Auctus on Friday - 03/02/2023

AUCTUS PUBLICATIONS
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ADX Energy (ADX AU)C; target price of A$0.80 per share: Drilling commences at Anshof-2 – Drilling at Anshof-2 has started. The well is targeting the field’s possible reserves with an unrisked NAV of A$0.23 per share. A success would open-up the 3C case with an additional A$0.26 per share unrisked NAV.

Arrow Exploration (AXL LN/CN)C; target price of £0.55 per share: High flow and a new discovery at RCE-6. Larger volumes than expected at Oso Pardo – The RCE-6 well encountered 16 feet of pay in a high quality upper C7 sand. The pump is turned-off and the well is flowing naturally at a gross rate of 834 bbl/d (417 bbl/d net). This initial rate is above our expectations of 700 bbl/d. The RCE-6 well has also encountered 7 feet of high quality pay in the Ubaque (24% porosity). The zone was tested at a gross oil rate of up to 393 bbl/d (179 bbl/d net) of 13.3 deg API crude with no pressure decline. This is a new discovery and as such there are no booked reserves. The downhole pressure is consistent with the Ubaque at Carrizales Norte and the reservoir quality is the same. Further drilling will be required to estimate the areal extent of the discovery. The Carrizales Norte field is 2 km away. Oso Pardo-3 in the Middle Magdalena encountered multiple pay zones totaling 53 feet of net pay in high quality sands in the Umir formation, with an average porosity of 23%. The oil was encountered across the fault 120 feet below expectations. This potentially opens five new drilling locations on the lands already held by Arrow and could result in additional reserves and production. The well will now be put in production. The discovery in the Ubaque at RCE and additional volumes at Oso Pardo are expected to be accretive to our Core and ReNAV.
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GeoPark (GPRK US)C; target price of US$25 per share: Positive exploration results open multiple new areas of material production growth - 3Q23 production had already been reported. GeoPark held US$106 mm in cash at the end of September, which is in line with our expectations. 25-30 feet of hydrocarbon pay were encountered in the Guadalupe formation at the high impact Halcon-1 exploration well at CPO-5. The OWC was not encountered. The Guadalupe formation is one of the producing formations at Llanos-34 and is the reservoir that GeoPark was looking for. The well will now be tested. An appraisal well (Perico-1) will spud adjacent to Halcon-1 before YE23 to delineate the play. At Llanos-87, the Zorzal Este 1 exploration well encountered 40 feet of hydrocarbon pay (no OWC encountered) in the Guadalupe and will be tested in November. A new appraisal well will spud at Zorzal Este by YE23. At Block 123, a new appraisal well will be spudded at Toritos by YE23 and GeoPark is currently drilling the Bisbita Centro-1 exploration well. In light of the positive exploration drilling results and the extensive FY24 appraisal programme, Llanos-87, Llanos-123 and the Perico block (Ecuador) could become material producers by YE24 (Llanos-123 and Perico already produce ~2.1 mbl/d and ~2.4 mbbl/d gross respectively). The story benefits from multiple drilling catalysts in 4Q23 and beyond.
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Panoro Energy (PEN NO)C; target price of NOK50 per share: Production affected by short term ESPs issues. Adding reserves and exploration upside - 3Q23 production of ~10 mbbl/d was slightly ahead of our expectations given a strong performance in Tunisia (2.3 mbbl/d vs our expectations of 2.1 mbbl/d). While gross production at Dussafu had reached up to 39 mbbl/d following the restart of the ESPs at both DHIBM-3 and DHIBM-4, subsequent problems at these two ESPs resulted in inconsistent production. It has therefore been decided to pull out the completions at these two wells to address the ESPs issues. Production should be restored shortly. We note that this is a deferral of some production volume and that reservoir deliverability has been demonstrated by the strong rates achieved when all wells have been producing normally. 4Q23 gross production at Dussafu is expected to average 25-30 mbbl/d. Two further wells are expected to be on stream in 1Q24 (one well at the Hibiscus South discovery and one new well at Hibiscus) followed by the completion of the recently drilled Ruche well. With a total of seven producing wells (rather than six), the gross production plateau of 40 mbbl/d is expected to be extended. BW Energy now expects that the overall Ruche/Hibiscus development holds 10 mmbbl oil in place above initial expectations (4-5 mmbbl recoverable resources, 0.6-0.8 mmbbl net to Panoro). This is in addition to the recent discovery at Hibiscus South (6-7 mmbbl gross recoverable resources). We believe this has positive implications for Panoro’s 2023 organic reserve replacement ratio (92% in 2022). The last slot of the drilling programme will be used to drill the Bourdon prospect with 29 mmbbl prospective resources (~5 mmbbl net).
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PetroTal (PTAL LN/TAL CN)C; target price of £1.50 per share: Another high dividend. Production reverting to normal - The 3Q23 production of 10,909 bbl/d and the liquidity position at the end of September had already been reported. Amazon river levels are now gradually increasing. Production in October was 11,808 bbl/d and is now 13,420 bbl/d. It is expected to reach ~20 mbbl/d consistently by the last week of November. PetroTal expects production of 14.5 mbbl/d in 4Q23, at the top end of the latest guidance (14-14.5 mbbl/d). PetroTal expects to replace the 2P reserves produced in 2023. A US$0.02 per share dividend has been declared for 3Q23 (payable in 4Q23). While this is below the dividend for 2Q23 (US$0.025 per share), this is above the expected quarterly dividend base rate of US$0.015 per share. The current quarterly dividend of US$0.02 per share (US$0.08 per share per year) represents a dividend yield of ~15%. The ongoing share buyback programme represents a further return of >2% per year.
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Pulsar Helium (PLSR CN)C; target price of C$0.30 per share: High impact drilling rescheduled to February - The drill rig under contract for the appraisal well at the Topaz Project, as announced September 25, 2023, has been delayed due to a pre-agreed extension option being exercised by its current client.

Valeura Energy (VLE CN)C; target price of C$6.40 per share: Another good quarter. Re-iterating FY23 guidance - 3Q23 production of 19,961 bbl/d and net cash at the end of September of ~US$103 mm had already been announced. The company has re-iterated its FY23 guidance of 20.0-22.3 mbbl/d production with US$200-220 mm opex and US$155-175 mm capex. At Jasmine, two new wells were brought into production in October and delivered initial flow rates above expectations. Current aggregate production from these two wells is ~1,600 bbl/d, which will support production from the field in 4Q23. One of two sidetracks drilled from one of the boreholes (before the well was completed) encountered oil-bearing reservoir. This has potentially positive implications for further development locations and reserves. Using US$85/bbl for Brent, no cash tax during the quarter (+US$29 mm vs 3Q23, everything else being equal), lower 4Q23 capex and a normal lifting schedule (positive working capital movement vs 3Q23 for the liftings of early October), we forecast that Valeura will generate ~US$65 mm free cash flow in 4Q23 leading to net cash of ~US$170 mm at YE23. The FY23 activity programme at Nong Yao, Jasmine and Manora is expected to have replaced a large proportion of the reserves produced in 2023. The new resources encountered at Wassana would be additive. In 2024, Valeura will drill high impact wells that could add reserves including at Wassana North, Jasmine and Nong Yao.
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Wentworth Resources (WEN LN)C: Operational Update - Gross production in 2023 YTD in Tanzania was 105 mmcf/d. The company held US$44.6 mm net cash at the end of October. The Government of Tanzania's re examination of the historic cost pool audit for the years 2013 - 2015 remains unresolved with the Operator. Wentworth's maximum exposure is ~US$14 mm.

Zephyr Energy (ZPHR LN)C; target price of £0.16 per share: Another good quarter. Re-iterating FY23 guidance - 3Q23 sales of 1,043 boe/d was above our expectations of 987 boe/d. Production is expected to increase in 4Q23 with contribution from the six new Slawson wells. In addition, ten Harms East Federal / Quale Federal wells are expected to come online in December or January. 3Q23 operating income was US$4.3 mm, compared to US$4.2 mm in 2Q23. The story benefits from multiple important catalysts by YE24 including (i) production growth in the Williston, (ii) the redrill of Well 36-2 in the Paradox in March, (iii) the initial development and production start-up in the Paradox and (iv) drilling of the company first helium’s well in Salt Wash that could be spudded just after Well 36-2 is completed. This upcoming programme is expected to start derisking the large upside in the Paradox and allow the company to book additional reserves. We understand that the insurer has now re-imbursed all the costs associated with the work-over of Well 36-2 submitted by Zephyr.
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IN OTHER NEWS
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AMERICAS

ATOME Energy (ATOM LN): Granted free-trade zone for Paraguay project – The 145MW Villeta Project in Paraguay has been granted Free-Trade Zone status. This provides the project with exemption from VAT, a 3% effective CT rate and 0.5% tax on revenue from export sales. In addition, remittance of profits or dividends will be exempt from CT and withholding taxes.

BW Energy (BWE LN): 3Q23 results – Gross production from the Golfinho field in Brazil averaged ~11.2 mbbl/d for the period 28 August to 30 September. 3Q23 gross production in Gabon was 23.2 mbbl/d. Net debt at the end of September was ~US$180 mm.

Canadian Overseas Petroleum (COPL LN/XOP CN): 3Q23 update in the USA – 3Q23 WI production was 1,029 bbl/d increasing to 1,110 bbl/d in October. Production was impacted by downtime at high productivity wells. The company held US$2.2 mm in cash at the end of the quarter.

Diversified Energy (DEC LN): 3Q23 update – 3Q23 production in the USA was 134 mboe/d with a September exit rate of 134.4 mboe/d. 3Q23 adjusted EBITDA was US$140 mm. The company has current liquidity of US$135 mm. A dividend of US$0.04375 per share has been declared.

Maha Energy (MAHA-A SS): 3Q23 results – Production in Brazil had already been reported. Net cash at the end of September was US$103 mm.

Pantheon Resources (PANR LN): Raising new equity for Alaska – Pantheon is raising US$4.15 mm of new equity at a price of 20.8p per share.

Touchstone Exploration (TXP LN/CN): 3Q23 results – 3Q23 WI production in Trinidad was 3,391 boe/d with sales volumes of 8,917 boe/d in October including 7,234 boe/d at Cascadura). A workover at Coho was unsuccessful as the packer collapsed after the well commenced dry natural gas production. Net debt at the end of September was US$29.9 mm.

ASIA PACIFIC

Conrad Asia Energy (CRD CN): Prospective resources estimates at Indonesia asset – 11 tcf net prospective resources have been estimated across 38 leads at Offshore North West Aceh and Offshore South West Aceh. Four of these leads individually have Prospective Resource potential of over 1.0 tcf of recoverable gas. The leads are located 20-60 kms offshore, in water depths ranging from less than 100m to in excess of 1000 m.

Jadestone Energy (JSE LN): Operating update in Australia, Malaysia and Indonesia. Acquisition in Australia – Since 1 April, WI production has averaged ~14,400 boe/d. Production is now expected to be towards the upper end of the April to December guidance range of 13,500 – 15,000 boe/d with US$110-125 mm capex (unchanged). The Akatara development project remains on schedule for commissioning activities in 1Q24 with first gas before mid-2024. In Malaysia, the three wells drilled to date at PMC323 are currently producing at a gross rate of ~6,200 bbl/d, above the pre-drill gross rate expectation for all four wells of 3,500 bbl/d. Gross PM323 production has reached ~8,800 bbl/d in recent days, or ~5,300 bbl/d net to Jadestone. The capex for the 2023 East Belumut drilling campaign is now estimated at US$28 mm net to Jadestone, or ~US$7 mm (net) more than pre-drill expectations. Jadestone is acquiring 16.67% WI in the Cossack, Wanaea, Lambert, and Hermes (CWLH) oil fields development, offshore Western Australia, from Japan Australia LNG, for a total initial cash consideration of US$9 mm plus up to US$102 mm cash contribution into the CWLH Abandonment Trust Fund in three instalments in 2024. US$42 mm will be due on closing in 1Q24, with a further US$23 mm expected to be contributed in March and US$37 mm in December 2024. Jadestone is acquiring 11.8 mmbbl net, comprising 0.2 mmbbl of production since the effective date (01/07/2022), 5.1 mmbbl of 2P Reserves and a further 6.5 mmbbl of 2C Resources. The CWLH fields produced ~2,200 bbl/d during 3Q23.

EUROPE

Beacon Energy (BCE LN): Reserves increase in Germany – The Erfelden field is now estimated to hold 7.24 mmbbl potential reserves (best estimate), up from 3.8 mmbbl.

The Parkmead Group (PMG LN): FY results for the year ending 30 June - Gross production for the period across in the Nethelands was 17.5 mmcf/d. The company held £28.6 mm in cash at the end of the period.

MIDDLE EAST AND NORTH AFRICA

Energean (ENOG LN): 3Q23 update - 3Q23 production was 143 mboe/d. The company has re-iterated its FY23 production guidance of 120-130 mboe/d. There has been no production impact from the ongoing security situation in Israel and Karish North is on track for completion by YE23. Net debt at the end of September was US$2.9 bn. A US$0.30 per share quarterly dividend has been declared.

Genel Energy (GENL LN): 3Q23 update in Kurdistan – The Iraq-Türkiye pipeline remains shut. Net cash at the end of September was US$132 mm. US$110 mm is overdue from the KRG for past oil sales at the end of 3Q23. The company is exiting the Sarta licence.

SUB-SAHARAN AFRICA

88 Energy (88E LN/AU): Farm-in agreement in Namibia – 88 Energy is acquiring 45% WI in onshore PEL 93 by funding its share of costs under the 2023-2024 approved work program and any future work program budgets yet to be agreed. The maximum total investment costs are anticipated to be US$18.7 mm..

Africa Oil (AOI SS/CN): 3Q23 results – 3Q23 WI production in Nigeria was 20.3 mboe/d. Prime distributed a dividend of US$125.0 mm, US$62.5 mm net to the Company's 50% shareholding. The net debt of Prime (net to Africa Oil 50% WI) at the end of September was US$256.1 mm. In addition, Africa Oil held US$201.5 mm in cash at the end of 3Q23. Africa Oil expects WI production of 18.5-21.5 mboe/d during 2023 with US$80-100 mm of capex.

Capricorn Energy (CNE LN): Potential tax liability in Senegal – Capricorn has been informed that the Senegalese registration duty (US$28.2 mm including interest and penalties) should have been paid on the transfer (in December 2020) by Capricorn to Woodside of its PSC interests offshore Senegal, and that the Senegalese real estate capital gains tax (US$14.5 mm including interest and penalties) should have been withheld by Woodside from the price paid to Capricorn in respect of the sale of those PSC interests. Capricorn's analysis remains that no Senegalese registration duty or capital gains tax is payable.

Shell (SHEL LN): Dry hole in Mauritania – Shell did not encounter hydrocarbons in commercial quantities at Pannacotta.

Tullow Oil (TLW LN): Trading update – Net debt at YE23 is expected to stand at US$1.6 bn with lower FY23 capex (US$370 mm instead of US$400 mm). FY23 production is expected to be marginally below the 58-60 mbbl/d guidance primarily due to Jubilee South East schedule delays and reduced water injection. Gross production at Jubilee is expected to be maintained at ~100 mbbl/d over 2023-2025.

EVENTS TO WATCH NEXT WEEK
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21/11/2023: Nostrum Oil & Gas (NOG LN) – 3Q23 results