Auctus on Friday - 21/04/2023
AUCTUS PUBLICATIONS________________________________________
ADX Energy (ADX AU)C: Target price of A$0.100 per share: Competent person report confirms the materiality of the Welchau pospect – The Welchau prospect has been estimated to hold between 365 bcfe and 1,128 bcfe of prospective resources by Gaffney, Cline & Associates (GCA) with a mid-case at 645 bcfe including 10.1 mmbbl of condensate. While this is below the 807 bcfe mid-case estimated by ADX, the fact that the lower end of the GCA range (332 bcf of natural gas plus 5.5 mmbbl of condensate in the 1U case) is significantly larger than ADX’s estimate of 212 bcfe is the most important take away in our view. The unrisked value of the asset (A$0.09 per share) is very high even in the low case. Welchau is now expected to be drilled in September. Drilling will last 6-8 weeks. ADX has purchased all the necessary long lead items to drill the well. 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.
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Panoro Energy (PEN NO)C: Target price of NOK50 per share: Accretive transaction in Tunisia – Panoro is buying the 40% minority interest it does not own in its Tunisia JV for a total consideration of US$18.2 mm in cash and shares. On closing (expected in April), Panoro will have 49% interest in the TPS producing assets and 87.5% interest in SOEP. The transaction adds ~2.96 mmbbl of net 2P oil reserves and 800 to 900 bbl/d of net production. We are increasing our production forecasts to reflect this and now estimate Panoro FY23 production of 10.8 mboe/d. The transaction is accretive to our valuation, it adds materiality and simplifies the business structure. We are increasing our target price from NOK48 per share to NOK50 per share as we incorporate the impact of the acquisition.
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Southern Energy (SOUC LN/SOU CN)C: Target price of £1.50 per share: FY22 Financials in line. Operations on track - There were no surprises in the FY22 financials with production, cashflow and working capital very close to our expectations. The 18-10 #2 Upper Selma Chalk well that was completed in 1Q23 is performing in line with expectations. The 18-10 #3 Upper Selma Chalk will be worked-over in late 2Q23 (as expected). The 18-10 #1 City Bank well has now flowed back 9% of the injected fluid (this compares with 5% ~2 weeks ago). Peak gas rates are not expected until the load fluid recovery is closer to 20%, which is expected towards the end of 2Q23. Early gas rates are encouraging and continue to increase. This is a very important well. On success, it would add reserves (none booked so far in the City Bank). Our unrisked NAV for the City Bank is ~£0.50/sh. We understand that 1Q23 production has held up very well. The business continues to be resilient in the current environment of low gas prices. Higher gas prices would unlock material value and allow the company to return to growth.
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Valeura Energy (VLE CN)C: Target price of C$6.00 per share: Working capital well ahead of expectations. Replacing >6.5 mmbbl 2P reserves during 2022 – At completion of the Mubadala Acquisition on 22 March, the acquired entity held cash and cash equivalent resources of ~US$243 mm. After accounting for inventories, accounts payable, and tax payable in May, the increase in Valeura’s adjusted net working capital position is estimated at ~$105 mm. This amount is also net of some of the tax payable in August associated with revenue in 2023 prior to completion. The adjusted working capital associated with the Mubadala Acquisition is well ahead of our forecasts. We were conservatively expecting only US$58 mm. We were also assuming that Valeura would have to pay >US$75 mm in cash tax outside of the working capital. We now estimate that the cash tax (including SRB) due in August and not captured in the adjusted working capital is less than US$30 mm. FY23 production (including the period before completion of the acquisition) is 20-22.5 mbbl/d. This assumes that Wassana starts production in May. Valeura has budgeted US$180-200 mm capex in 2023 including ~US$34 mm for 1Q23 activities occurring mostly before the completion of the acquisition (and already netted off from the adjusted working capital). As we incorporate the adjusted working capital and the production and capex guidance, we are increasing our target price from C$5.20/sh to C$6.00/sh.
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IN OTHER NEWS
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AMERICAS
3R Petroleum Oleo e Gas: Raising new equity for Brazil – 3R is raising ~US$183 mm of new equity priced at 24.45 reais. The closing price on the previous trading day was 32.87 reais.
Canadian Overseas Petroleum (COPL LN/XOP CN): Operating update in the US – 1Q23 gross production was 1.2 mbbl/d. Oil production on 17 April was ~1,000 bbl/d (gross), with 350 bbl/d (gross) shut in. In addition, there is a similar production volume (>300 bbl/d) restricted due to pressure related facility constraints. At the Cole Creek Unit, ~100 bbl/d (gross) is currently shut in due to temporary access restrictions resulting from high snow melt and associated surface runoff.
Echo Energy (ECHO LN): 1Q23 update in Argentina – 1Q23 production was 6.3 mmcf/d plus 213 bbl/d. As at 17 April, the Company’s UK cash balances are less than £0.1 mm. In February 2023, the company indicated that total creditors amounted to ~US$19.5 mm.
Parex Resources (PXT CN): Resuming production at Colombian asset – Operations have resumed at the Capachos Block. Drilling is expected to restart at Arauca in 2Q23.
Trinity E&P (TRIN LN): Production back on line in Trinidad - Oil production from all previously producing wells on the Bravo platform has been restored. Total Trintes field production is ~1,010 bbl/d.
ASIA AND AUSTRALASIA
Woodside Energy (WDS AU/LN/US): 1Q23 update – 1Q23 production was 520 mboe/d.
EUROPE
Aker BP (AKERNP NO): 1Q23 update in Norway – 1Q23 production was 452.7 mboe/d.
Deltic Energy (DELT LN): Update in the UK North Sea – The company held £20.4 mm in cash at YE22. The Selene exploration well (>300 bcf prospective resources) is expected to be drilled mid 2024.
Hurricane Energy (HUR LN): Update in the UK – 1Q23 production was 7,311 bbl/d. The company held US$132 mm of net free cash at the end of March.
IGas Energy (IGAS LN): Receive planning consent in the UK – Lincolnshire County Council has granted planning consent for IGas’ Glentworth development. The development is for an initial appraisal well and up to six horizontal development wells in Phase II.
IOG (IOG LN): Drilling update in the UK –The H2 well encountered an abnormally pressured gas and oil influx with associated drilling fluid losses. The well might have to be side tracked. The well duration could be to be extended by up to four weeks with an impact on costs.
Kistos (KIST LN): Acquisition in Norway – Kistos is acquiring Mime Petroleum for US$1 plus the issue of up to 6 mm warrants to buy new shares in Kistos at a price of £3.85 per share. Kistos is also assuming US$225 mm of debt from Mime on completion. In addition, Kistos will pay US$75 mm to bondholders (the US$225 mm debt assumed by Kistos is net of this repayment). Mime has cash of US$109 mm and is due to receive a tax refund of US$80 mm in December. Mime holds 10% WI in Balder and 7.4% WI in Ringhorne East with 23.6 mmboe net 2P reserves and 29.8 mmboe net 2C resources. FY23 net production is estimated at 2 mboe/d. Kistos expects Mime’s capital expenditure in 2023 to be up to US$130 mm.
OMV (OMV AG): Discovery in Norway – Well 15/2-2 S on licence PL 817 has encountered 6-33 mmboe of recoverable hydrocarbon.
FORMER SOVIET UNION
Block Energy (BLOE LN): 1Q23 update in Georgia – 1Q23 production was 400 boe/d.
MIDDLE EAST AND NORTH AFRICA
DNO (DNO NO): 3Q23 update – 1Q23 gross production in Kurdistan was 94,720 bbl/d. WI production over the period in Norway and Cote d’Ivoire was 14,776 boe/d and 3,676 boe/d. FY23 production at Tawke will be below the guidance of 100 mboe/d.
SUB-SAHARAN AFRICA
Curzon Energy (CZN LN): Moving to battery metals – Curzon Energy has terminated a potential transaction with Poseidon Enhanced Technologies. The company has now signed a letter of intent with Technology Metals Market contemplating a reverse takeover of Curzon by an African-based lithium development company.
Savannah Energy (SAVE LN): Divestment of pipeline stake in Cameroon – Savannah is selling a 10% interest in the Chad-Cameroon export pipeline, the Kome Kribi 1 floating storage and offloading facility and related infrastructure for US$44.9 mm in cash. The consideration will be used for part repayment of existing debt facilities. Savannah has also signed a MoU with the Government of the Republic of Cameroon for the development of the 75 MW Bini a Warak Hydroelectric Project located in the northern Adamawa Region of Cameroon.
EVENTS TO WATCH NEXT WEEK
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24/04/2023 - Var Energi (VAR NO): 1Q23 results
25/04/2023 – Jadestone Energy (JSE LN): FY22 results
27/04/2023 – Aker BP (AKERBP NO): 1Q23 results
27/04/2023 - Repsol (REP SM): 1Q23 results
28/04/2023 – Eni (ENI IM): 1Q23 results
28/04/2023 – OMV (OMV AG): 1Q23 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.
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.
Canadian Overseas Petroleum is engaged in the exploration and development of oil and gas in the United Kingdom North Sea.
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.
Echo Energy is a holding company for a group of companies engaged in the exploration, appraisal and development of oil and natural gas producing assets.
Hurricane Energy is engaged in the exploration of oil and gas reserves principally on the U.K. continental Shelf. Co.'s acerage is focused on the Rona Ridge, West of Shetland.
IGas Energy is engaged in exploring for, appraising, developing and producing oil and gas. Co. has producing assets in Scotland, East Midlands and the Weald Basin and is seeking to develop shale resources across its acreage position focusing on the East Midlands, Yorkshire and the North West of England. As of Dec 31 2016, Co. had proved plus probable reserves of 13.4 million barrels of oil equivalent, which consisted of 12.7 million barrels of oil and 3.95 billion cubic feet of gas.
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).
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.
Parex Resources is engaged in oil and natural gas exploration, development and production in South America and the Caribbean region. As of Dec 31 2010, Co. had gross proved light and medium oil reserve of 1,066 thousand barrels (net: 980 thousand barrels).
Savannah Petroleum is an oil and gas company. Co.'s principal activity is the management of its investment in Savannah Petroleum 1 Limited (SP1). SP1's principal activity is the management of its investment in Savannah Petroleum 2 Limited (SP2), and the provision of services to other companies within Co. SP2 has a 95% interest in Savannah Petroleum Niger R1/R2 S.A. whose principal activity is the exploration of hydrocarbons in the Republic of Niger.
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).
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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