Auctus on Friday - 17/03/2023

AUCTUS PUBLICATIONS
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ADX Energy (ADX AU) C; Target price of A$0.10 per share: Drilling news flow. Production growth. Value. – 2023 is expected to be a busy and transformational year for ADX. The company plans to grow gross production at Anshof (4.2 mmbbl net 2P reserves) to almost 1,000 bbl/d with two new wells by YE23. At that level, ADX can generate US$13 mm operating cashflow per year (after tax). This represents ~65% of the company’s market cap. The Anshof 2 appraisal well, expected to be drilled in 3Q23, will provide further visibility on the field’s production rate potential and firm-up the position of the water oil contact. It could unlock a large proportion of the 26 mmbbl 3P/3C case (21 mmbbl net to ADX). ADX has also matured 16 drill-ready prospects (including prospects adjacent to Anshof) in Upper Austria with ~200 mmboe of unrisked resources in aggregate. Welchau, the largest prospect with 807 bcfe (134 mmboe) prospective resources, is planned to be drilled in 3Q23. ADX holds 80% WI. With further partners from the ongoing farm-out process, ADX will seek to drill another two other prospects in 2023. Progress is also expected to be made on the green hydrogen project in the Vienna basin and at the geothermal project in Upper Austria. ADX offers a combination of strong underlying value, increasing cashflow and reserves growth with very material exploration upside from an expanded near-term drilling programme. As we have revised the chances of success of the various assets, we are increasing our target price from A$0.070/sh to A$0.100/sh.
See website for full report

Arrow Exploration (AXL LN/CN)C: Target price of £0.45 per share: Another good well result – The RCE-4 well encountered 45 feet of net oil pay, including 25 feet in the Carbonera C7 and 20 feet in the Lower Gacheta. The well will initially be completed in the C7 zone, targeting to be on stream in late March. This will increase Arrow’s production and reserves. The 25 feet encountered in the Carbonera C7 at RCE-4 compares with 19 feet in the same sand at RCE-3, 16 feet at RCE-2 and 38 feet at RCS-1 (C7A and C7B sands). RCE-2 is currently producing ~ 500 bbl/d (net to Arrow), RCS-1 is at >350 bbl/d (net) while RCE-3 is producing ~325 bbl/d (net). RCE-3 production is still on natural flow (ie – the pump has not been activated yet) while the other wells are on pump. RCE-3 is not producing any water yet and there is no pressure drop. This is important as it highlights the strong performance of this well. By comparison, the water cut at RCE-2 (the highest producer) increased to ~25% just a few days after first oil. As the pump at RCE-3 is activated, production is expected to increase to ~500 bbl/d (net to Arrow). Following completion operations at RCE-4, the rig will then be moved to the RCE-5 location with the intention that RCE-5 will spud within a few days of RCE-4 being brought on production. Our 2Q23 net production forecast for the RCE field (1,650 bbl/d) looks low given this level could be reached by the end of March assuming only 350 bbl/d (net) at RCE-4 and before taking into consideration the additional contribution from the RCE-5 well in early 2Q23. The RCE-4 and RCE-5 wells are the second and third wells of a 10 well programme. They will be followed by the first of three Carrizales Norte Wells. The FY23 drilling programme could add between 2,800 and 4,800 boe/d net production (before decline and in a success case).
See website for full report

Hartshead Resources (HHR AU)C; Target price of A$0.18 per share: Re-iterating key guidance: industry partner by the end of March, FID by mid 2023 – Hartshead published its half year financial report for the six month period ending 31/12/2022. The cash position as at the end of December had already been reported and there are no surprises in the financials. Hartshead continues to hope to announce a farm-out partner over the coming weeks. This would provide clarity on the funding of the project as well as well as an external industry valuation for the assets. FID for the Phase I field development could be taken by mid 2023. The completion of the phase I basis of design engineering study with Shell for the preferred export route and tie-in option to Shell infrastructure will also take place later in 2023. The platforms are expected to be ordered during the summer. They are the critical items to be able to deliver first gas by YE24. A new CPR will be prepared to better define the 2C contingent resources associated with Phase II (Hodgkin and Lovelace).
See website for full report

Tethys Oil (TETY SS)C; Target price of SEK125 per share: Imminent first oil at Al-Jumd – First oil al Al-Jumd on Block 56 is expected before the end of next week. The test will last 3-6 months with an initial gross flow rate of 400 bbl/d increasing rapidly to 800 bbl/d (Tethys WI: 65%). With only ~US$0.35 mm associated opex per month, this will add cashflow and production that is not included in the FY23 guidance. The test is also expected to add contingent resources (we assume ~1.5 mmbbl) that would be converted into 2P reserves on declaration of commerciality. Drilling in the central area of the block is expected to start in 4Q23. The overall prospective resources are estimated at ~50 mmbbl, but the ongoing interpretation of 3D seismic recently acquired could lead to a higher figure. Tethys’ shares continue to provide investors with a combination of dividend yield, production and cash flow growth with very high impact exploration. A first well on Block 58 will be drilled in 3Q23, targeting 124 mmbbl prospective resources with an unrisked NAV of SEK205/sh (~4x the current share price). The total unrisked NAV of the company is >SEK560/sh.
See website for full report

IN OTHER NEWS
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AMERICAS

Molecular Energy (MEN LN): Trading update in Argentina and Paraguay – YE22 2P reserves were estimated at 18.9 mmboe (YE21: 24.4 mmboe).

ASIA PACIFIC

Jadestone Energy (JSE LN): Further delays in Australia – The restart of production at Montara has been delayed again on issues at the FPSO.

EUROPE

DNO (DNO NO)/Equinor (EQNR NO): Discovery in Norway – 28-84 mmboe have been encountered at the Heisenberg prospect in Hordaland Group sandstones of Paleogene Age.

IOG (IOG LN): FY22 results – YE22 net debt was £68.2 mm (including £32.4 mm in cash). The company held £32.6 mm in cash as at 15 March. Over January and February 2023, gross average production from the Blythe H1 well was 15.9 mmcf/d. The Elgood field is currently shut in.

Hurricane Energy (HUR LN): Recommended offer for the company – Prax E&P is acquiring Hurricane Energy. Hurricane’s shareholders will receive up to 12.50 p per share in cash including 3.32 p as a transaction dividend and an initial cash consideration of 0.83 p per share. They will also receive a supplementary dividend of 1.87 p per share and a deferred consideration of up to 6.48 p per share. The transaction values Hurricane at up to £129.1 mm. The supplementary dividend is contingent on receiving the proceeds from the oil lifting from the Lancaster Field scheduled for late April. The deferred consideration units confer an entitlement to receive 17.5% of all future net revenues earned by Hurricane, including from both the Lancaster Field and from any acquisition made by Hurricane, from 1 March 2023 until 31 December 2026.

Reabold Resources (RBD LN): Potential offer to acquire the company – Reabold has been approached by Portillon Capital to potentially acquire the company at a price representing a 10% premium to the previous day closing price, implying a value of 0.2035 p per share.

FORMER SOVIET UNION

Nostrum Oil & Gas (NOG LN): Acquiring assets in Kazakhstan – Nostrum is acquiring 80% of Positive Invest, which holds the subsoil use right to the contract No. 25 for estimation, development and production of hydrocarbons for the area “Kamenskoe” and the development area "Kamensko-Teplovsko-Tokarevskoe" (the Stepnoy Leopard Fields) for US$20 mm. The Stepnoy Leopard Fields are estimated to hold between 50 mmboe and 150 mmboe of recoverable volumes which are considered contingent resources, with over 20% estimated to be liquids. The consideration for the acquisition will be funded out of Nostrum's existing cash reserves, and approximately US$8.5 mm in historical costs incurred by Nostrum.

MIDDLE EAST AND NORTH AFRICA

Forza Petroleum (FORZ CN): Reserves update in Kurdistan and FY22 results - YE22 2P oil reserves decreased to 31 mmbbl from 43 mmbbl at YE21, primarily due to revisions to the estimated oil reserves for the Cretaceous reservoir of the Banan, Demir Dagh and Zey Gawra fields from updated production profiles and revised development plans. The company held US$71.1 mm in cash at YE22. Production averaged respectively 13.7 mbbl/d and 13.9 mbbl/d in January and February. The overall FY23 capex is estimated at US$68.3 mm.

Genel Energy (GENL LN): Reserves update in Kurdistan – YE22 2P reserves were estimated at 92.2 mmbbl (YE21: 104.2 mmbbl). This includes 78.9 mmbbl at Tawke, 10.5 mmbbl at Taq Taq and 2.8 mmbbl at Sarta.

Predator Oil & Gas (PRD LN): Raising new equity for Morocco – Predator is raising £2 mm of new equity priced at 5.5 p per share. The proceeds will fully fund the MOU-3 well.

EVENTS TO WATCH NEXT WEEK
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21/03/2023 – Diversified Energy (DEC LN): FY22 results
22/03/2023 – Alvopetro Energy (ALV CN): FY22 results
22/03/2023 – Energean (ENOG LN): FY22 results
22/03/2023 – Genel Energy (ENOG LN): FY22 results
22/03/2023 – Pharos Energy (PHAR LN): FY22 results
23/03/2023 – Gulf Keystone Petroleum (GKP LN): FY22 results