Auctus on Friday - 01/09/2023
AUCTUS PUBLICATIONS________________________________________
ADX Energy (ADX AU)C: target price of A$0.08 per share: Funding from the Austrian Science Fund to collaborate on study at Welchau – The Austrian Science Fund will fund a scientific project in the Welchau area to better understand the geology of the area. An Environment Sustainability project will also be conducted by a group of experts funded by ADX. The project budget is A$0.75 mm to which the Austrian Science Fund will contribute A$0.6 mm. We view the collaboration of the Austrian Scientific communities with ADX as a positive as it highlights the alignment of the community with the industry and particularly the development of natural gas resources.
Arrow Exploration (AXL LN/CN)C: target price of £0.55 per share: CN-2 now in production at 1 mbbl/d. Carrizales Norte to be developed with 21 wells – 2Q23 production was 2,169 boe/d. This is below our forecast of 2,600 boe/d due to the timing of production ramp-up at Carrizales Norte and some wells at RCE being temporarily offline. The CN-2 well is now in production at 1,000 bbl/d (500 bbl/d net). This is above the previous reported figure of 680 bbl/d gross (340 bbl/d net). The CN-3 well is expected to be put into production in the Ubaque next week. Arrow indicated that Carrizales Norte well will be developed with 21 wells. This includes 6 wells in the Carbonera, 5 wells in the Gacheta and 8 wells in the Ubaque. 11 wells are expected to be drilled in 2024. A new reserves report for Carrizales Norte is expected to be published by the end of September. Assuming 0.3-0.5 mmbbl are recovered per well would suggest the field holds ~6-10 mmbbl gross resources (3-5 mmbbl net). This is very material in the context of Rio Cravo Este estimated to hold 2.1 mmbbl net. As we update our production profile that now incorporates Carrizales Norte, we increase our target price from £0.50 to £0.55 per share (~our ReNAV). This excludes any contribution from exploration success in 2024.
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Calima Energy (CE1 AU)C; target price of A$0.50 per share: Selling the Montney assets. Increasing dividend distribution – Calima has sold its Montney acreage and its Tommy Lakes facilities to Advantage Energy for A$11.4 mm. Calima will also be returned an operating bond of A$0.4 mm. The proceeds represent ~A$0.02 per share. While this is less than what we carried for the asset (A$0.04 per share), the transaction reflects (1) the continued low gas price in North-East British Columbia, (2) very weak equity markets and (3) the required minimum capital programme spend (C$50-100 mm) to develop the Montney assets is significant. The disposal of the Montney Assets will also result in operating and holding savings of approximately A$1 mm per year. With the September dividend increased from A$2.5 mm to A$7.5 mm, the total dividend yield for 2023 is >14%. By the end of September, the total dividend distribution over the previous 12 months will amount to A$10 mm, which represents ~20% of the company’s current market cap. The company will also distribute a further A$2 mm in January. As we incorporate the proceeds for the disposition of the Montney assets in our valuation, we have trimmed our target price from A$0.50 per share to A$0.45 per share, which still represents >5x the current share price.
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Longboat Energy (LBE LN)C; target price of £0.90 per share: Production start at Norwegian asset – Production at Statfjord Øst project has started.
SDX Energy (SDX LN)C: Selling Egyptian assets – SDX has entered into non-binding Heads of Terms with a large multinational operator to divest all of its Egyptian assets. The disposal will position the company for upcoming diversification into Morocco's energy transition sector.
IN OTHER NEWS
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AMERICAS
88 Energy (88E AU/LN): Raising new equity for Alaska and Texas– 88 Energy is raising up to £4.5 mm of new equity at a price of £0.0031 per share to fund ongoing activity across the portfolio including the flow testing of the Hickory-1 well, located in Project Phoenix.
Challenger Energy (CEG LN): Funding for Uruguay exploration. Suriname asset relinquished – Challenger has established a £3.3 mm convertible funding facility. Already £0.55 mm has been drawn. There are 10 subsequent tranches of £0.275 mm each. The loan notes, once drawn, are all repayable 36 months from the date of the first draw-down. Each tranche of the facility is convertible into ordinary shares of the company at the investor's election at any time prior to repayment, at the lesser of (i) 140% of the company's closing price on the trading day immediately prior to the date of draw-down of the relevant tranche, or (ii) 90% of the lowest closing price in the five trading days immediately preceding the date of conversion. The Weg Naar Zee PSC in Suriname has been relinquished.
Diversified Energy (DEC LN): 2Q23 results – 2Q23 production in the USA was 142 mmcfe/d with a June exit rate of 144 mboe/d. Net debt at the end of June was ~US$1.5 bn.
Melbana Energy (MAY AU): Positive well test results in Cuba – The Alameda-2 appraisal well flowed 1,903 bbl/d of 19 deg API oil at peak with an average stabilised rate of 1,235 bbl/d. The oil is lighter than expected. No formation water was observed. Melbana indicated that higher quality oil has implications for the value of the oil produced and the possibility of higher recovery rates than were assumed in the original resource estimates. These results were obtained by perforating less than 20% of the total net pay for Unit 1B.
Pantheon Resources (PANR LN): Independent resources estimates in Alaska – 2C Gross contingent resources at the Kodiak project have been estimated at 962.5 mmbbl of liquid plus 4.5tcf of residual natural gas.
ASIA PACIFC
Falcon Oil & Gas (FOG LN/FO CN): Drilling update in Australia – The Shenandoah South 1H pilot hole in exploration permit 117 has intersected ~90 metres of the Amungee Member B-shale with strong dry gas shows. A 1,000-metre horizontal section will now be drilled within the shale formation ahead of a stimulation program of up to 10 stages over a 500-metre section, which is planned for 4Q23.
Jadestone Energy (JSE LN): Montara restarts – Production at Montara will be restarted from one well at an expected rate of ~1,000 bbl/d to recommission the FPSO's oil production system, followed by gas compression, allowing further wells to be brought back online within several days. At this point, production is expected to increase to ~6,000 bbl/d, the rate prior to the shutdown at the end of July.
Santos (STO AU): Selling asset in PNG – Santos is selling 2.6% interests in PNG LNG to Kumul Petroleum for US$576 mm and the assumption of US$160 mm of debt.
EUROPE
i3 Energy (I3E LN): 1H23 results – 2Q23 production in Canada was 18,529 boe/d. ~3,100 boe/d was offline for the quarter due to restrictions associated with the Alberta wildfires, unanticipated apportionment issues associated with the Pembina Peace Pipeline liquids line and scheduled turnarounds and debottlenecking projects. Post May / June curtailments, production has recovered with a July average rate of 22,065 boe/d. The FY23 production guidance of 20-21 mboe/d has been re-iterated. Net debt (based on working capital) at the end of June was ~£30 mm.
Star Energy (STAR LN): Geothermal assets acquisition in Croatia – Star has acquired 51% of A14 Energy that owns the Ernestinovo geothermal waters exploration licence in the Pannonian Basin in Croatia for EUR1.3 mm in cash. Additionally, Star Energy will pay EUR0.1 mm relating to the provision of cash backed guarantees to the Croatian Hydrocarbon Agency, plus EUR0.2 mm in back costs relating to the ongoing appraisal of the Ernestinovo licence.
MIDDLE-EAST AND NORTH AFRICA
Gulf Keystone Petroleum (GKP LN): 1H23 results – Gross sales in Kurdistan have reached 23.1 mbbl/d (from 12.1 mbbl/d during the first two weeks of August). Current sales prices are ~US$30/bbl. Net cash at the end of August was US$82.1 mm.
SUB-SAHARAN AFRICA
PetroNor E&P (PNOR NO): 2Q23 results – 1H23 WI production in Congo was 5,119 bbl/d. Net debt at the end of June was US$18.2 mm. PetroNor anticipates producing 5.1-5.5 mboe/d in 2023 and 4.8-6.1 mboe/d in 2024.
Shell (SHEL LN): Dry hole in Namibia – Media reports indicated that the Cullinan-1X well did not encounter hydrocarbons.
EVENTS TO WATCH NEXT WEEK
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05/09/2023: EnQuest (ENQ LN) – 1H23 results
07/09/2023: Energean (ENQ LN) – 1H23 results
ADX Energy is engaged as an oil and gas exploration company. As of Dec 31 2015, Co. operated five oil and gas permits in North Africa and Europe, which under following projects: Kerkouane project located in Tunisia; Pantelleria project, Nilde project and Orlando project, which are located in Italy; and Romania project, which Co. held 50% interest on its project.
Front Range Resources is engaged in oil and natural gas exploration and production focusing on horizontal multi-stage frac development in Montney, Bluesky, Wilrich and Falher formations in the Deep Basin area of west central Alberta.
Bahamas Petroleum is engaged in oil and gas exploration in the Commonwealth of the Bahamas. Co. and its subsidiaries hold several oil and gas exploration licenses issued by the government of the Commonwealth of the Bahamas.
Calima Energy and its subsidiaries are engaged in investing in oil and gas exploration and production projects internationally and more specifically in West Africa.
Diversified Gas & Oil is an Appalachian Basin focused natural gas and crude oil operations company.
i3 Energy is engaged in the development and production of oil and gas in the UK North Sea. Co.'s strategy is to focus on the development of discoveries located close to existing infrastructure and the exploitation of producing fields, whilst maintaining limited exploration exposure.
Jadestone Energy is engaged in the evaluation, acquisition, exploration and development of oil and gas properties.
Longboat Energy PLC, formerly Longboat Energy Ltd, is a United Kingdom-based investment company. The Company's investment objectives is to create a full-cycle North Sea exploration and production (E&P) company in order to deliver value to investors.
Santos is a natural gas company engaged in the exploration for, and development, production, transportation and marketing of, hydrocarbons. Co.'s operating segments consist of five key assets/operating areas of: Cooper Basin; Gladstone LNG; Papua New Guinea; Northern Australia; and Western Australia gas; based on the nature and geographical location of the assets, plus Other non-core assets. Co.'s proved petroleum reserves were 485.0 million barrels of oil equivalent at Dec 31 2016.
SDX Energy is engaged in the exploration, acquisition, development and production of oil and natural gas in Africa and Egypt. As of Dec 31 2010, total gross proved reserves for light and medium oil consisted of 3,593 thousand barrels ("mbbls"), natural gas liquids consisting of 211 mbbls and natural gas consisting of 2,575 million cubic feet.
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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