Panoro Energy ASA (OSE: PEN): Hibiscus South discovery potentially 50-100% larger than expected
• The FY23 production of 8,471 bbl/d was in line with previous indications. YE23 cash, gross debt and cash advances had been previously reported.• The FY24 production guidance is now 11-13 mbbl/d (11-14 mbbl/d previously) as Panoro has incorporated a pause in drilling offshore EG. The main factor driving the adjusted upper limit of guidance range is the timing to secure a new rig in EG and deferral of some associated production. Drilling is currently expected to start in late 2Q24 (based on management’s current estimates). We have left our production forecast of 12.2 mbbl/d for FY24 unchanged.
• The most important new information is the fact that the discovered resources at Hibiscus South are now expected to materially greater than initially expected (we estimate from 6-7 mmbbl previously to 9-14 mmbbl gross – Panoro holds 17.5% WI). Following the drilling of the development well, the structure appears to be larger than anticipated. Given that Hibiscus South is being developed as a tieback to the existing infrasctructure, the incremental capex and opex is minimal meaning the value of each discovered barrel very high.
• Hibiscus South is expected to be onstream in March.
• We re-iterate our target price of NOK47/sh. Our unrisked NAVs for the Akeng and Bourdon wells are ~NOK13/sh and NOK5/sh respectively.
Gabon and Tunisia
Current gross production at Dussafu remains ~25 mbbl/d with two of the Hibiscus wells on pump and a third on natural flow (total of 3 wells in production). The 4th existing Hibiscus well is expected to be worked-over in April. Further development drilling during 1H24 will include one Ruche well and a 5th Hibiscus well. Overall, a total of five Hibiscus wells plus one Hibiscus South well and one Ruche well (total of seven wells) could be onstream by mid-2024. This should provide wellhead production capacity significantly above the 40 mbbl/d production plateau. In Tunisia the development of Guebiba is expected to start in late 4Q24 to boost production. Planning for the development of Rhemoura (16 year extension recently approved) and Cercina (offshore) is also expected to start in 2024. These areas should open new centres of incremental production growth.
Valuation
Our Core NAV and ReNAV stand at ~NOK31/sh and ~NOK48/sh. At US$80/bbl for Brent, we estimate that the cumulative free cash flow over 2024-2026 is greater than the current market cap. The NOK50 mm dividend for 4Q23 is in line with our expectations. The NOK400-500 mm shareholder distribution will include a material buyback programme that is expected to underpin the share price.
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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