Valeura Energy (TSX: VLE): >US$100 mm cash build during 4Q24. All eyes on the reserves update in February
• Record 4Q24 production was 26.1 mbbl/d, which is in line with our expectations.• Net cash at YE24 was US$259 mm, exceeding our forecasts by US$34 mm. This reflects a 0.56 mmbbl reduction in oil inventory during 4Q24 (1.2 mmbbl at the end of September versus 0.64 mmbbl at the end of December).
• Valeura’s net cash balance increased by ~US$100 mm during 4Q24, representing over 18% of the company’s market cap. This highlights the company’s business model and the cash flow generating potential of its assets.
• The FY25 production guidance is set at 23-25.5 mbbl/d with US$125-150 mm in capex, plus US$11 mm for exploration drilling. This compares with 22.8 mbbl/d production in 2024. This excludes the capex for the redevelopment of Wassana (FID expected in early 2Q25). The production and development guidance is in line with our expectations (~24.5 mbbl/d and US$130 mm).
• Incorporating the YE24 net cash balance and the FY25 guidance, we have increased our target price from C$10.00/sh to C$11.00/sh. The YE24 net cash position represents over 45% of the current market cap.
Reflections on the guidance and its impact on reserves
The 23-25.5 mboe/d production guidance assumes that Wassana will represents only 15% of total production as post-FID drilling is not expected to occur until 2026. This implies higher production at Nong Yao, Jasmine and Manora. Consequently, this positively impacts our production profiles (and overall recovered volumes and reserves) for these assets in later periods. We now assume an additional year of production for each asset, with Manora being shut down in 2027 rather than 2026. The YE24 reserves report expected to be published in February will provide more visibility on the reserves additions.
Valuation
We have rolled forward our DCF to YE25 and incorporated the FY25 capex guidance. Consequently, we have increased our core NAV for the company from C$7.38/sh to C$8.67/sh and our ReNAV from C$9.82/sh to C$10.94/sh. Pending FID on the redevelopment of Wassana, we are valuing Wassana’s 2P reserves + 2C contingent resources in line with Nong Yao 2P reserves multiples, adjusted for development costs. Excluding Wassana development capex, we forecast Valeura will hold US$370 mm in cash at YE25 (>65% of the current market cap). Additional production from Wassana will lift our production profile from 2027.
Valeura Energy is engaged in the exploration, development and production of petroleum and natural gas in Turkey and Western Canada. As of Dec 31 2010, proven gross reserves for light and medium oil was 116 thousand barrels (net reserves of 104 thousand barrels); proven gross reserves for heavy oil was 10 thousand barrels (net reserves of 9 thousand barrels); proven gross reserves for natural gas was 1,047 million cubic feet (net reserves of 938 million cubic feet); and proven gross reserves for natural gas liquids was 26 thousand barrels (net reserves of 19 thousand barrels).
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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