Panoro Energy ASA (OSE: PEN): Transformational acquisition in EG
• Panoro is acquiring 40.375% WI in Block G, Equatorial Guinea from Kosmos Energy for US$180 mm, effective 1 January 2025. Closing is expected in August, with an estimated ~US$140-150 mm payable at completion and up to US$39.5 mm in deferred contingent consideration tied to oil prices and production over 2026–2028.• The acquisition is highly material, increasing Panoro’s WI in Block G by ~3.9× and adding 46 mmbbl of 2P reserves (+110% versus the company’s current 2P base) and 29 mmbbl of 2C resources. By YE26, WI production from EG is expected to reach ~11 mbbl/d, taking group output to ~20 mboe/d, roughly double FY25 levels.
• With Kosmos facing liquidity constraints, EG was not a priority for capital allocation. Panoro’s enlarged position and Trident’s operatorship should support increased capital allocation to workovers and new wells. Panoro’s WI production from EG could rise progressively to ~19 mbbl/d by 2031.
• There are no pre‑emption rights and the transaction has already received approval in Equatorial Guinea. The only outstanding regulatory step is authorization from CEMAC (Economic and Monetary Community of Central Africa).
• The transaction will be funded through a US$150 mm tap issuance within the company’s existing bond and a US$49 mm equity raise priced in line with yesterday’s close.
• The NOK50 mm per quarter dividend policy for 2025 implies a ~7% yield and aligns with expectations. Production and capex guidance are also in line with our forecasts. Incorporating the transaction and the equity raise, our target price increases from NOK 46 to NOK 55 per share.
Accretive acquisition
Echoing the dynamic seen in Panoro’s 2021 acquisition of Tullow’s assets, Kosmos’ liquidity constraints have likely contributed to the attractive acquisition price secured by Panoro for the EG asset. The deal values the acquired 2P reserves at ~US$3.91/bbl, a steep discount to Panoro’s own pre‑deal EV/2P of more than US$8/bbl. Excluding any value for contingent resources, our YE26 NAV for the acquired incremental 2P barrels is US$358 mm, compared with the ~US$140-150 mm Panoro is expected to pay at closing. At US$70/bbl Brent, we forecast that the company will generate ~US$670 mm of free cash flow between 2026 and 2030.
Valuation
We have increased our 2P NAV and ReNAV from NOK30 per share and NOK44 per share to NOK39 per share and NOK55 per share, respectively.
Panoro Energy is an international independent oil and gas company engaged in the exploration and production of oil and gas resources in Brazil and West Africa. In Brazil, Co. participates in a number of oil and gas licenses located in the Santos basin outside the south-east coast of Brazil and in the Camamu-Almada basin in the state of Bahia. In West Africa, Co. participates in a number of licences in Nigeria and Gabon. As of Dec 31 2013, Co.'s commercial production is from the Manati field in Brazil.
Auctus Advisors is a specialist Equity Capital Markets and Advisory business with a focus in the Energy Sector.
The partners have complementary skill sets, with decades of experience across Equity Capital Markets, Investment Banking and the Energy industry. We have worked at Société Générale, Canaccord Capital, BMO Capital Markets and Schlumberger. Most recently we have worked together for many years at GMP FirstEnergy.
Auctus has been set up at the beginning of a new decade in which we see significant opportunities in the Energy space. Globally, demand for energy is at record levels and continues to grow. Conversely, investment in traditional energy sources has been severely constrained. We believe this imbalance creates opportunities for both companies and investors.
Auctus provides Corporate Broking, Equity Research and Investment Banking services.
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