Auctus on Friday - 01/12/2023
AUCTUS PUBLICATIONS________________________________________
ADX Energy (ADX AU)C; target price of A$0.80 per share: Key environmental permit received for key well – An Environmental Clearance has been received from the Department of Nature Protection of the State Government of Upper Austria to drill the Welchau-1 gas well. The Environmental Clearance is the last regulatory requirement to commence operations at the Welchau gas exploration project. The well is expected to spud in January and targets a 134 mmboe gas prospect (ADX WI: 80%). Our unrisked NAV for the well is A$1.60 per share (16x the current share price).
Arrow Exploration (AXL LN/CN)C; target price of £0.55 per share: FY24 drilling programme: high impact & low risk – 3Q23 production was 2,518 boe/d, near our forecast of 2,674 boe/d. Arrow held US$12.9 mm in cash at the end of September. This is ahead of our expectations of US$6.6 mm on lower capex and opex. Four new wells are expected to be on stream by YE23 including RCE 7, RCE-8 and two wells at Oso Pardo. Following interpretation of the recently shot 3D seismic at Tapir, Arrow plans to drill a total of 15 wells in 2024 including five exploration wells targeting 3 material and low risk exploration prospects and ten development wells (including at least 3 horizontal wells at Carrizales Norte). The total capex budget for 2024 will be around US$40 mm. Our ReNAV of £0.55 per share now includes contribution from the 2024 exploration programme, offsetting our decision to reduce the contribution to our valuation of the development of the area of Oso Pardo outside of Arrow’s current licence area given the delays to obtain the required licence expansion. Arrow continues to expect that the licence will be awarded but the focus of the 2024 programme will be the Tapir block.
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Longboat Energy (LBE LN)C; target price of £0.60 per share: All eyes on 2024 – With the acquisition of interests in Sygna and Statfjord Øst expected to complete in January, the process to establish a stable well-funded producing business in Norway is almost complete. FY23 production at Sygna and Statfjord Øst net to Longboat Norge is ~250 boe/d. The acquisition of 49.9% of Longboat Norge by JAPEX in 2023 provides low cost capital and access to a strong balance sheet to develop further the Kveikje area and make acquisitions at no further dilution to Longboat plc. With the entry in Malaysia and the acquisition of Topaz, 2024 is expected to be an important year with (1) a significant increase in production at Sygna and Statfjord Øst early in the year when all wells will be brought on stream (we assume 600 boe/d net to Longboat Norge), (2) high impact drilling at Lotus (Norway), (3) progress in farming out the giant Kertang prospect in Malaysia and (4) potentially the acquisition of producing/development assets in Norway and/or South East Asia. We understand that Longboat is actively pursuing opportunities with multiple counterparties. We understand that Longboat is already in discussions with multiple counterparties.
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Panoro Energy (PEN NO)C; target price of NOK50 per share: 2024 shareholder distributions could represent a total yield of 12.5%-15.5% – 3Q23 production of ~10 mbbl/d and net cash at the end of September had been previously reported. There were no specific updates on the ongoing ESP investigation at Dussafu. Production plateau of 40 mbbl/d was reiterated and could be reached by the end of 1Q24 in our estimation. Drilling the first of three new wells in EG will commence by YE23 (unchanged). The corporate tax rate in EG has been reduced from 35% to 25%. Dure to the timing of tax payments the cash effect of this will be felt in 2025 (ie. 2024 taxes paid in 2025). 2024 will be a very important year for Panoro. The company will drill two high impact exploration wells at Akeng Deep in EG and at Bourdon in Gabon. Our unrisked NAVs for Akeng Deep and Bourdon are ~NOK14 per share ~NOK5 per share respectively. The FY24 capex is estimated at US$70-75 mm (we had assumed US$65 mm) given increased activity. Part of the cost of Akeng Deep, should it be unsuccessful, will be accounted for as cost oil in the producing field. This implies that a portion of the cost of the well will be recovered very quickly in the downside scenario. In the upside scenario of a discovery, the nearby FPSO offers a fast-track tie-back development option. The FY24 programme includes more activity in Tunisia, with drilling at Rhemoura and Guebiba expected to start in late 2024. With increasing free cashflow in 2024, the overall shareholder distributions are expected to increase by 100-150% in 2024 versus 2023.
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Southern Energy (SOUC LN/SOU CN)C; target price of £1.20 per share: Resilient quarter. Waiting on higher US gas prices – 3Q23 production of 2,814 boe/d had been previously reported. While the level of drilling activity is closely tied to the evolution of gas prices in the USA, the financial performance in 3Q23 showcases the resilience of the business in the current low gas price environment. While Henry Hub gas prices were only US$2.55/mcf in 3Q23, Southern captured a premium of US$0.28/mcf. Even at these low levels for gas prices, net debt increased by only ~US$ 1mm in the three months to the end of September. Southern held US$1.9 mm in cash at the end of September. The company has currently US$10 mm of unused capacity on its credit facility. Southern has also raised US$5 mm of new equity in 4Q23. With a forward strip gas price of US$2.7/mcf in December, we have reduced our Henry Hub gas price forecast to US$3.30/mcf (from US$4/mcf) close to the forecasts the EIA published earlier this week. We have also reduced our Henry Hub forecasts for 2024 from US$4.4/mcf to ~US$3.65/mcf. Given the supply/demand dynamics in the USA, we continue to expect Henry Hub gas prices to increase to ~US$5/mcf by YE24. The first DUC well (14-6 #3 - Upper Selma Chalk) is expected to be completed by YE23. IP30 rates are expected to be available towards the end of January. On our gas price assumptions, we forecast that Southern could fund a programme to grow production to 4.8 mboe/d in 4Q24, 5.3 mboe/d in 4Q25 and 6.9 mboe/d in 4Q26. We re-iterate our target price of £1.20 per share. Southern continues to be a play on the recovery of US gas prices.
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IN OTHER NEWS
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AMERICAS
88 Energy (88E LN): Raising new equity – 88 Energy has raised A$9.9 mm of new equity at a price of £0.0023 per share. Participants in the placing will also receive one warrant for each three placing shares. The exercise price is £0.0039 per share. The net proceeds of the placing will provide capital to fund flow testing of multiple zones in the Hickory-1 well at Project Phoenix in Alaska, and payment for initial farm-in exploration activities at the recently acquired Owambo Basin acreage in Namibia (including 2D seismic acquisition).
NG Energy International (GASX CN): Production update in Colombia – NG Energy has signed definitive agreements to complete infrastructure construction. Production is expected to reach 30 mmcf/d in 1H24.
Seacrest Petroleo (SEAPT NO): Operating update in Brazil – WI production in Brazil has recovered to 8,279 boe/d.
EUROPE
Dial Square investments (DSI LN)/Energy Pathways: RTO for East Irish Sea gas business – EnergyPathways is reversing into Dial Square investments. Energy Pathways hold gas assets in the East Irish Sea including the Marram gas discovery.
EnQuest (ENQ LN): Operating update in the UK – 2023 production in the ten months to end October was 43,872 boe/d. Net debt at the end of October was US$586 mm (US$615 mm at the end of August). Gross production at Kraken over the period was 19.1 mboe/d. The FY23 production guidance of 42-46 mboe/d with US$220 mm of cash capex has been re-iterated.
Harbour Energy (HBR LN): Operating update – Production from January to the end of September was 189 mboe/d. Net debt at the end of September was US$0.3 bn. The FY23 guidance of 185-195 mboe/d with US$1 bn capex is unchanged.
OKEA (OKEA NO): Acquisition in Norway revisited on lower resources estimates - The 2P reserves and 2C resources in the Statfjord Area are estimated to be 10-15% lower than previously. In addition, expected costs have increased. OKEA is reconsidering the acquisition of 28% of the area from Equinor at a price of US$220 mm.
Serinus Energy (SEN LN): 3Q23 results – Production from January to September 2023 was 641 boe/d including 524 boe/d in Tunisia and the balance in Romania. The installation of artificial lift in the Sabria W-1 well will require a sidetrack. The Sabria N-2 well is dewatering at a slow rate and Serinus is considering stimulation techniques. Serinus has a working capital deficit of ~US$4.3 mm at the end of September.
Trillion Energy (TCF CN): Raising new equity for Turkey Trillion has raised C$10.8 mm at a price of C$0.30 per share to fund its drilling programme in Turkey.
MIDDLE EAST AND NORTH AFRICA
Capricorn Energy (CNE LN): Operating update in Egypt – To the end of October 2023, WI production across the four main concession areas in the Western Desert averaged 30,600 boe/d (45% oil) for the year. The combination of further project delays beyond those announced previously and lower than expected contributions from new wells mean that FY23 is expected to average ~30,000boe/d, below the low end of the original FY23 32-36,000 boe/d guidance. FY23 capex and opex guidance remains unchanged at US$117-127 mm and US$5-6/boe. Capricorn held an end October cash position of US$158 mm before Egypt reserve-based lending of US$113 mm. During the period from 1 July to 31 October, Capricorn has collected US$44 mm in accounts receivable and is scheduled to receive 50% of the proceeds of a cargo lifting in December. As at 31 October, Capricorn had US $170 mm in outstanding accounts receivable from EGPC.
Maha Energy (MAHA-A SS): Exiting Oman – Maha is selling its 65% WI in Block 70 to Mafraq Energy for US$14 mm.
SUB-SAHARAN AFRICA
Equinor (EQNR NO): Selling Nigerian assets – Equinor is selling 53.85% in OML128 and 20.21% WI in the Abgami oil field to Chappal Energies.
PetroNor (PNOR NO): 3Q23 results – 3Q23 WI production in Congo was 5,113 bbl/d increasing to 6,000 bbl/d in October. Net cash at the end of September was ~US$17 mm.
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.
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.
Enquest is an oil and gas production and development company. As of Dec 31 2016, Co.'s principal U.K. assets were its interests in the producing operated oil fields Heather/Broom, Thistle/Deveron, the Dons area, the Greater Kittiwake Area, Alma/Galia and Scolty/Crathes. In addition, Co. had interests in the Kraken development and also a non-operated interest in the producing Alba oil field. In Malaysia, Co.'s operated assets comprise the PM8/Seligi Production Sharing Contract and the Tanjong Baram Risk Services Contract. At Dec 31 2016, Co. had proven and probable reserves of 215.0 million barrels of oil equivalent.
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.
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.
Maha Energy AB is a Sweden-based independent, international upstream oil and gas company whose business activities include exploration, development and production of crude oil. It directly operates through Maha Energy Inc in Canada, as well as Maha Energy 1 [Brazil] AB and Maha Energy 2 [Brazil] AB in Sweden. It owns an oil field in Wyoming, the United States. The Company specializes in primary, secondary and enhanced oil and gas recovery technologies, and operates a technical office in Calgary and Alberta in Canada, as well as an operations office in Newcastle and Wyoming in the United States. The Company operates as wholly-owned subsidiaries Gran Tierra Finance (Luxembourg) SARL and Gran Tierra Brazco (Luxembourg) SARL.
Okea ASA is a Norway-based oil company engaged in the oil and gas exploration and production industry. The Company contributes to the value creation on the Norwegian continental shelf with development and operation systems through the utilization of the result of previous and ongoing exploration activities in order to bring undeveloped oil on stream in strategic cooperation with service companies. Its services do not involve the exploration for petroleum. The Company operates an office in Trondheim, Norway.
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.
Serinus Energy is engaged in the exploration for and development of oil and gas properties in Ukarine, Brunei and Syria.
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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