Current receivables and current payables are respectively ~US$1 mm and ~US$1.2 mm. In addition, the outstanding US$2.0 mm secured loan is due for full redemption in August.

MIDDLE EAST AND NORTH AFRICA

Capricorn Energy (CNE LN): Operating update in Egypt – Capricorn has approved a FY24 capital budget of US$57mm, which includes various infrastructure projects and the drilling of 12 development and three committed exploration wells. FY24 production continues to be expected to be 20-24 mboe/d. Capricorn’s cash position improved from US$190 mm at YE23 to US$209 mm at 30 April 2024. Over the same period, receivables in Egypt have reduced from US$169 mm to US$151 mm, and debt drawn has reduced from US$114 mm to US$108 mm. Subsequent to 30 April, the Capricorn has settled the US$25 mm contingent consideration due to Shell related to the acquisition of the Egypt assets.

Energean (ENOG LN): Operating update – 1Q24 production was 142 mboe/d. The FY24 production continues to be expected to be 155-175 mboe/d. The Abu Qir infill well drilling campaign in Egypt encountered around 270 feet of net pay across the BKES-1 formation and Abu Madi formations, around twice initial expectations. Preliminary analysis indicates gas-initially-in-place volumes of approximately 87-129 bcf. The well also encountered a possible liquids column of around 55 feet of net pay that requires further analysis. First production is expected in 3Q24. Net debt at the end of March US$2.9 bn.

ShaMaran Petroleum (SNM CN): Buying back bond – ShaMaran is launching a tender offer to buy back US$47 mm of bonds at 100% of par value. All future semi-annual amortization payments are proposed to be replaced by a quarterly cash sweep mechanism, and ShaMaran's call options for the Bond will be extended/amended.

United Oil & Gas (UOG LN): Exiting Egypt – United is settling with its debt provider for the final outstanding sum of US$0.8 mm. The company is withdrawing from Egypt.


SUB-SAHARAN AFRICA

Afentra (AET LN): Operating update in Angola – Afentra has completed the acquisition of 12% WI in Block 3/05 and of 18% WI in Block 3/05A. The payable cash consideration at completion is US$28.4 mm (US$48.5 mm headline price). Net debt at completion is expected to be US$46.2 mm but the company will also hold oil inventory of ~0.84 mmbbl. Overall WI production from January to April averaged 6.8 mbbl/d

Galp Energia (GALP NO): Selling Mozambique asset – Galp is selling its 10% WI in Area 4 in Mozambique for US$650 mm, net of capital gain taxes, to ADNOC. Lease liabilities were US$525 mm. Area 4 includes Coral South FLNG, in operation since 2022, as well as the prospective Coral North FLNG and Rovuma LNG onshore developments, both expected to be sanctioned during 2024/25. Additional contingent payments of US$100 mm and US$400 mm will be payable with the final investment decision of Coral North and Rovuma LNG, respectively.

EVENTS TO WATCH NEXT WEEK
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31/05/2024 – Nostrum Oil & Gas (NOG LN): 1Q24 results