AUCTUS ON FRIDAY - 01/11/2024
AUCTUS PUBLICATIONS________________________________________
ADX Energy (ADX AU)C; Target price of A$0.70 per share: Approvals to start well testing at Welchau received. Rig and test equipment mobilized – All necessary approvals have been received to commence flow testing operations on the Welchau-1 discovery well for the period from 30 October 2024 until 31 March 2025. A workover rig has been mobilised to the Welchau-1 drill site with flow testing due to commence during the second half of November. There are multiple zones to test. The key test objectives being to confirm fluid type, reservoir productivity and likely reserves recovery. Welchau-1 is a vertical exploration well that was cased and cemented. We would view a test flow rate in excess of 200 bbl/d from any one formation as a success. Fractured carbonate analogs in Canada for example are often developed with horizontal drilling combined with acidization. This allows production from a larger number of fractures to materially increase the flow rate of individual wells. Given the shallow depth of Welchau and relatively modest well costs, the development of the field based on horizontal wells is likely to significantly enhance commerciality. We have removed the LICHT prospect from our valuation following the drilling results of last week and we have changed our target price to A$0.70 per share. Our unrisked NAV for Welchau is A$1.18 per share (~11x the current share price).
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GeoPark (GPRK US)C; Target price of US$26 per share: Strong 3Q24 financials. Flow rates at Confluencia Norte expected imminently – 3Q24 operating cash flow of ~US$126 mm was particularly high. Netting off a positive working capital movement of US$32 mm, the adjusted operating cash flow of US$94 mm is well above our forecast of US$65 mm. In Argentina, the IP rates of the three exploration wells at Confluencia Norte are expected in the coming days. This is very material news and this could allow GeoPark to start converting some of the 39 mmbbl net 3C resources associated with the area into reserves. Typical IP rates at Mata Mora Norte are 750-1,500 bbl/d with 5% gas. Two wells in the area have produced 2-3 mboe/d. Our unrisked NAV for this block is US$4.60 per share. Gross production in Argentina was ~13.6 mboe/d in September. With additional wells in 4Q24, the gross YE24 production is estimated at 13.5-14.5 mboe/d (6.1-6.5 mboe/d net to GeoPark). The current dividend yield is >7%. As we incorporate the higher 3Q24 cashflow offset by higher future opex in Colombia (we now assume US$12/boe vs US$10-11/boe previously), we have changed our target price to US$25 per share.
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Panoro Energy (PEN NO)C; Target price of NOK52 per share: High flow rate at EG infill well – The C-45 infill well on Block G in Equatorial Guinea has been put on stream at a gross rate of 5 mbbl/d on a restricted choke. Production could increase as the choke size is increased. While this is line with the company’s expectations, this takes gross production in EG to ~30 mbbl/d. The second infill well (OF-19) has been drilled and is expected to be on stream in the next two weeks. This could take gross production to ~ 35 mmbbl/d assuming OF-19 is similar to C-45. With gross production in Gabon nearing 40 mbbl/d (excluding the contribution from wells requiring ESP work-overs), we continue to expect corporate production to be over 13 mbbl/d by YE24. Following the conclusion of the OF-19 infill well, the rig will move to the Akeng Deep prospect on Block S. Thise well is targeting a 180 mmbbl prospect (Panoro WI: 12%) with an unrisked NAV of ~NOK15/sh. We re-iterate our target price of NOK52 per share. The current dividend yield is >6.5%. Assuming Brent prices remain at current levels in 2025, Panoro free cash flow is expected to be material and the shareholder distributions could increase. We are anticipating a high Reserve Replacement Ration at YE24.
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Pulsar Helium (PLSR LN)C; Target price of £0.90 per share: Gearing-up to start drilling – Sections of the main access road (to the Topaz project in Minnesota) have been modified for all weather access to support operational traffic for year-round operations. The Jetstream #! drill pad is ready and the rig is expected to arrive during the first week of December.
Tethys Oil (TETY SS)C; Target price of SEK80 per share: Well test results at Kunooz-1 weeks away – 3Q24 production of 7,717 bbl/d had already been reported. While the company moved from an overlift position of 2,357 bbl at the end of 2Q24 to a large underlift position of 28,993 bbl at the end of 3Q24, the 3Q24 operating cash flow of US$14.5 mm (before working capital) was very close to 2Q24 (US$15.4 mm). The key near term newsflow is the results of the flow tests of the Ara/Birba and Bua formations at Kunooz-1 on Block-58. A positive result would be very material to Tethys and could lead to Roc Oil increasing its offer for the company. The large and extensive natural fractures encountered over 500 m (gross thickness) in these formations are similar to the fractures at Block 4, where they are highly productive. The Ara/Birba and Bua formations at Kunooz-1 will be completed open hole and the well test results are expected in 3-4 weeks. The acceptance period for the Roc Oil offer expires on 2 December. Overall, our target price of SEK80 per share is unchanged. It has been set in line with the offer price (SEK58.70 per share) plus 50% of our risked value for Kunooz (50% of SEK45 per share).
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Valeura Energy (VLE CN) C; Target price of C$10.00 per share: Tax restructuring adds cash flow and showcases Thailand’s operating environment – Valeura has completed the restructuring of its Thailand subsidiary companies. Valeura’s working interests in all its Thai III fiscal contracts, covering the Nong Yao, Manora and Wassana fields will now be held in a single subsidiary. This will allow Valeura to use its US$397 mm tax losses at Wassana against the profits at Nong Yao and Manora. The amount of tax losses is higher than we anticipated (~US$350 mm). Under our Brent price assumptions (US$70/bbl from 4Q25), we estimate that Valeura will not pay corporate tax on these assets over the foreseeing future. The value of these tax assets increases dramatically at higher oil prices, particularly over US$80/bbl. Valeura will make a payment related to the tax due at Nong Yao, Manora and Wassana for the July-October period in 1Q25. We estimate this payment at US$15 mm. While we had already factored the restructuring in our forecasts, this showcases Thailand’s operating environment for upstream oil and gas. This also showcases the execution capability of Valeura’s management.
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IN OTHER NEWS
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AMERICAS
Alvopetro Energy (ALV CN): 3Q24 results – October production in Brazil was 1,912 boe/d. 3Q24 sales were 2,106 boe/d. Working capital at the end of September was US$15.8 mm.
Canacol Energy (CNE CN): 3Q24 results – 3Q24 sales were 159.8 mmcf/d. Net debt at the end of June was US$697 mm.
Eni (ENI IM): Selling assets in Alaska – Eni has sold its interests in the Nikaitchuq and Oooguruk assets to Hilcorp for US$1 bn.
ExxonMobil (XOM US): Selling assets in Argentina? – Media reports indicated that ExxonMobil was selling its Vaca Muerta assets in the Neuquen basin to Pluspetrol.
Frontera Energy (FEC CN): 3Q24 results – 3Q24 production in Colombia and Ecuador was 40,606 boe/d, increasing to 42.3 mboe/d in October. Net debt at the end of September was ~US$290 mm. The company is launching a further US$30 mm share buyback programme.
Gran Tierra Energy (GTE CN/LN/US): 3Q24 results – 3Q24 production in Colombia and Ecuador was 32,764 boe/d. A discovery has been made at the Charapa-B7 well in Ecuador. Net debt at the end of September was US$509 mm.
Parex Resources (PXT CN): 3Q24 Operating results – 3Q24 production in Colombia was 47,569 boe/d. The FY24 average production guidance has been increased from 48,000-50,000 boe/d to 49,000-50,000 boe/d, while the capex guidance has been reduced from US$370-390 mm to US$350-370 mm. Production in October averaged 47 mboe/d. Net cash at the end of September was US$140 mm.
ASIA AND AUSTRALASIA
Empyrean Energy (EME LN): Raising new equity for new Australian asset – Empyrean has raised £1.12 mm of new equity at a price of 0.1 pence per share. Empyrean is in discussions to acquire an option from Apnea Holdings to participate in the conventional Wilson oil prospect which is situated close to existing infrastructure in the Cooper Basin in Southwest Queensland. The option will allow Empyrean to earn a minimum 40% WI in the permit by paying two thirds of the gross cost of drilling an exploration well at the Wilson prospect, estimated at ~A$2.8 mm. Apnea is a company wholly owned by Thomas Kelly, Managing Director of Empyrean.
EUROPE
Equinor (EQNR NO): Acquisition in Norway – Equinor is acquiring Sval Energi’s 11.8% share in the Halten East Unit.
Harbour Energy (HBR LN): 3Q24 trading update – Production from January to September 2024 was 177 mboe/d. The FY24 production guidance has been narrowed to 255-265 mboe/d (250-265 mboe/d previously) with US$1.8 bn capex (US$1.7 bn previously). Net debt at the end of September was US$4.7 bn. October production averaged 503 mboe/d. An oil discovery has been made at Gilderoy in the UK.
MIDDLE EAST AND NORTH AFRICA
DNO (DNO NO): 3Q24 results – 3Q24 net production averaged 77,200 boe/d, to which Kurdistan contributed 63,200 boe/d, North Sea 11,200 boe/d and West Africa 2,800 boe/d. Net cash at the end of September was US$134 mm.
Predator Oil & Gas (PRD LN): Raising new equity for Morocco and Trinidad – Predator is raising £2 mm of new equity priced at £0.05 per share with a single investor. The investor will also be issued 40 mm warrants with a strike price of £0.08 per share. The proceeds will fund well testing activities in Morocco and drilling in Trinidad.
ShaMaran Petroleum (SNM CN): 3Q24 results – 3Q24 production at Atrush and Sarsang in Kurdistan was 59,300 bbl/d. Net debt at the end of September was US$159 mm.
SUB-SAHARAN AFRICA
Afentra (AET LN): 3Q24 update in Angola – Net average production to end October 2024 for Block 3/05 and 3/05A was respectively 5,815 bbl/d and 255 bbl/d. The focus is now on opportunities in the Kwanza Onshore Basin. Net debt at the end of September was US$4.6 mm.
Kosmos Energy (KOS US): 3Q24 results – 3Q24 net production was 65.4 mboe/d including 40.5 mboe/d in Ghana, 16.9 mboe/d in the US GoM and the balance in EG. Net debt at the end of September was US$2.7 bn. The company expects to produce 90 mboe/d around the end of 2024. The FY25 capex guidance has been reduced from US$550 mm to US$400 mm. First LNG in Mauritania and Senegal is expected in 4Q24.
Orca Energy (ORC.A/B CN): Operating update in Tanzania – With the expiration of the PPA with Songas, the Songas power plant has been shut down. The FY24 production for Additional Gas sales is now forecast to be 65 - 68 mmcf/d. This range incorporates the exclusion of all volumes previously forecast to be supplied to Songas for November and December, and certain volumes lifted but disputed by a major industrial customer as a consequence of the position taken by TPDC in relation to the cessation of Protected Gas. The payment received from Songas from the end of July until the end of November represents only 19.5% of the payments specified in the contract. Orca held US$76 mm in net cash at the end of September.
EVENTS TO WATCH NEXT WEEK
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11/11/2024: Vaalco Energy (EGY US/LN) – 3Q24 results
12/11/2024: Condor Energy (CDR CN) – 3Q24 results
12/11/2024: Diversified Energy (DEC US/LN) – 3Q24 update
13/11/2024: Valeura Energy (VLE CN) – 3Q24 results
13/11/2024: Africa Oil (AOI SS/CN) – 3Q24 results
14/11/2024: PetroTal (PTAL LN/CN) – 3Q24 results
15/11/2024: BW Energy (PTAL LN/CN) – 3Q24 results
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.
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.
Empyrean Energy is engaged in the business of financing the exploration, development and production of energy resource projects in regions with energy hungry markets close to existing infrastructure. Co. is focused on non-operating working interest positions in projects that have drill ready targets that substantially short cut the life-cycle of hydrocarbon projects by entering the project after exploration concept, initial exploration and drill target identification work has been completed.
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.
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.
Exxon Mobil operates or markets products in United States and other countries through its divisions and affiliated companies. The company's business involves exploration for, and production of, crude oil and natural gas and manufacture, trade, transport and sale of crude oil, natural gas, petroleum products, petrochemicals and other products. In United States, the company's development activities are focused on the onshore United States, in the Permian Basin of West Texas and New Mexico and the Bakken oil play in North Dakota. Gas development activities are also focused on the Marcellus Shale of Pennsylvania and West Virginia, the Utica Shale of Ohio and the Haynesville Shale of East Texas and Louisiana.
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.
Kosmos Energy is a holding company. Through its subsidiaries, the company operates as a deepwater independent oil and gas exploration and production company focused along the Atlantic Margins. The company's assets include production offshore Ghana, Equatorial Guinea and U.S. Gulf of Mexico, as well as gas development offshore Mauritania and Senegal. The company also maintains a sustainable exploration program balanced between proven basin infrastructure-led exploration (Equatorial Guinea and U.S. Gulf of Mexico), emerging basins (Mauritania, Senegal and Suriname) and frontier basins (Cote d'Ivoire, Namibia and Sao Tome and Principe).
Orca Exploration Group is an international company engaged in hydrocarbon exploration, development and supply of gas in Tanzania, the establishment of a coastal gas pipeline network in East Africa, oil appraisal and gas exploration in Italy and the acquisition of exploration opportunities in Europe and Africa.
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).
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.
Shamaran Petroleum is a Canadian-based oil and gas company engaged in the business of oil and gas exploration and development. Co. is in the pre-production stages of an exploration and development campaign in respect of petroleum properties located in the Kurdistan Region of Northern Iraq.
Sterling Energy, together with its subsidiary is an upstream oil and gas company. Co. is an operator of exploration and production licenses, with a primary geographic focus on Africa. Co. is primarily focused on the development of its Somaliland Odewayne block, and Mauritania C-10 exploration block. Co. holds 40% working interest in the Somaliland Odewayne exploration block. This unexplored frontier acreage position comprises an area of 22,840 sq. km. Co. holds 13.5% working interest in the Mauritania C-10 exploration block. Block C-10 covers an area of approximately 8,025 sq. km. As of Dec 31 2016, Co. had a total proven plus probable oil reserves of 73,000 barrels of oil equivalent.
Tethys Petroleum is an oil and gas exploration and production company focused on projects in Central Asia. Through its subsidiaries, Co. is engaged in the exploration for, and the acquisition, development and production of, oil and natural gas resources in Kazakhstan, Tajikistan and Uzbekistan.
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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