Tethys Oil AB (SSE: TETY): Well test results at Kunooz-1 weeks away
• 3Q24 production of 7,717 bbl/d had already been reported.• While the company moved from an overlift position of 2,357 bbl at the end of 2Q24 to a large underlift position of 28,993 bbl at the end of 3Q24, the 3Q24 operating cash flow of US$14.5 mm (before working capital) was very close to 2Q24 (US$15.4 mm).
• The key near term newsflow is the results of the flow tests of the Ara/Birba and Bua formations at Kunooz-1 on Block-58. A positive result would be very material to Tethys and could lead to Roc Oil increasing its offer for the company.
• The large and extensive natural fractures encountered over 500 m (gross thickness) in these formations are similar to the fractures at Block 4, where they are highly productive.
• The Ara/Birba and Bua formations at Kunooz-1 will be completed open hole and the well test results are expected in 3-4 weeks. The acceptance period for the Roc Oil offer expires on 2 December.
• Overall, our target price of SEK80 per share is unchanged. It has been set in line with the offer price (SEK58.70 per share) plus 50% of our risked value for Kunooz (50% of SEK45 per share).
• We continue to view the offer by Roc Oil as a put option with a strike price of SEK58.70 per share if the Kunooz well test is not successful. Tethys’ shares currently trade at around this price.
Other take aways
The FDP at Block-56 is now expected to be approved in 4Q24. This would allow the company to book additional reserves and grow production. At Blocks 3&4, the FNW-1 exploration well has entered a period of additional testing with results expected in 4Q24. The result of the Afnan-1 exploration well is also expected during 4Q24. A further exploration well is expected to be drilled in late 2024/early 2025.
Valuation
The offer for the company (SEK58.70 per share) is close to our ReNAV for the company based on Blocks 3&4 plus Block 56 (SEK52 per share). Our ReNAV for Kunooz on Block 58 is SEK45 per share. The overall unrisked value of the prospective resources at Block 58 alone (>400 mmboe) is >SEK700 per share.
Tethys Petroleum is an oil and gas exploration and production company focused on projects in Central Asia. Through its subsidiaries, Co. is engaged in the exploration for, and the acquisition, development and production of, oil and natural gas resources in Kazakhstan, Tajikistan and Uzbekistan.
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.
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