Auctus on Friday - 22/09/2023
AUCTUS PUBLICATIONS________________________________________
ADX Energy (ADX AU)C; target price of A$0.08 per share : Completing farm-out transaction in Austria – The farm-out transaction of Anshof to MND has now completed with an initial payment of EUR1.93 mm. MND has further Anshof development funding obligations of EUR4.683 mm for the drilling, completion and tie-in of the Anshof-2 and Anshof-1 wells as well as payment of further contingent amounts of EUR1.335 mm and EUR3.57 mm (A$ 5.95 million) if the Anshof-2 well meets agreed production performance criteria.
Arrow Exploration (AXL LN/CN)C; target price of £0.55 per share: Good flow rate in the C7 at CN-3 – A 23 ft pay zone (25% porosity) in the Carbonera C7 formation in the CN-3 well has been perforated and put initially on production at a rate of 1,149 bbl/d on pump with a water cut of 11 bnbbl discoveries made by Shell and TotalEnergies in 2022-2023. ~US$1 bn has been spent in the basin in just 2.5 years and the Majors are rushing to acquire licences. Woodside and Chevron have entered into two of Sintana’s blocks over the last 12 months, fast tracking 3D seismic and well planning. Exploration drilling is about to start on Sintana’s blocks, with at least 4 wells expected from 4Q23 to 4Q24. Each well is a potential company-maker. Sintana’s indirect interests are carried by its partners for all these operations, which maximizes the value of the interests. Our C$0.90/sh target price reflects our ReNAV. It implies >3x the current s/p.
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Tethys Oil (TETY SS)C; target price of SEK110 per share: Production in August – WI production from Blocks 3 & 4 in August was 8,576 bbl/d, marginally up from July (8,537 bbl/d).
Valeura Energy (VLE CN)C; target price of C$6.40 per share: Positive drilling results unlock additional resources and delay decommissioning – The A28 and A28-ST1 wells encountered 72 ft and 75 ft of net oil pay respectively in deeper reservoir sections (2.0 and 2.1) at Wassana. The A28 well results proved the presence of oil down to 5,594 ft TVD, 77 ft below previous the estimate of 5,517 ft, which was the depth that was used to estimate reserves. A28 also encountered a thicker package of reservoir sands and new oil-filled sands that have not been previously developed. The A28-ST1 well confirmed the presence of oil in an untested area south of the main producing part of the field. The results of the two wells are expected to trigger a material increase in the recoverable volumes estimates at Wassana. An additional ~20 wells could be required to develop the resources. Assuming EUR of 0.25-0.50 mmbbl per well would lead to a potential increase of 5-10 mmbbl (15-30% of the existing 2P total corporate reserves). Wassana is expected to return to production during 4Q23 with the restart of the MOPU but the increased volumes are expected to require additional surface and wellhead infrastructure. This could result in increased production and an extension of the field’s economic life well into the 2030s. This is important for decommissioning considerations, as the decommissioning costs at other fields (as they are shutdown) would provide a tax shelter (CT rate of 50%) for the extended cashflow of Wassana. We have increased our target price from C$6.10/sh to C$6.40/sh as we incorporate the risked value of the new Wassana resources. We continue to believe that the confirmation that the ~US$300 mm of tax losses associated with Wassana can be applied to the other fields could be a rerating event.
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Zephyr Energy (ZPHR LN)C; target price of £0.18 per share: Production in August – The Dominion gas pipeline will be operational in the next 30 days and will be available to receive Zephyr volumes when Zephyr’s infrastructure and wells have been completed. This removes a significant uncertainty regarding the start of gas production.
IN OTHER NEWS
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AMERICAS
Seacrest Petroleo (SEAPT NO): Operating update in Brazil – Current production is >10 mboe/d including 9,179 bbl/d of oil. Production in 2023 is now expected to be 8.0-8.2 mbbl/d (8.7-8.9 mbbl/d previously) with production cost of US$20-22/boe (US$24-26/boe previously). Production continues to be expected to reach >21 mbbl/d by YE25 and >27 mbbl/d by YE27.
ASIA PACIFIC
Jadestone Energy (JSE LN): 1H23 results – The Akatara project is on budget and on schedule for first gas in 1H24. Montara production has averaged 6,250 bbls/d since early September. The production guidance from April to December will be at the lower of the previously indicated range (13,500 – 15,000 boe/d now vs 13,500 – 17,000 boe/d previously). The company also plans to spend US$110-125 mm in FY23 at the lower end of the previously indicated range (US$110-140 mm). Net cash at the end of June was US$7.8 mm.
EUROPE
DNO/Equinor/Aker BP/Var Energi (DNO NO/EQNR NO/VAR NO/AKERBP NO): Discovery in Norway – A play opening 25-130 mmboe gas and condensate discovery has been made at Norma on the PL984 licence (DNO: 30%, Equinor: 20%, Aker BP: 10%, Var Energy: 20%)).
Orcadian Energy (ORCA LN): Farming out heavy oil pilot project in the UK – Orcadian has entered into a non-binding Heads of Agreement with a North Sea operator, for the farm-out of a heavy oil pilot development project. The operator will acquire an 81.25% interest in Licence P2244. Orcadian will retain an 18.75% carried interest in the Pilot development with the Operator paying 100% of the pre-first oil scope of work. On completion of the transaction, extension of the P2244 licence, and a licence award over former P2320, Orcadian would receive a cash consideration of up to US$0.2 mm, with a further US$3 mm being received on Pilot FDP Approval.
Serica Energy (SQZ LN): 1H23 results – 1H23 production in the UK was 49,350 boe/d. Net cash was £234 mm at the end of June. The FY23 production guidance is 40-45 mboe/d (40-47 mboe/d previously).
Var Energi (VAR NO): Cost increase in Norway – The capex budgets of Balder X and Johan Castberg have been increased by US$340 mm and US$390 mm respectively. The start dates of Balder X and Johan Castberg continue to be 3Q24 and 4Q24 respectively. The FY23 production guidance is now 210-220 mboe/d (210-230 mboe/d previously) with an exit rate >230 mboe/d. The FY23 dividend range policy remains 20-30% of operating cashflow.
MIDDLE-EAST AND NORTH AFRICA
Sound Energy (SOU LN): 1H23 results – Phase 1 LNG project in Morocco is expected to commence in 2024. The company held £4 mm in cash equivalents at the end of August. Sound has reached a final settlement with the Moroccan tax authorities with a phased payment of ~£2.5 mm.
SUB-SAHARAN AFRICA
Invictus Energy (IVZ CN): Raising new equity for Zimbabwe – Invictus is raising A$15 mm to fund the Mukuyu-2 appraisal drilling.
EVENTS TO WATCH NEXT WEEK
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26/09/2023: Touchstone Exploration (TXP LN/CN) – Capital Market Day
27/09/2023: Longboat Energy (LBE LN) – 1H23 results
28/09/2023: Trinity E&P (TRIN LN) – 1H23 results
28/09/2023: United Oil & Gas (UOG LN) – 1H23 results
29/09/2023: Zephyr Energy (ZPHR 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.
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.
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.
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.
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.
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.
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.
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.
Serica Energy is an independent oil and gas company with production, development and exploration licence interests in the U.K. Continental Shelf and exploration interests in Ireland, Morocco and Namibia. As of Dec 31 2016, Co. had proved plus probable reserves of 3.8 million barrels of oil equivalent, which consisted of 2.1 million barrels of oil and 10.40 billion cubic feet of gas.
Sintana Energy is a development stage company engaged in oil and gas exploration and development activities in the United States.
Tethys Oil AB is a Sweden-based energy company. The Company is focused on oil and gas exploration and production onshore areas with known discoveries. Its core area of focus is the Sultanate of Oman, where the Company holds licence interests in three onshore blocks. Tethys Oil has licences in three countries altogether: Oman, Lithuania and France. Two of the licenses are in production, namely Blocks 3 & 4 in Oman and Gargzdai in Lithuania. During 2013 the Company also had licenses in Sweden, however, they have expired and were not renewed. As of December 31, 2013, the Company had 10 wholly owned subsidiaries active in Sweden, Gibraltar, Switzerland and the British Virgin Islands, such as Tethys Oil Denmark AB, Tethys Oil Spain AB and Tethys Oil Turkey AB, among others.
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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