AUCTUS ON FRIDAY - 05/04/2024

AUCTUS PUBLICATIONS
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ADX Energy (ADX AU)C; target price of A$1.00 per share: Sample analysis at Welchau – Compositional analysis of a gas sample at Welchau shows 92 mole % methane, 4 mole % ethane with low CO2 and no H2S.

Criterium Energy (CEQ CN)C; target price of C$0.30 per share: Growth within cashflow – The FY24 guidance reflects a self-funded development and debt repayment programme. While a reduced capital programme, we believe this is a prudent strategy with upside optionality should additional funds from the Bulu sale or higher oil prices materialize. As a result of the Bulu sale not completed yet, Criterium is carrying more debt than we expected (the repayment of US$5.5 mm of debt in March would have also triggered a US$3.8 mm debt write down). Pending the divestment of Bulu, we expect debt servicing (8.6% interest per annum plus US$1.5 mm principal repayment every quarter) in 2024 and beyond could be much higher than anticipated. The higher debt servicing combined with higher opex results in less than expected cash resources available for drilling. The FY24 capex is therefore expected to be US$4.8-5.5 mm (we anticipated ~US$10 with the proceeds from the sale of Bulu) and production is expected to grow from ~820 bbl/d currently to only 1.2-1.3 mbbl/d by YE24 (we anticipated ~2.0 mbbl/d with a US$10 mm capex programme). Should the Bulu acquisition close, the capex could be increased to US$10 mm and close the gap on production. The FY24 programme includes 12-15 work-overs (US$0.06 mm per work-over adding 10-30 bbl/d with a payback of 2-5 months) and only 2 new wells (US$1.6-2.0 mm/well adding 75-200 bbl/d with similar payback). While the company has an inventory of a further 15 wells, we have made the cautious assumption that new oil wells beyond the 2024 programme would not be drilled before 2026 as Criterium’s cash resources (excluding the proceeds from selling Bulu) would be allocated to the gas aggregation project in 2025 to be also partially funded with new debt or offtake arrangements. Should the company fund the gas development with the offtaker, additional oil wells could be drilled in 2025. We now expect oil production to grow to >2 mbbl/d only in 2027. As we assume a slower production ramp-up and attribute a 50% chance of Bulu being sold, we change our TP to C$0.30/sh in line with our ReNAV
See website for full report

Panoro Energy (PEN NO)C; target price of NOK47 per share: Heads of terms for high potential EG block - Panoro has agreed heads of terms for the award of Block-23 in EG. Panoro could hold up to 80% WI in the block. There will now be a period of exclusive negotiations to finalise a Production Sharing Contract. Block EG-23 is located offshore Equatorial Guinea north of Bioko Island and adjacent to the producing Alba gas and condensate field. The Alba gas field started production in the late 90’s and reached peak production of >200 mboe/d (including >50% sold as LNG) in 2009. Covering a surface area of approximately 600 km2 in water depths ranging from 50 metres to 100 metres, 19 wells have been drilled on Block EG-23 to date, resulting in seven hydrocarbon discoveries (four oil, two gas and one gas/condensate), some of which have been tested. The block was previously held by Marathon. Panoro’s technical evaluation indicates that a range of plays (oil and/or gas) exists on the block and has identified a number of prospects and leads in addition to the existing discoveries. The initial work programme will be focused on re-processing existing seismic data to mature prospects with an option to then enter a second stage which would entail drilling. Given the modest water depth, the company can probably use a jack-up mounted rig for drilling. With declining production the Alba Field, growing spare capacity in existing gas infrastructure and an increasing focus on US operations, Marathon, the operator of the Alba, field announced in 2021 the intention to create a Gas Mega Hub, with the Punta Europa gas complex (including LNG facilities) at the centre, to process and liquefy gas from proximate fields in EG and neighboring countries. The first phase of the Gas Mega Hub began in early 2021 with the delivery of wet gas from the offshore Alen Field to the Punta Europa complex for processing and liquefaction. This is a very important development as this could provide a monetization route for gas discoveries on Block-23.
See website for full report

IN OTHER NEWS
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AMERICAS

3R Petroleum: Potential merger in Brazil – Enauta is proposing a merger with 3R. 3R and Enauta shareholders would hold respectively 53% and 47% of the combined entity that would produce ~100 mbbl/d and hold 700 mmboe 2P reserves.

88 Energy (88E AU/LN): Operating update in Alaska – The Upper SFS zone at the Hickory-1A well flowed at an average 42 bbl/d of oil on test with instantaneous rates ranging from 10-77 bbl/d from a 20 ft perforated interval that was stimulated with a single fracture. The maximum oil cut reached 15% (85% water cut).

Alvopetro Energy (ALV CN): Operations update in Brazil/Unit redetermination – March sales averaged 1,911 boe/d. Production was negatively impacted by reduced nominations from the offtaker. Demand resumed in March, however lower nominations of only 8.9 mmcf/d are expected in April. As a result of the Cabure Unit redetermination, the WI of Alvopetrp in Cabure has increased from 49.1% to 56.2%. The company’s 2P reserves in the unit are increasing from 8.7 mmboe to 9.6 mmboe.

Diversified Energy (DEC LN/US): Share buyback programme update – Diversified intends to continue to buy back a maximum of 4,870,500 shares. The total consideration of Shares repurchased under the programme shall not exceed an aggregate market value of £97.4 mm.

Helium Evolution (HEVI CN): Operating update at helium project in Canada – Recent drilling results in southern Saskatchewan highlighted helium concentration of 0.78%-0.95%. 6-9 new wells will be drilled.

Seacrest Petroleo (SEAPT NO): Reserves update in Brazil – YE23 2P reserves were estimated at 143.9 mmboe (YE22: 140 mmboe). Oil production in the 2P reserve case continues to be estimated to exceed 30 mbbl/d in 2027.

EUROPE

Shell (SHEL LN): 1Q24 operating update – 1Q24 production is expected to average 2,780-2,920 mboe/d.

FORMER SOVIET UNION

Nostrum Oil & Gas (NOG LN): Operating update in Kazakhstan – The appraisal operations at the Tepl-72 & 74 wells in the Artinskian carbonate reservoir of the Stepnoy Leopard field confirm high well productivity potential with peak rate indications of ~20 mmcf/d and 600 bbl/d of condensates. The company believes that the results obtained to date support the commercial potential of the field.