Auctus on Friday - 08/12/2023

AUCTUS PUBLICATIONS
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ADX Energy (ADX AU)C; target price of A$0.80 per share: Adding further exploration prospects in FY24 - ADX has farmed out a 50% interest in an exploration area within the ADX AT I licence to MND in return for a A$0.73 mm back costs payment plus A$7.34 mm funding in exploration drilling. The exploration area farmed-out to MND includes the LICHT and IRR gas prospects. These prospects are close to infrastructure and considered low risk. One of these prospects will be drilled in 2H24. The LICHT prospect location (16.2 bcf gross best case prospective resources) has already received a drilling permit including the environmental clearance. The IRR gas prospect is expected to hold 38 bcf gross best case prospective resources with a upside case of 79 bcf (P10).
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Chariot (CHAR LN)C; target price of £0.55 per share: Like-minded farm-in partner to unlock Anchois – Chariot is farming-out up to 55% in Anchois (Lixus licence) and 37.5% of the Rissana exploration licence to Energean for (1) up to US$75 mm in cash equivalents, including a US$50 mm loan convertible into Energean shares at a price of £20/sh or 3 mm Energean shares at Chariot’s option, (2) up to US$850 mm gross carry (US$170 mm net to Chariot based on US$850 mm x 20%) and (3) a 7% royalty on Energean’s share of revenue above a hurdle for gas price (we have assumed US$10/mcf). The transaction consists of two tranches. Energean will initially acquire 45% and 37.5% interests in the Lixus and Rissana licences respectively for US$10 mm on closing plus US$15 mm on FID. Energean will also fund US$85 mm of gross costs, including drilling the Anchois East well and up to US$7 mm seismic at Rissana. The well (to be drilled in mid-24) could increase the 1C resources from 365 bcf to an amount significantly closer to the current 2C resources of 637 bcf and the initial production plateau from 105 mmcf/d to up to ~200 mmcf/d. The well is also targeting 383 bcf prospective resources across two deeper prospects and could derisk a further 372 bcf at Anchois South Flank that would be drilled with the first Anchois producing well. Energean will then have the option to acquire a further 10% (to 55%) in the Lixus Licence (Anchois) in return for (1) a further US$50 mm convertible/share payment, (2) a US$850 mm gross carry (including the initial $85 mm carry) and (3) a 7% royalty. The cash and carry component alone values 10% of the project at US$220 mm or US$440 mm for Chariot’s residual 20% interest (£0.31/sh). The royalty adds further value. The net carry is repayable from 50% of Chariot’s future net sales revenues (which means they will have material cashflows and could pay a dividend from day one) and attracts a 7% over SOFR coupon.
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Longboat Energy (LBE LN)C; target price of £0.60 per share: Farmin-out of Norwegian assets – Longboat JAPEX is divesting 15% WI in Licence PL1182S with the Lotus prospect to Concedo in return for a full carry on the Lotus well expected to spud in 3Q23. This leaves Longboat JAPEX with 15%. Our unriksed Nav for the well is £0.11 per share. Longboat Norge is also divesting 15% in PL1049 with the Jasmine and Sjøkreps prospects to Concedo in return for Concedo carrying 15% of Longboat’s 2024 exploration expenditure. This leaves Longboat JAPEX with 25%. We do not carry any value for this licence. This is line with the strategy to reduce capital exposure to exploration in Norway.

Pharos Energy (PHAR LN)C; target price of £0.55 per share: More share buybacks and more dividends – Pharos has declared an interim dividend of 0.33 p per share for 2023 payable in January. The interim dividend represents ~33% of the final dividend of the previous year. This is in line with the dividend policy and our expectations. The company is also looking to commit a further US$3 mm to share buybacks in 2024 which will provide additional support to the share price. In Egypt, the carry by IPR is expected to last until 1Q24. Within the current context, the receivables are expected to remain stable during 2024 with the level of investment being driven by the ability to recover US$ receivables. In Vietnam, Pharos continues to be wait for government approval for the licence extensions to 2031 (TGT) and 2023 (CNV), which is in line with expectations. The RFDP for the two new wells at TGT is also pending final government approval. We continue to anticipate that drilling will start in 2H24. Pharos continues to be in discussions with potential partners for Block 125 in Vietnam. Securing a farm-in partner would be a very high impact event. The process is also tied to securing a drilling rig suitable for deep offshore. We note that Mr Radoff has continued to buy shares. He now holds 14.1% of the company..
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Pulsar Helium (PLSR CN)C; target price of C$0.90 per share: Positive implications from passive seismic results – The processing of the passive seismic survey at the Topaz project matches very precisely what was encountered by the LOD-6 well. This is very encouraging as it confirms the company’s interpretations of the trapping mechanism of the reservoir and its geometry. In our view, this reduces the geological risk associated with the discovery. A significant and distinct shear wave velocity anomaly (velocity decrease) has been identified at the same depth (542 metres) where gas containing 10.5% helium was encountered in the LOD-6 discovery well. The velocity anomaly persists to a depth of ~1,150 m, suggesting a vertical thickness of ~600 m. To the northeast, the vertical thickness increases to 1 km. It covers a continuous area of 7 km2, suggesting a very large potential reservoir with positive implications for volumes. Another connected area of velocity decrease dips and broadens to the west, suggesting that the play extends regionally further with positive implications for the running room of the project. Importantly, a larger proportion of the area of interest identified by the passive seismic is located within the lands under Pulsar’s existing licence. We continue to estimate the unrisked NAV of 100 mmcf of helium at ~C$0.65 per share.
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IN OTHER NEWS
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AMERICAS

Alvopetro Energy (ALV CN): Production update in Brazil – November sales averaged 2,264 boe/d.

NG Energy International (GASX CN): Production update and gas contracts in Colombia – Production volumes at Maria Conchita have increased from an initial baseline of 14 mmcf/d to a current production rate of 16.4 mmcf/d. The company has also commenced realizing sales of natural gas at prices ranging from US$7.70/mcf to US$8.20/mcf from Maria Conchita. The Company expects to sign two additional offtake contracts in December.

Seacrest Petroleo (SEAPT NO): Raising new equity for Brazil – The company has raised US$25.6 mm of new equity at a price of NOK9 per share to fund a high activity level in 2024 at the Norte Capixaba and Cricaré Clusters.

ASIA PACIFIC

Jadestone Energy (JSE LN): Operating update in Malaysia and production update – The results of the East Belumut infill campaign have exceeded Jadestone’s expectations, which were for initial gross aggregate rates from all four wells of 3,500 bbl/d. Current aggregate production at East Belumut is up to 7 mbbl/d and the final well is expected to add IP rate >3.5 mbbl/d. The overall group production has been averaging ~20 mboe/d since 13 November.

Synergia Energy (SYN LN): Farm-out in India and equity raise – Syneria has agreed a framework to sell 50% WI in the Cambay PSC in return for a carry on a 12 month work programme. The company is also raising £1.1 mm of new equity at a price of £0.08 p per share. Subscribers to the placement will also be offered one free warrant for every new share with a strike price of 0.14 per share.

Woodside Energy (WDS AU/LN): Potential merger in Australia – Woodside is in discussions with Santos about a potential merger.

EUROPE

Hartshead Resources (HHR AU): Farm-out in the UK – Hartshead has the option to divest an additional 20% WI in the Phase 1 project development for an uncapped free carry provided by RockRose. Exercising this option would increase the total committed project funding to over A$800 mm.

Kistos (KIST LN): Technical problem at UK facility – The Shetland Gas Plant has been shut down due to an element of the heating medium system that failed. Production remains shutdown whilst an investigation into the incident is conducted.

Orcadian Energy (ORCA LN): Farm-out of UK asset – Orcadian is selling 81.25% WI in the Pilot Development project on Licence P2244 to Ping petroleum for US$3.1 mm including an initial consideration of US$0.1 mm payable on completion. The balance of the proceeds is payable on approval by the NSTA of a FDP.

Serica Energy (SQZ LN): Operating update in the UK – During the last four weeks, production rates have averaged in excess of 52 mboe/d. The overall production guidance for the year is unchanged at 40-45 mboe/d reflecting delayed production restarts and slower than expected production ramp-ups after the summer shutdowns.

SUB-SAHARAN AFRICA

Afentra (AET LN): Acquisition update in Angola – The acquisition of a 14% non-operating interest in Block 3/05 and a 40% non-operating interest in Block 23 has been completed. The payable cash consideration is US$21 mm, down from US$56.5 mm initially due to cash flow adjustments during the period since the effective date of April 2022. Afentra is also inheriting crude oil stock with an approximate value of US$11.9 mm. The company expects to have a net debt of US$20.7 mm at YE23. Gross production from Block 3/05 has averaged 20,560 bbl/d in November, with annual gross production for 2023 forecast to be around 19,100 bbl/d. In addition, production from Block 3/05A continues at around 1,300 bbl/d from the well Gaz-101.

Africa Oil (AOI SS/CN): Share buyback programme – Africa Oil is launching a share buyback programme for up to 10% of its share capital.

Helium One (HE1 LN): Not enough funds to drill helium well in Tanzania – A cost analysis and budgeting exercise in relation to Itumbula well indicates a need for further funding. The rig is on site and the well is expected to spud in January.

Invictus Energy (IVZ AU): Appraisal well update in Zimbabwe - Wireline log interpretation calculates a preliminary net pay estimate of 13.9 m for the Upper Angwa. Significant additional gross sands were intersected within the Upper Angwa gas leg but are below the current net reservoir cutoff.

Noble Helium (NHE AU): Well update in Tanzania – The Mbelele-2 well encountered approximately 163 m of stacked net reservoir in the middle and lower lake beds. Petrophysical evaluation of SLB’s wireline logs demonstrates good to very good porosities and permeabilities, which are slightly lower than Mbelele-1 but significantly thicker. A probable 10-15-metre column of nitrogen and helium was identified at the crest and helium-rich downhole samples calculated at 2-3% helium in exsolved gas. Helium-rich gas bubbles in the drilling mud was observed at multiple depths in both wells.