AUCTUS ON FRIDAY - 14/07/2023
AUCTUS PUBLICATIONS________________________________________
ADX Energy (ADX AU)C; target price of A$0.10 per share: Securing additional loan to prepare for drilling – ADX is issuing A$1.5 mm of loan notes with a term of 18 months. A$1.0 mm of the loan notes carry an interest rate of 8% per annum with 30 mm options with an exercise price of A$0.01 per share and 30 mm options with an exercise price of A$0.014 per share. The balance of the loan notes carry an interest rate of 12% per annum with 21.5 mm options with an exercise price of A$0.014 per share. The proceeds of the funding will allow the company to continue preparation for (1) the planed drilling of two wells at Anshof, the Welchau gas prospect and a further gas prospect as well as (2) engineering and procurement for the installation of a permanent facility at the Anshof-3 well site. Drilling is expected to start in September. ADX expects to secure farm-in partners for some of its Upper Austrian drilling projects during the summer. This will provide further funding. ADX is offering multiple farmouts of individual prospects or play types within its extensive portfolio of exploration projects within its licence areas in Upper Austria. ADX continues to offer a combination of strong underlying value, increasing cashflow and reserves growth with very material exploration upside from an expanded near-term drilling programme. The dilution associated with the funding is minimal.
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Chariot (CHAR LN)C; target price of £0.50 per share: Adding portfolio depth and near term newsflow – Chariot has raised US$16.1 mm of new equity priced at £0.14 per share. The company is also looking to raise up to an additional US$3 mm through an open offer. The proceeds of the raise will be used to drill four new low cost/low risk exploration wells onshore Morocco in a licence expected to be awarded imminently. The new licence covers an area into which the reservoir fairways from Chariot’s Lixus licence are believed to extend. It is located close to existing infrastructure, as well as the planned processing facilities and onshore pipelines for the Anchois Gas Development. It is also close to the industrial offtake market with the potential to rapidly monetize a discovery. Domestic industrial gas prices have been reported to have reached ~U$16/mcf. The onshore wells are drill ready and a suitable drilling rig has already been identified in Morocco. Each well will target 8-18 bcf prospective resources and cost ~US$3 mm to drill. The raise also provides additional working capital, which is important to negotiate the best farm out terms for the Anchois project. With seven wells expected to be drilled in Morocco (three development wells at Anchois and four exploration wells onshore) over the coming 18 months, and a farm-out partner at Anchois due to be announced shortly, the story now benefits from much more frequent and material newsflow. As we incorporate the impact of the raise to our ReNAV, with onshore drilling anticipated to commence around year end, we have changed our target price to £0.50 per share.
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Valeura Energy (VLE CN)C; target price of C$6.00 per share: Entering a phase of cash build-up after large tax payment made – 2Q23 production was 22,097 bbl/d, near our forecast of 22.8 mbbl/d. Drilling operations at the Manora oil field are currently in the final stages of a three-well programme. The rig will then move to the Wassana field later this month. Valeura has paid US$178.1 mm in tax during 2Q23 in line with the our expectations. This amount reflects tax due on 2022 profit in Thailand. A further US$25-30 mm is due to be paid in August. Following the tax payment, Valeura held US$121.6 mm in cash and US$30.7 mm of debt at the end of June. We also anticipate that the company is carrying an important non-cash working capital surplus. With the large 2022 tax payment now made, we anticipate Valeura’s cash will start to build up. At US$78/bbl over 2H23 and 2024, we forecast that the company could hold >US$160 mm in net cash at YE23 (slightly above the current market cap) increasing to ~US$360 mm at YE24 (~2.5x the current market cap). Pending the publication of the 2Q23 financial results, our target price of C$6.00 per share (close to our ReNAV) in unchanged. We continue to believe that the confirmation that the ~US$300 mm of tax losses associated with Wassana could be applied to the other fields could be a rerating event. It would materially offset the tax bill due in relation to profits made in 2023.
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Zephyr Energy (ZPHR LN)C; target price of £0.18 per share: First payment from insurance received – Initial invoices submitted to the insurer have now been approved and reimbursement totalling ~US$0.8 mm have been received. This represents ~100% of the initial claim (after US$0.2 mm full claim deductible was satisfied). Additional invoices are being submitted on a regular basis with payments expected within 30 days of receipt by the insurer. Zephyr expects total costs for the remedial work on well State 36-2 to be in the region of US$3-5 mm, all of which are expected to be covered by the insurance. The initial US$0.8 mm reimbursement was largely for well control services and oil-based mud. Greater costs will come later in the process and are expected to be regularly re-imbursed as invoices are submitted. To date approximately 7,000 feet of 8,900 feet of tubing in well State 36-2 has been pulled and inspected with circa 15% of the pulled joints requiring replacement. Over the last two weeks Zephyr has retrieved ~500 feet of tubing and, importantly, a difficult area has now been passed and the company is making good progress again. Dominion expects to start delivering gas to Green River in late 3Q23 or early 4Q23, as previously announced.
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IN OTHER NEWS
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AMERICAS
Gran Tierra Energy (GTE CN/LN/US): Operating update in Colombia – 2Q23 production was 33.8 mboe/d with current production of 34.8 mboe/d. The FY23 capital expenditures are expected to be ~US$210-$230 mm, at the lower end of the guidance.
Maha Energy (MAHA-A SS): Production update in Brazil and the USA – 2Q23 production was 1,988 boe/d including 211 boe/d in the USA.
Trinity E&P (TRIN LN): Exploration drilling update in Trinidad - The Jacobin well has encountered 228 ft of net hydrocarbon pay across the Forest and Upper Cruse secondary targets. The well then encountered unexpected wellbore conditions prevented further progress necessitating a sidetrack to reach the targeted TD of 10,000 ft. The well has already penetrated over 2,000 ft into the Lower Cruse with at least three well-developed, oil-bearing sand intervals.
ASIA PACIFIC
Lion Energy (LIO AU): Operations update in Indonesia – The Lofin-2 gas well flowed up to 14.8 mmcf/d on test. The field is estimated to hold 1.5 tcf contingent resources.
EUROPE
Aker BP (AKERBP NO): 2Q23 results – 2Q23 production in Norway was 481 mboe/d. The FY23 production guidance has been increased to 445-470 mboe/d (430-460 mboe/d previously). Net debt at the end of June stood at US$3.5 bn.
Deltic Energy (DELT LN): Resources estimate increase in the UK – The Pensacola structure is now estimated to hold 99 mmboe recoverable resources (50 mmboe previously). Oil is estimated to represent 30% of the volume.
DNO (DNO NO): Discovery in Norway – DNO encountered 120-230 mmboe goss recoverable resources at the Carmen prospect.
IOG (IOG LN): 1H23 update in the UK – 1H23 gross production was 13.8 mmcf/d. The company held £20.3 mm in cash at the end of June. 2H23 gross production at Blythe is expected to be 20-30 mmcf/d. IOG will prioritize high permeability conventional reservoirs from the Western Cluster (Blythe and Elgood) to the Southern Cluster (Kelham, Abbeydale, Orrell) and the Central Cluster. The tight gas assets at Southwark, Nailsworth and Elland are being re-evaluated.
OKEA (OKEA NO): 2Q23 results – 2Q23 production in Norway was 22,263 boe/d. Net cash at the end of June was ~NOK 1 bn.
OMV (OMV AG): 2Q23 update– 2Q23 production was 353 mboe/d.
Var Energi (VAR NO): 2Q23 production in Norway – 2Q23 production in Norway was 202 mboe/d. The 210-230 mboe/d production guidance for FY23 is unchanged.
FORMER SOVIET UNION
Petro Matad (MATD LN): Dry hole in Mongolia – The Velociraptor-1 exploration well did not encounter hydrocarbons.
MIDDLE-EAST AND NORTH AFRICA
Predator Oil & Gas (PRD LN): Operating update in Morocco – The MOU-4 well is estimated (Nutech technology) to have encountered 64 metres of likely gas sands.
SUB-SAHARAN AFRICA
Africa Oil (AOI SS/CN): Buying assets in South Africa from Eco Atlantic (ECO LN/EOG CN) – Africa Oil is acquiring 6.25% WI in Block 3B/4B, located in the Orange Basin and on trend with the Venus, Graff, La Rona and Jonker oil discoveries for US$10.5 mm in cash. This includes US$4 mm contingent on the completion of a farm-out transaction and US$1.5 mm on spudding of the first exploration well.
PetroNor E&P (PNOR NO): Update in Congo – 1H23 WI production in Congo was 5,105 bbl/d.
Shell (SHEL LN): Discovery in Namibia – Media reports indicated that Shell made a fourth discovery offshore Namibia.
Tullow Oil (TLW LN): Operating update – 1H23 WI production was 53 mboe/d with Jubilee and TEN contributing respectively 28 mbbl/d and 11 mbbl/d. The FY23 production guidance is unchanged at 58-64 mboe/d with US$400 mm capex. Net debt at the end of June was US$1.9 bn.
EVENTS TO WATCH NEXT WEEK
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20/07/2023: Jadestone Energy (JSE LN) – 2Q23 update
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.
Africa Oil is an international oil and gas exploration company based in Canada with oil interests in Kenya, Ethiopia, Puntland (Somalia) and Mali. Co. is an exploration stage enterprise that participates in oil and gas projects located in sub-Saharan Africa.
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.
Chariot Oil & Gas is an independent oil and gas exploration company focused offshore in West Africa with a portfolio of assets located in the under-explored regions of Namibia, Mauritania and Morocco.
Cluff Natural Resources invests in global resources opportunities with a primary focus on U.K. based upstream energy projects. Co.'s principal activity is the exploration, evaluation and development of mineral exploration targets. As of Dec 31 2016, Co. held a 100% interest in two gas licenses in the Southern North Sea.
DNO is a Norwegian exploration and production company focused on the Middle East and North Africa. Co. holds stakes in oil and gas blocks in various stages of exploration, development and production, both onshore and offshore, in the Kurdistan region of Iraq, Yemen, Oman, the United Arab Emirates, Tunisia and Somaliland.
Gran Tierra Energy, together with its subsidiaries, is a company focused on oil and gas exploration and production in Colombia. Co. is primarily engaged in the exploration and production of oil and natural gas. Co. has one reportable segment based on geographic organization, Colombia. As of Dec 31 2017, Co. had total estimated proved reserves of 59.3 million barrels of oil and natural gas equivalent, consisting of 58.9 million barrels of oil and 2.1 million cubic feet of natural gas.
Independent Oil and Gas, through its subsidiaries, is engaged in the business of oil and gas exploration and/or operations in the North Sea. Co. has its oil and gas interests are in the U.K. sector of the North Sea.
Maha Energy AB is a Sweden-based independent, international upstream oil and gas company whose business activities include exploration, development and production of crude oil. It directly operates through Maha Energy Inc in Canada, as well as Maha Energy 1 [Brazil] AB and Maha Energy 2 [Brazil] AB in Sweden. It owns an oil field in Wyoming, the United States. The Company specializes in primary, secondary and enhanced oil and gas recovery technologies, and operates a technical office in Calgary and Alberta in Canada, as well as an operations office in Newcastle and Wyoming in the United States. The Company operates as wholly-owned subsidiaries Gran Tierra Finance (Luxembourg) SARL and Gran Tierra Brazco (Luxembourg) SARL.
Okea ASA is a Norway-based oil company engaged in the oil and gas exploration and production industry. The Company contributes to the value creation on the Norwegian continental shelf with development and operation systems through the utilization of the result of previous and ongoing exploration activities in order to bring undeveloped oil on stream in strategic cooperation with service companies. Its services do not involve the exploration for petroleum. The Company operates an office in Trondheim, Norway.
OMV is an international energy company with activities in Exploration and Production (E&P), Refining and Marketing including petrochemicals (R&M), and Gas and Power (G&P). Co. explores and develops oil and gas resources and supply energy to over 100 million people. OMV has three operating segments: Exploration and Production (E&P), Refining and Marketing, including petrochemicals (R&M), and Gas and Power (G&P), as well as the segment Corporate and Other (Co&O).
Petro Matad's principal activity consists of oil exploration in Mongolia. Co. is focused on its exploration activities on its Production Sharing Contracts with the Mineral Resources and Petroleum Authority of Mongolia on Blocks IV, V and XX in Mongolia.
Predator Oil & Gas Holdings PLC seeks to consolidate the acquisition of a specific non-operated oil and gas business opportunity in the Republic of Trinidad and Tobago, to generate income for Co., and exploration and appraisal assets in the Licensing Options offshore Ireland that form an existing operating business operated by POGV. Both businesses are consistent with Co.'s focus on responsible, environmentally aware, investment in the fossil fuel industry.
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).
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).
Rose Petroleum is an oil and gas (O&G) and mining company with exploration assets and an operational crushing and flotation mill. Co.'s principal activities are the exploration and development of O&G resources together with the evaluation and acquisition of other mineral exploration targets, principally gold, silver, uranium and copper, and the development and operation of mines in Mexico. In Co.'s O&G division, the area of focus is on two unconventional oil and gas basins in the U.S.: the Uinta Basin and the Paradox Basin. In its mining division, Co. continues its milling operations through its subsidiary, Minerales VANE S.A. de C.V., which owns the SDA Mill in Mexico.
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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