AUCTUS ON FRIDAY - 13/12/2024

AUCTUS PUBLICATIONS
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ADX Energy (ADX AU)C; Target price of A$0.30 per share: Reflections on Welchau - Three intervals in the Reifling formation (1324 m-1340 m, 1346 m-1351 m and 1358 m-1382 m MD) were perforated but only limited inflow was determined. No fluid could reach the surface after the well was shut in. Sampling of the well indicated only completion brine (not reservoir fluid) and fine solid particles of unknown origin. ADX will analyse the particles to understand their origin before deciding on the next steps. This could include acidization of the reservoir. The particles could come from the reservoir or could potentially be the result of a chemical reaction between the drilling fluids and materials or fluid in the reservoir. ADX will continue to monitor the well for inflow and analyse the results of samples recovered from the well. A decision on further work on the well is not expected before early 2025. Pending the results of the analysis, we have changed our target price of A$0.30/sh. The shorter well test and lower drilling costs is expected to allow the Company to preserve cash. As we incorporate conservative flow rates for the new Anshof wells (150 bbl/d per well) and a development capex programme that ADX can manage with its own balance sheet, we estimate the value of the company based on its 2P reserves at Anshof and Ziesterdorf alone at ~A$0.07/sh. This represents >2x the current share price.
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Condor Energies (CDR CN)C: Target price of C$5.60 per share: Equity financing to accelerate production growth and bolster the balance sheet – Condor has completed a C$19.4 mm equity financing priced at C$1.90 per share. This represents a C$2 mm increase compared the latest announcement. The proceeds of the raise will allow the company to bring to Uzbekistan a third service rig in 1Q25 and a drilling rig in 2Q25 (4Q25 previously). This will enable the company to grow production more quickly than previously expected. Condor will use the drilling rig to drill the first multi-lateral well in the country. This well could have a material impact on the development and the production profile. Production is now expected to reach 14-15 mboe/d in mid 2025 and 15.5-17 mboe/d by YE25. Current production is ~11 mboe/d. We have now added 1 mboe/d production in 1Q26 to our previous forecasts of ~15.5 mboe/d. Given the performance of the field, we have also assumed a longer production plateau until 2029. The required capex to maintain production at that level is ~US$8 mm per year. The increased cash position puts the company in a stronger position ahead of taking FID at the first modular LNG project in Kazakhstan, particularly as the company looks to negotiate financing terms with debt providers and a JV partner. Our unrisked NAV for the first LNG plant at Alga alone is ~US$3.80 per share. The unrisked NAV of the second plant at Kuryk is ~C$3.70 per share. Another important near term newsflow is the first independent reserves certification at YE24. Given the good results achieved during the work-over programme, the estimated resources could be high. We now assume >350 bcf recoverable resources based on the development programme. As we incorporate the recent equity financing, we have changed our target price to C$5.60 per share, in line with our new ReNAV.
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Pulsar Helium (PLSR LN/CN)C; Target price of £0.90 per share: Pulsar in the context of peers - Topaz shines -Comparing helium projects presents significant challenges due to variations in risk profiles, resource sizes, stages of maturity, operating environments, and potential for commercial viability. For example, it may be more advantageous to invest in a smaller resource base situated near established infrastructure and customers within a favorable operational setting, rather than a much larger exploration asset that carries a minimal chance of successful economic development, even if exploration yields positive results. The purpose of this note is to compare the potential commerciality of the projects held by various publicly listed helium juniors. Many firms rely on historical data from previous operators or cite results from adjacent licenses, raising concerns about the quality and relevance of that information. To address this, we have chosen to focus exclusively on measurements taken directly by each company on its own licenses. While helium concentration is often emphasized, we argue that it does not provide a complete picture. High helium concentration may be inconsequential if the overall flow rate is very low. Therefore, we have also assessed net helium flow rates (calculating flow rate multiplied by helium concentration). We believe this metric offers a more accurate and critical assessment of a project's potential commerciality. We have also evaluated and ranked the projects based on three key criteria: (1) operating environment, characterized by favorable regulations, immediate access to field services and helium-related technologies; (2) proximity to helium markets; and (3) an independently estimated chance of development. For instance, a project situated in a region that necessitates significant investment in export infrastructure would carry considerably weaker economics compared to a similar project located closer to the market. On this basis, Pulsar's Topaz project screens very favourably. It boasts the second highest helium net flow rates coupled with the highest helium concentration. Additionally, its location in the USA, which offers the most favorable operating environment for helium extraction, enhances its overall appeal.
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Serica Energy (SQZ LN)C; Target price of £3.00 per share: Bolt-on acquisition provides tax synergies and operational flexibility - Serica is acquiring the UK assets of the Parkmead Group for an initial consideration US$6.5 mm in cash. The transaction includes 50% WI in the Skerryvore prospect (Serica already owns 20%) and 50% in Fynn Beauly (heavy oil discovery). An additional deferred consideration of US$11.7 mm will be paid in stages over the next 3 years. On approval of a FDPs, Serica would make contingent payments of £0.8/bbl with a cap of £30 mm for Skerryvore and £90 mm for Fynn Beauly. The transaction is expected to complete in 1H25. The transaction offers Serica significant tax synergies. Upon completion of the acquisition, Serica's tax loss balance will increase by £197 mn for RCT, £193 mn for SCT (including £12 mn in activated investment allowances), and £1 mm for EPL, as of 30 June 2024. Previously, we forecasted that Serica's tax losses for SCT and RCT would be exhausted by mid-2027 and mid-2028, respectively. With this acquisition, these tax losses will now extend until mid-2028 and 2030. The value of these tax losses could increase further if the company makes a more material acquisition of tax paying producing assets in the UK. This remains one of Serica’s strategic goal. The acquisition provides operational flexibility. With a 70% interest in Skerryvore, Serica now controls the timing of exploration and drilling activities. However, given the current context of poor visibility on environmental approvals and the UK government's attitude towards exploration, drilling at Skerryvore is likely to be delayed. We have increased our target price from £2.90 per share to £3.00 per share, which captures the accretive nature of the acquisition.
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Sintana Energy (SEI.V CN)C; Target price of C$1.85 per share: More drilling in Namibia - The Mopane-2A appraisal well (the 4th well to be drilled at Mopane) has been spud. The purpose of the well is to appraise the AVO-3 that had been discovered at Mopane-2X located ~8km to the northeast. This appraisal well has been prioritized following the Mopane-1A success. A positive result could help to firm-up the farm-out price for the block. AVO-1 (encountered at Mopane-1X and Mopane-2X ~8 km to the west) has already been appraised by Mopane-1A (~8 km to the southwest). The next well in the programme will be the Mopane-3X exploration well to be spud in early April. It will target AVOs 10 and 13 that were visible on the 3D seismic. It could add resources to Mopane. We continue to believe that Sintana’s current share price reflects only the value of its interest in the Mopane discovery (PEL 83) that could be crystalized by an partial divestment process initiated by Galp. The continued drilling programme increases the amount of “past cost”, which could boost the price offered by a potential partner. We estimate the additional unrisked value of the upcoming drilling programme at PEL 83 (Galp), PEL 90 (Chevron) and PEL 87 at C$2.80/sh.
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Tethys Oil (TETY SS)C; Target price of SEK58.70 per share: Kunooz water wet – The Kunooz-1 well yielded only water and traces of hydrocarbons on test. We now assume that shareholders will accept the take-over offer by Roc Oil at SEK58.70 per share. We have set our target price at that level.
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Vaalco Energy (EGY US/LN)C; Target price of US$10 per share: Drilling rig contracted for Gabon – Vaalco has signed a drilling contract for the 2025/2026 campaign in Gabon. The program is expected to begin in mid-2025 with the sequencing and exact number of wells yet to be finalized. The programme is expected to add production and reserves as it will cover multiple wells at Etama and a redrill and several workovers at Ebouri to access production and reserves that were previously shut in and removed from proved reserves due to H2S.

IN OTHER NEWS
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AMERICAS

Frontera Energy 9FEC CN): Operating update – 4Q24 production to date in Colombia and Ecuador was 42,450 boe/d, FY25 production is expected to be 41-43 mboe/d with US$200-245 mm. In Guyana, Frontera is reviewing all alternatives to safeguard its interest in the Corentyne block in light of recent comments from certain Government officials.

Helix Exploration (HEX LN): Helium flow test results at exploration well in USA – The Darwin #1 well was tested at a stabilized rate of 2.75 mmcf/d of gross gas with 1.1% of helium. The Absolute Open Flow was 4.5 mmcf/d. Tis equates to 30.8-50 mcf/d of helium.

Seacrest Petroleo (SEAPT NO): Default on US$120 mm bonds – Seacrest is in default on its US$120 mm bonds.

Pantheon Resources (PANR LN): Discovery in the US – The Megrez-1 well has discovered a large light liquids hydrocarbon column across three hydrocarbon bearing zones over a ~1,260 foot vertical section, including the two primary objective formations. The porosities are above 20%.

Parex Resources (PXT CN): Operating update in Colombia – Parex is acquiring 50% of future incremental production in the Orito, Area Sur, Occidente and Nororiente Blocks in the Putumayo Basin. In return Parex will carry Ecopetrol through a US$350 mm capital programme including US$20-50 mm in 2025. After three years, thereafter Parex will receive 50% of all base existing production, in addition to 50% of incremental production, with an ongoing 3% capital carry in favour of Ecopetrol. Current average oil production from the base existing producing wells is approximately 5,800 bbl/d. WI 2P reserves are estimated at 18 mmbbl. Parex has also acquired 50% WI in the Farallones Block in the Llanos Foothills, in exchange for drilling the Farallones exploration well, as well as the further gross expenditure commitment of US$60 mm. During November, corporate production was affected by downtime that resulted in average production of 44,700 boe/d. The primary drivers of heightened downtime were electrical interruptions at Cabrestero, as well as social factors at LLA-32 and Capachos. While LLA-32 has regained full operational status, beginning 28 November, ongoing social protests have caused the Company to temporarily shut in operations at Capachos. For the period from 1 December to 9 December, estimated average production was 42,800 boe/d. The FY24 average production guidance of 49,000 to 50,000 boe/d is unchanged. The Arantes exploration well encountered mechanical issues and will be abandoned, with an estimated total cost net to Parex of approximately US$35 mm.

Touchstone Exploration (TXP LN/CN): FY25 guidance. Acquisition in Trinidad – FY25 production in Trinidad is expected to be 6.7-7.3 mboe/d with US$23 mm capex to drill and tie-in four Cascadura development wells. Net debt at YE25 is expected to be US$30 mm. Touchstone is acquiring 65% WI in the Central Block in Trinidad from Shell for US$23 mm. Current gross production from the Central block is approximately 18 mmcf/d of natural gas and 200 bbl/d of natural gas liquids.

EUROPE

MCF Energy (MCF CN): Operating update in Germany – The Reudnitz RZ2 well has flowed 0.84 mmcf/d on test at 5 bars during phase 1. MCF will now move to phase 2.

Orcadian Energy (ORCA LN): Farm-out of UK asset – Orcadian is farming out 50% WI in Earlham and Orwell to MLCP for US$2.2 mm. MLCP will also carry Orcadian to first gas. The fields are estimated to contain 145 bcf (in aggregate).

Var Energi (VAR NO): Appraisal success in Norway – Following appraisal drilling at Countach, the estimates of discovered recoverable volumes have increased from 3-13 mmboe to 10-55 mmboe. In addition to encountering oil in the Kobbe formation with good reservoir quality, an oil column of over 200 metres was encountered in the Klappmyss formation which, despite being of poorer reservoir quality, opens new opportunities in the deeper section of the Goliat ridge.

MIDDLE EAST AND NORTH AFRICA

Gulf Keystone Petroleum (GKP LN): Operating update in Kurdistan – Gross production YTD was 40.2 mbbl/d. October production was only 34.3 mbbl/d reflecting the temporary impact of road closures and subsequent disruption to truck availability around the Kurdistan parliamentary elections on 20 October, which has since eased. November gross average production was ~29,500 bbl/d due to the planned PF-1 shutdown. Production is now 46 mbbl/d with realized prices of US$27-28/bbl. Gulf Keystone held US$95 mm in cash as at 10 December. Field declines are estimated at 6-10% per year.

Tullow Oil (TLW LN): Potential offer for the company – Tullow is in preliminary discussions with Kosmos Energy (KOS US/LN) regarding a possible all-share offer by Kosmos for the company.