Auctus on Friday - 30/06/2023
AUCTUS PUBLICATIONS________________________________________
ADX Energy (ADX AU)C; target price of A$0.100 per share: Exploration portfolio update in Austria: larger volume, lower risk – The exploration portfolio in Upper Austria is now estimated to hold 213 mmboe of best technical prospective resources (previously 200 mmboe) in 20 prospects. The importance of the upgrade is as much about risk reduction as it is about resources increase. The expansion of the portfolio also provides new opportunities for further farmouts. The resource estimate increase reflects (1) an upward revision of the size of certain prospects such as IRR (gas) which is now estimated to hold 38 bcf (previously 18 bcf) given a higher expected net pay, ZAM (100 bcf vs 87.6 bcf previously) and GRB (9.5 mmboe vs 8.5 mmboe previously) and (2) the addition of three new lower risk gas opportunities (SCHOE, HOCH and GAST) on ADX- AT-I which is new play type in the licence with further follow ups extended. The discoveries and low risk appraisal opportunities now represent 18.7 mmboe (5.5 mmboe previously). Given the high permeability of the reservoirs, a gas well at SCHOE, HOCH and GAST could flow ~10 mmcf/d. The 3D seismic response on the IRR prospect is similar to an adjacent gas field that has produced ~155 bcf of gas thereby increasing confidence in the prospect. The discovery of an oil field at Anshof has derisked the adjacent GRB prospect where an old down dip well had already encountered an oil leg. GRB has been upgraded from “Trend Exploration” to “Discoveries and Appraisal” which given its size is a potential high value opportunity.
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Calima Energy (CE1 AU)C; target price of A$0.50 per share: Asset sale not proceeding. High free cash flow in 2Q23. – While Calima received three unsolicited offers from Canadian entities to acquire assets from the company at a premium to Calima’s current market cap, the preferred transaction could not complete due to the volatility of the equity market. Calima indicated that the rationale for Canadian entities to consider Calima’s assets as an attractive target was the disconnect between the earnings multiples at which Calima shares trade in Australia (~1.5x P/E for 2023 on our forecasts) and similar Canadian multiples (2.5-3.5x according to Calima). 2Q23 production is estimated at 4,125 boe/d, close to the company’s previous indications (4,200 boe/d) but ~100 boe/d above our more conservative forecasts. Calima also anticipates 2Q23 free cash flow of A$7.5 mm, which is also well above our latest forecasts (~A$5 mm). The high free cashflow reflects very low WTI/WCS differentials of just ~US$14/bbl. This is well below our forecasts of US$20/bbl. Calima has confirmed a second dividend distribution of A$3 mm payable during 3Q23.
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Zephyr Energy (ZPHR LN)C; target price of £0.18 per share: Waiting on well 36-2 test – FY23 production, revenue and operating income had been reported previously. At Well 36-2, two thirds of the tubing has already been pulled out and Zephyr is cautiously progressing the activity to pull out the rest. This can take a few more weeks. The timing of the well test is the main factor driving the delivery of first production in the Paradox. Well 16-2 is expected to be worked-over once Well 36-2 has been tested. We understand the results of the analysis subsequent to the testing of the well are consistent with a salt blockage. The company is performing some further work on salt precipitation mitigation measures with vendors and testing different water samples. The surface facilities will be sized according to the stabilized flow rates achieved at both wells. Dominion continues to be expected to start delivering gas to Green River in late 3Q23 or early 4Q23.
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IN OTHER NEWS
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AMERICAS
Alvopetro Energy (ALV CN): Better well results than expected in Brazil – The BL-06 development well on the Bom Lugar field has encountered a total of 35.4 metres of potential net oil pay, with an average porosity of 11.2% and average water saturation of 39.2%. The well encountered thicker than anticipated Caruaçu sands and, with successful production testing, is expected to lead to an expanded development drilling program.
Diversified Energy (DEC LN): Share Buyback programme and divestment of non core US assets – Diversified is launching a buyback programme for up to £97.4 mm. The company is also selling 17 mmcfe/d production and 85,000 net acres in Oklahoma and Texas for US$40 mm.
Frontera Energy (FEC CN)/CGX Energy (OYL CN): Discovery in Guyana – The Wei-1 well encountered 210 feet of hydrocarbon bearing sands in the Santonian horizon. Oil samples were not obtained due to a tool failure downhole. The rock and fluid properties of the Santonian will now be analysed to define net pay and a basis for the evaluation of this interval. The company estimates that 77 feet of net pay have been encountered at the shallower Maastrichtian and the Campanian intervals. Fluid samples indicate the presence of light crude in the Campanian and sweet medium crude oil in the Maastrichtian.
i3 Energy (I3E LN): Cutting production guidance, capex and dividend in Canada – 1Q23 production was 22,773 boe/d. The FY23 production and capex guidance have been reduced from respectively 22.25-23 mboe/d and US$64 mm to 20-21 mboe/d and US$25-31 mm. The expected go forward dividend has also been reduced by 50% from 0.171 p per share per month to 0.0855 p per share per month.
Molecular Energies (MEN LN): FY22 results and spin-out of its alternative energies division – FY22 net production in Argentina was 1,708 boe/d (FY21: 2,473 boe/d). 2P reserves in Argentina have been reduced from 24.4 mmboe at YE21 to 18.9 mmboe at YE22. YE22 net debt has increased to ~US$40 mm (YE21: US$27 mm). Molecular is considering the spin out of Green House Capital with an IPO on AIM. Green House is looking to increase its stake in Dual Field Limited from 50% to 100%. Dual Fuel is involved in the decarbonisation of heavy transport by retrofitting existing heavy goods vehicles to run on a mix of hydrogen and diesel.
Royal Helium (RHC CN): Acquisition of helium asset in Canada – Royal is acquiring a new project located in the vicinity of the company’s Steveville asset in southern Alberta for C$0.4 mm including C$0.15 mm in shares. The newly acquired land holds potential for high flow rate helium enriched gas in the Cambrian and Devonian horizons in at least two structures identified in the acquired and reprocessed 2D seismic.
Trinity Exploration & Production (TRIN LN): Drilling update in Trinidad – The Jacobin well encountered good quality oil bearing sands in the shallow secondary formations. The well is now drilling ahead towards the primary target.
Touchstone Exploration (TXP LN/CN): Disappointing well test results in Trinidad – The second production test at the Royston-1X well did not flow commercial flow rates from any of the targeted three zones in the middle portion of the subthrust sheet of the Herrera Formation. This section of the formation (80 ft) appears to be a low permeability reservoir, and further testing will not be conducted. The next well test will target a gross interval of 106 feet within the intermediate sheet, which is the primary target of the well.
ASIA AND AUSTRALASIA
Jadestone Energy (JSE LN): Operating update – WI production has averaged ~14,800 boe/d since 1 April. The guidance for April to December 2023 is unchanged at 13,500 - 17,000 boe/d. The Akatara gas development project onshore Indonesia remains on schedule and budget for first gas in the first half of 2024.
EUROPE
IOG (IOG LN): UK Well intervention update – Following work-over activities, the H2 well flowed at a maximum rate of 41.9 mmcf/d. The well has been put in production at an initial rate of 20 mmcf/d. The rate will be steadily built-up to full rate over the coming weeks.
Serica Energy (SQZ LN): Update in the UK – Net production for the combined Serica and Tailwind portfolios has averaged over 49,000 boe/d YTD, reaching 56,582 boe/d in June. The company anticipates producing 40-47 mboe/d in 2023 (guidance unchanged). The North Eigg well will not be re-entered as the company believes that there is an insufficient accessible volume of oil to justify the work.
FORMER SOVIET UNION
Caspian Sunrise (CASP LN): Suspending dividend – In the context of the conflict in Ukraine impacting the profitability of the Kazakhstan business, Caspian as decided to suspend further dividend payments until either the end of the year or following a significant increase in production from Wells 141, 142 or 802 or the receipt of the US$22.5 mm proceeds from the sale of 50% of the Caspian Explorer.
Nostrum Oil & Gas (NOG LN): 1Q23 results – 1Q23 production in Kazakhstan was 10,479 boe/d.
MIDDLE EAST AND NORTH AFRICA
Capricorn Energy (CNE LN): Update in Egypt – Year to date production to the end of May has averaged 31,500 boe/d (split 14,000 bbl/d and 98 mmcf/d). The FY23 WI production guidance remains 32,000-36,000 boe/d with US$155-175 mm capex. At the end of May Capricorn had net cash of US$191 mm, US$145 mm trade receivables in Egypt (US$104 mm is overdue) and US$65 mm of trade payables and accruals.
Predator Oil & Gas (PRD LN): Funding for Morocco drilling – Predator is raising ~£1.9 mm through the sale of 18 mm share priced at 10.5 p per share by insiders. The insiders will loan the proceeds to the company. When the company has sufficient head room, it will issue the same number of shares to the insiders and extinguish the loan. Interest accrues on the loan at a rate of 4% above SONIA.
Sound Energy (SOU LN): Project funding update in Morocco – Sound has received a conditional offer for up to US$237 mm financing for the Tendrara development. The financing is to be 100% underwritten by the arranger.
SUB-SAHARAN AFRICA
Eni (ENI IM): Selling assets in Congo – Eni is selling non core oil assets to Perenco for US$30 mm.
PetroNor (PNOR NO): Divesting exploration asset in Guinea-Bissau – PetroNor is selling its 100% interest in the Sinapa (Block 2) and Esperança (Blocks 4A and 5A) licences to Apus Energy (majority owned by Petromal) for up to US$85 mm. This includes a contribution towards past licence costs of at least US$25 mm at completion of the transaction, and a further entitlement to two contingent earnout payments of US$30 mm each, subject to government approval of a field development plan and achievement of continuous production.
ReconArica (RECO CN): Resources update in Namibia – ReconAfrica is estimated to hold 22.1 tcf WI unrisked prospective resources.
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.
Alvopetro Energy is a resource company and is engaged in the exploration for, and the acquisition, development and production of, hydrocarbons in the Reconcavo, Tucano, Camamu-Almada and Sergipe-Alagoas basins in onshore Brazil. Co. develops producing hydrocarbons by appraising and developing existing discoveries and exploring in areas considered by management to be prospective for hydrocarbon resources. Co.'s assets consist of interests in three producing fields and 16 exploration blocks comprising 148,500 gross acres onshore Brazil.
Cairn Energy is an oil and gas exploration and development company. Co. has three groups of business unit: Senegal, which focuses on appraising the discoveries offshore Senegal and to identify further exploration prospects for drilling; U.K and Norway, which includes exploration activities in the North Sea, Norwegian Sea and Barents Sea and management of Co.'s development assets in the U.K. North Sea; and International, which consists of all other regions where Co. holds exploration licenses, including Greenland, Ireland, Morocco, Western Sahara, Mauritania and the Mediterranean. As at Dec 31 2016, Co. had total proved plus probable reserves of 51.5 million barrels of oil equivalent.
Calima Energy and its subsidiaries are engaged in investing in oil and gas exploration and production projects internationally and more specifically in West Africa.
Caspian Sunrise is engaged in exploration and production of crude oil. Co. builds a portfolio of oil and gas exploration and production assets in Central Asia and in particular Kazakhstan.
CGX Energy is engaged in the petroleum and natural gas exploration in offshore Guyana, South America. Co. is in the process of exploring and evaluating its petroleum and natural gas properties and has not yet determined whether they contain economically recoverable reserves. The recovery of both the costs of acquiring the petroleum and natural gas properties and the related deferred exploration expenses depends on the existence of economically recoverable reserves, the ability of Co. to obtain the financing necessary to complete exploration and the development of the properties, and the future profitable production, or alternatively, on the sufficiency of proceeds from disposition.
Diversified Gas & Oil is an Appalachian Basin focused natural gas and crude oil operations company.
Eni is engaged in the oil and gas exploration and production, gas marketing operations, management of gas infrastructures, power generation, petrochemicals, oil field services and engineering industries. Co.'s operations are divided into three segments; Exploration and Production (oil and natural gas exploration and field development and production, as well as LNG operations), Gas and Power (supply, trading and marketing of gas and electricity, managing gas infrastructures for transport, distribution, storage, re-gasification, and LNG supply and marketing), and Refining and Marketing (supply of crude oil, refining and marketing of refined products). Co. maintains operations in 73 countries.
Frontera Energy is a publicly traded oil and gas company engaged in the exploration, development and production of heavy crude oil and natural gas in Colombia, Peru, Brazil, and Guatemala.
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.
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.
Jadestone Energy is engaged in the evaluation, acquisition, exploration and development of oil and gas properties.
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.
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.
Sound Energy is the holding company for a group of companies whose principal activities are the exploration, appraisal and development of oil and gas assets to first production and the operation of producing assets. Co.'s principal areas of activity are in Italy and Morocco.
Touchstone Exploration Inc., formerly Petrobank Energy and Resources Ltd., is an oil and gas exploration and production company. The Company's segments include Trinidad and Canada. The Company's core producing properties are located onshore within Trinidad. The Company's producing properties in Trinidad include Coora 1, Coora 2, New Dome, South Palo Seco, Barrackpore, Fyzabad, Icacos, Palo Seco and San Francique. The Company's exploratory properties in Trinidad include Bovallius, Moruga, New Grant, Ortoire, Otaheite, Piparo, Rousillac, Siparia and St. John. Its exploratory properties in Canada include Beadle, Druid, Luseland and Winter. The gross acres of the properties include approximately 106,604. The Company operates a total of approximately 370 wellbores on the Coora blocks. The New Dome block is located onshore in the southwest portion of Trinidad in the Ward of Siparia. The Barrackpore Block is located approximately 11 kilometers southeast of the city of San Fernando.
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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