Auctus on Friday - 26/01/2024
AUCTUS PUBLICATIONS________________________________________
ADX Energy (ADX AU)C; target price of A$0.65 per share: Drilling rig on location of high impact well by the end of January – A rig is expected to be mobilised to the high impact Welchau-1 drilling location during the last week of January. Drilling is expected to last for 6-8 weeks. The total vertical depth of the well is only 1,800 m with a dry hole cost estimated at ~EUR5.1 mm. Welchau gross prospective resources have been independently estimated at 365 to1,128 bcf (ADX’s internal estimates: 212 to1,631 bcf). The prospect is located up-dip of the Molln gas discovery drilled in 1989 where a 400 m gas column was encountered (with up to 900 m indicated based on pressure gradient) and was tested at 3.5 mmcf/d of condensate rich gas. Based on the low case independent resource of 365 bcf the field could be developed with 8 producing wells and could require only one appraisal well. The production plateau under this development scenario is estimated at 120 mmcf/d. ADX net cash is estimated at A$7 mm as at YE23. Our unrisked NAV for ADX’s 75% interest in Welchau is ~A$1.50 per share. This represents almost 15x the current share price.
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Panoro Energy (PEN CN)C; target price of NOK47 per share: ~45% production growth in 2024 – FY23 production was ~8.5 mbbl/d, implying ~9.5-9.7 mbbl/d in 4Q23. The YE23 net debt position of ~US$66 mm reflects a 0.26 mm bbl lifting expected in December that was completed in January. This resulted in US$20 mm revenue deferred to January. The electrical issue at the ESPs on Dussafu has not been fully resolved and continues to negatively impact gross production. Currently ~25 mbbl/d with three of the four new producing wells back on stream (two on ESP, one on natural flow). Production in Gabon is expected to grow again from March with a new Hibiscus South development well (currently drilling) coming on stream . Another Hibiscus development well will then be drilled , followed by a new Ruche development well. Panoro continues to anticipate gross production plateau of ~40 mbbl/d. In EG, the three well drilling campaign has started with the first well expected to come on stream around the end of 1Q24. Overall, 1Q24 production is expected to be 9.5-10 mbbl/d increasing to 11-14 mbbl/d over FY24. Panoro expects to spend US$75 mm in 2024 in line with previous indications (US$70-75 mm). As we incorporate a lower Brent price assumption for 2024 and marginally reduce our FY24 production forecast, we have changed our target price to NOK47 per share. The mid point of the production guidance suggests 47% production growth with the company anticipating increasing shareholder distributions by 100-150% at US$85/bbl for Brent. High impact drilling in Gabon and EG could add material reserves.
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PetroTal (PTAL LN)C; target price of £1.35 per share: FY24 production expected to grow by 20%. Two new export routes to be opened in 2024 – The FY24 production guidance stands at 16.5-17.5 mbbl/d (we forecasted 18.6 mbbl/d assuming a moderate dry season) with US$135 mm capex (broadly in line with our expectations of US$130 mm). The FY24 production guidance assumes a dry season as severe as in 2023 with production of only 13 mbbl/d in 3Q24 and 17.5 mbbl/d in 4Q24. The Ecuador export route through the OCP will be operational in October (2 mbbl/d) while a new route via Yurimaguas to Bayovar (2 mbbl/d) could be operational in July. With these new routes fully operational over 2025, we anticipate that the impact of the dry season will be less material next year. We forecast 19.9 mbbl/d production in 2025. The FY24 capex programme includes US$107 mm at Bretana and US$12 mm for seismic to validate the oil migration models to the South of Bretana. This could partially derisk prospects on Block 95, some of which could be as large as Bretana. The FY24 capex programme also includes US$14 mm for preventive erosion control. The purpose of the programme is to protect the Bretana oilfield and nearby communities against riverbank erosion issues. During 2024, PetroTal plans to also incur a further opex of US$23 mm for erosion control and US$7 mm for community projects . An additional US$4.2 mm (from G&A) will be allocated to community support. The FY24 opex component of the erosion project is expected to be a one off occurrence and the residual project capex of ~US$14 mm will be spent in 2025. As we incorporate our lower oil price assumptions for 2024, the erosion control cost, the FY24 production guidance and higher £/US$ exchange rate, we have changed our target price to £1.35/sh in line with our new ReNAV. PetroTal anticipates distributing US$66 mm to shareholders in 2024 (12% of market cap) including a total dividend of US$0.06/sh.
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IN OTHER NEWS
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AMERICAS
BW Energy (BWE NO): BW Offshore sells interests in BW Energy to BW Group – BW Offshore will sell 58,111,461 (22.52%) shares in BW Energy to BW Group at a price of NOK32 per share, resulting in total proceeds ~US$176 mm. BW Group currently holds 52% in BW Energy.
Gran Tierra Energy (GTE CN/US/LN): Operating update and FY24 guidance – YE23 2P reserves in Colombia have been estimated at 147 mmboe, representing a 242% reserves replacement ratio. YE23 1P and 3P reserves were respectively 90 mmboe (reserves replacement ratio of 154%) and 207 mmboe (reserves replacement ratio of 303%). FY23 production was 32,650 boe/d. Gran Tierra expects to produce 32-35 mboe/d in 2024 with US$210-240 mm capex. The company plans to allocate up to 50% of free cash flow to share buybacks. 40-45% of the FY24 capex programme is expected to be allocated to high impact near-field exploration.
Karoon Energy (KAR AU): Lower production in Brazil – Karoon now expects to produce 7.2-9.0 mmbbl in Brazil in FY24. This compares with 8-10 mmbbl previously.
Rockhopper Exploration (RKH LN): Update in the Falklands – The 2C contingent resources at Sea Lion are now estimated at 791 mmbbl (712 mmbbl previously). FID is expected during 2024 with first oil by YE26. 312 mmbbl (269 mmbbl previously) will be developed in two phases with capex of US$1.2 bn (US$1.3 bn previously). Rockhopper held US$8 mm in cash at YE23.
TotalEnergies (TTE FP): Exiting Guyana licence – TotalEnergies and Qatar Energy are exiting the Orinduik licence. Eco Atlantic is the only remaining holder.
ASIA AND AUSTRALASIA
Bp (BP LN): Dry hole in India – Media reports indicated that a key exploration well on Block KG UDW1 was dry.
Woodside Energy (WDS LN): Operating update and FY24 guidance – FY23 production was 187.2 mboe/d. The company expects to produce 505-533 mboe/d in 2024 with US$5-5.5 bn capex.
EUROPE
Equinor (EQNR NO): Non-commercial discovery in Norway – The 30/12-3 S well encountered oil on licence PL 272 B but not in commercial quantities.
AkerBP (AKERBP NO)/Equinor (EQNR NO)/Var Energi (VAR NO): Dry holes in Norway – The exploration wells targeting the Hubert and Magellan prospects in PL 917 were dry.
Var Energi (VAR NO): Operating update in Norway – 4Q23 production was 224.9 mboe/d.
FORMER SOVIET UNION
Condor Energy (CPI CN): Gas feed allocation for LNG in Kazakhstan – Condor has received a natural gas allocation to feed gas for the company’s first modular LNG production facility. The feed gas will be liquefied to produce up to 350 tonnes per day of LNG.
MIDDLE EAST AND NORTH AFRICA
Genel Energy (GENL LN): Operating update in Kurdistan – Net production in 2023 was 12,410 bbl/d. Net cash at YE23 was US$119 mm. The company expects to maintain net cash over US$100 mm throughout 2024.
ShaMaran Petroleum (SNM CN): Buying assets in Kurdistan/Operating update – ShaMaran is increasing its interest in Atrush from 27.6% to 50%. 4Q23 gross production at Atrush and Sarsang was 9,006 bbl/d and 36,400 bbl/d. YE23 net debt was US$193 mm.
United Oil & Gas (UOG LN): Notice of default in Egypt – United has received a notice of default from Kuwait Energy for a total of US$3.8 mm for outstanding cash call in relation to the Abu Sennan concession. United had been in discussions to sell its 22% stake in Abu Sennan to a sister company of Kuwait Energy but the companies could not agree the terms of a SPA to sell the asset for ~US$2.1 mm. United has a receivables balance of US$0.80 mm outstanding from EGPC and cash in the bank of ~US$1.3 mm.
SUB-SAHARAN AFRICA
Afentra (AET LN): Operating update in Angola – FY23 gross production from Blocks 3/05 and 3/05A was 20,180 bbl/d. Net debt at YE23 was US$14 mm.
Invictus Energy (IVZ AU): Raising new equity for Zimbabwe – Invictus is raising A$15.2 mm of new equity priced at A$0.13 per share. Participants in the offering are also being issued one option with a strike price of A$0.20 per share for every two shares subscribed for.
Licences award in Angola – Serinus Energy (SENX LN) has been selected as preferred bidder on the KON-13 block in the onshore Kwanza basin with a 55% interest. Afentra (AET LN) has been selected as preferred bidder for KON15 and KON19 with 45% interest.
Tullow Oil (TLW LN): Operating update – FY23 production was 63 mboe/d including 6 mboe/d of Jubilee gas. YE24 net debt was US$1.6 bn. The company expects to produce 62-68 mboe/d including 48 mbbl/d in Ghana with US$250 mm capex plus US$70 mm decommissioning.
EVENTS TO WATCH NEXT WEEK
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31/01/2024: Diversified Energy (DEC LN/US) – Operating update
01/02/2024: Shell (SHEL LN) – FY23 results
Aker BP ASA engages in the exploration, development, and production of petroleum resources on the Norwegian Shelf. In addition, Co. has a separate Johan Sverdrup business unit to manage its interest.
BP is an integrated oil and gas group based in the United Kingdom. Co. is engaged in the exploration and production of crude oil and natural gas; refining, marketing, supply and transportation; and the manufacture and marketing of petrochemicals. Co. operates globally, with business activities in Europe, the U.S., Canada, Russia, South America, Australasia, Asia and parts of Africa. Co. operates in two business segments: Exploration and Production - including oil and natural gas exploration and development and production; and Refining and Marketing- activities include the refining, manufacturing, supply and trading, marketing and transportation of crude oil, petroleum and petrochemicals.
Equinor is engaged in oil and gas exploration and production activities. Co. is primarily focused on exploration, development and production of oil and gas on the Norwegian continental shelf (NCS). Co.'s operations are organized into four segments. The Development and Production Norway and Development and Production International segments explore, develop, produce and extract crude oil, natural gas and natural gas liquids. The Marketing, Processing and Renewable Energy segment markets, trades, transports and processes oil and natural gas and renewable energy. The Other segment consists of global well and project delivery, research and develpoment, and business development.
Genel Energy is a holding company. Co. is principally engaged in the business of oil and gas exploration and production. Co. has three segments: Oil, which is comprised of the producing assets, Taq Taq and Tawke, which are located in the Kurdistan Region of Iraq (KRI) and makes predominantly all sales to the Kurdistan Regional Government; Gas, which is comprised of the upstream and midstream activity on Miran and Bina Bawi also in the KRI; and Exploration, which is comprised of its exploration activity, principally located in the KRI, Somaliland and Morocco. As of Dec 31 2016, Co. had proved plus probable working interest reserves of 161.0 million barrels of oil equivalent.
Invictus Energy is engaged in the evaluation and exploration of coal bed methane (CBM) and unconventional gas in southern Africa.
Karoon Gas Australia is an independent oil and gas company. Co. is engaged in the investment in hydrocarbon exploration and evaluation in Australia, Brazil and Peru. Co.'s operations are organized into three areas: Australia exploration, Brazil exploration and Peru exploration. The Australia segment is involved in the exploration and evaluation of hydrocarbons in two offshore permit areas. The Brazil segment is involved in the exploration and evaluation of hydrocarbons in five offshore Blocks. The Peru segment is involved in the exploration and evaluation of hydrocarbons in two Blocks, onshore and offshore.
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.
Rockhopper Exploration is an oil and gas exploration and production company with key interests in the North Falkland Basin and the Greater Mediterranean region.
Shamaran Petroleum is a Canadian-based oil and gas company engaged in the business of oil and gas exploration and development. Co. is in the pre-production stages of an exploration and development campaign in respect of petroleum properties located in the Kurdistan Region of Northern Iraq.
Total is an international integrated oil and gas company also active in solar and biomass energy sources. Co. engages all aspects of the petroleum industry, including Upstream operations (oil and gas exploration, development and production, and LNG (Liquefied Natural Gas)) and Downstream operations (refining, petrochemicals, specialty chemicals, marketing and marketing and trading and shipping of crude oil and petroleum products). In addition, Co. is engaged in the coal mining and power generation sectors. Co.'s worldwide operations are conducted through three business segments: Upstream, Refining & Chemicals, and Marketing & Services.
Tullow Oil is an independent oil and gas exploration and production company. Co.'s focus is on finding oil in Africa and South America. Co.'s primary activities include targeted exploration and appraisal, selective development projects and growing its production. As of Dec 31 2017, Co.'s portfolio included 90 licences in 16 countries. Co.'s operations are organized into three business delivery teams: West Africa; East Africa; and New Ventures. As of Dec 31 2017, on a working interest basis, Co. had commercial reserves of 245.7 million barrels of oil, 268.90 billion cubic feet of gas, and 290.5 million barrels of oil equivalent (petroleum).
United Oil & Gas is engaged to take control or investing in businesses within the oil and gas sector.
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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