AUCTUS ON FRIDAY - 15/03/2024

AUCTUS PUBLICATIONS
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ADX Energy (ADX AU)C; target price of A$1.00 per share: Very high impact exploration well encounters gas and condensate in Austria – The Welchau well (ADX WI: 75%) encountered 115 m of liquids-rich gas shows in the primary target formation (Steinalm Formation) between 1452 m and 1567 m. The deepest gas shows were encountered at a depth of 1645 m. The well has reached TD at 1733 m. The Steinalm Formation intersection in the well is in line with the pre-drill prognosis. This is important as this gives confidence in ADX’s structural model. The Welchau prospect is estimated to hold 134 mmboe prospective resources (~100 mmboe net to ADX). The deeper gas shows suggest that there could be additional targets with further potential. The Steinalm Formation intersected in Welchau is the same zone that flowed condensate-rich gas in the nearby Molln-1 well at a rate of 4 mmcf/d in 1989. The compositional analysis from the gas shows at Welchau shows similar results to the gas tested at the Molln-1 well. The well has encountered 380 m of effective seal (the Lunz Formation) above the main target. This addresses the key risk at Welchau that was about seal quality and thickness. The Welchau-1 well could be a play opener in the area where no wells have been drilled since 1989. We have increased our target price from A$0.65 per share to A$1.00 per share as we have increased our chance of success for Welchau.
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Chariot (CHAR LN)C; target price of £0.50 per share: Initiating a strategic review of the Transitional Power business to focus on gas – Chariot is initiating a strategic review of its Transitional Power business. The business includes multiple wind and solar projects in Southern Africa (with a solar project already operational in Burkina Faso). It also includes a power trading licence in South Africa. In order to move these projects to construction and first production, a material amount of mezzanine and equity funding (at the Transitional Power subsidiary level) will be required to fund the proportion of the capex not covered by senior debt. Chariot has already received indications of potential interest from South Africa focused investors. The purpose of the strategic review process is to evaluate the best option to take these projects forward while maximizing the value to Chariot shareholders. The Transitional Power business could be fully or partially sold or demerged with equity being raised at the subsidiary level. Chariot is giving priority to its gas business in Morocco and any funds raised through selling the transitional power business could be redeployed in Morocco. Selling the Transitional Power business would also reduce Chariot’s G&A. Chariot’s Green Hydrogen business will remain part of the Group as this does not currently require significant capital.
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PetroTal (PTAL LN/TAL CN)C; target price of £1.45 per share: Delivering on guidance – FY23 production of 14,248 bbl/d had been reported previously and the YE23 cash position of US$105 mm (including ~US$15 mm of restricted cash) is very close to previous indications. PetroTal is re-iterating its FY24 production guidance of ~17 mbbl/d with US$134 mm capex. Production currently trends ahead of guidance with 24,453 bbl/d in January and 17,411 bbl/d in February. While PetroTal had to shut down the field for two days in early March for safety precautions and, as a result, production averaged only 15.6 mbbl/d in March, production continues to be expected to average ~18.5 mbbl/d in 1Q24. The two day shut down was related to PetroTal providing equipment to a third party operator following a barge incident between two independently operated barges that resulted in a small release of oil into the Puniuaha river ~2 km away from the field. The clean-up has been substantially completed. During the time the equipment was with the third party, PetroTal did not consider it safe to unload oil and the field was shut down for two days until a new equipment was procured. Approval letters from the Ecuadorian Ministry of Environment and Ecuadorian Navy, together with the signing of a use of port agreement with Petroecuador, have been received for the OCP pilot oil shipment trough Ecuador. One final letter from the Port Subsecretariate is still required to start the first 100,000 bbl pilot. A second pilot could take place in 2H24 with recurring sales expected in 4Q24 with an initial export capacity of 2 mbbl/d growing to 5 mbbl/d.
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Pulsar Helium (PLSR CN)C; target price of C$1.80 per share: Helium concentration of 13.8% – The analysis of eleven samples from the Jetstream #1 well at Topaz by two different laboratories revealed helium content of up to 13.8%, specifically from a sample obtained at 1,801ft in-hole depth. Because of the clear presence of small amounts of atmospheric air contamination in the samples, a third party expert from the Woods Hole Oceanographic Institution concluded that 13.8% helium should be considered as representing a minimum concentration estimate The analysis demonstrates an increase from the previous estimates from measurements on site of up to 12.4% helium concentration. As we incorporate the higher helium concentration (we previously assumed 10.5%) and higher helium sale prices, we have increased our target price from C$1.20 per share to C$1.80 per share based on our new ReNAV. Our unrisked NAV for the 0.26 bcf of contingent resources of helium at Topaz is C$2.37 per share.
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Tethys Oil (TETY SS)C; target price of SEK100 per share: Production update in Oman – WI production from Blocks 3&4 in February was 7,557 bbl/d. As previously communicated, the February production was negatively impacted by an eleven-day planned maintenance of the Saiwan production facility. Adjusted for the production stoppage, the average production was 8,429 bbl/d. This compares with 8,502 bbl/d in January.

Zephyr Energy (ZPHR LN)C; target price of £0.12 per share: Drilling operation at high impact well in the USA have started – initial drilling operations have commenced on the State 36-2R well in the Paradox Basin. A small and low-cost spudder drilling rig has already drilled a 30-inch hole to a depth of 96-feet before setting 20-inch conductor casing. The remaining sections of the well will be drilled with a heavy rig that has been mobilised to the well site and will begin rig-up activity in mid-April.

IN OTHER NEWS
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AMERICAS

Alvopetro Energy (ALV CN): Operating update in Brazil – Alvopetro's daily sales volumes averaged 1,592 boe/d In January and February. Natural gas sales have averaged 11.2mmcf/d to date in March. Alvopetro plans to spend capex of US$4.1 mm in Murucutulu, US$4.4 mm at the Cabure Unit and US$3.2 mm on a natural gas processing unit in 2024. The company held US$13.1 mm in working capital at YE23.

Canacol Energy (CNE CN): FY23 results and reserves update in Colombia. Discontinuing dividends – 4Q23 contracted gas sales were 164.8 mmcf/d. YE23 net debt was US$674 mm. YE23 2P reserves were estimated at 106.6 mmboe (-6.9% vs YE22).

Diversified Energy (DEC LN/CN): FY23 results. Acquisition in the US. Cutting dividend – FY23 production was 821 mmcfe/d with a December exit rate of 775 mmcfe/d. YE23 liquidity was US$139 mm. The company declared a quarterly dividend of US$0.29 per share. This compares with US$0.875 per share for 3Q23. Diversified is acquiring Oaktree's proportionate interest in the Indigo, Tanos III, East Texas, and Tapstone acquisitions for an estimated gross purchase price of US$410 mm (approximately US$386 mm net), which includes the assumption of approximately US$120 mm in amortizing notes and a hedge book with a positive mark-to-market of approximately US$70 mm. The transaction is expected to add 122 mmcfe/d production to Diversified. The purchase price is expected to be satisfied through existing and expanded liquidity, the assumption of Oaktree's proportionate debt of approximately US$120 mm associated with the ABS VI amortizing note, and approximately US$90 mm in deferred cash payments to Oaktree. Additional liquidity for the Acquisition may be generated from non-core asset sales and the potential issuance of a private placement preferred instrument. The Company does not plan to issue common equity as part of the acquisition. The acquisition has an effective date of November 1, 2023.

ExxonMobil (XOM US): Discovery in Guyana. Returning Argentine offshore blocks – The Bluefin well on the Stabroek block encountered ~197 feet of hydrocarbon-bearing sandstone. The company has returned blocks MLO-113 and MLO-117 in Argentina.

Touchstone Exploration (TXP LN/CN): FY23 results – 4Q23 production in Trinidad was 8,504 boe/d. YE23 net debt was US$22.9 mm. February production was 7,081 boe/d including 5,440 at Cascadura and 469 boe/d at Coho.

EUROPE

Aker BP (AKERBP NO): Reserves update in Norway – At YE23, Aker BP held 2P reserves of 1.7 bnboe (YE22: 1.9 bnboe).

BlueNord (BNOR NO): Reserves update in Denmark – YE23 2P reserves were estimated at 185.6 mmboe. The company’s 2P Reserves Replacement Ratio was 135%, with a total of 12.3 mmboe added. Production has restarted at Tyra.

DNO (DNO NO): Appraisal success in Norway – Following the results of an appraisal well and sidetrack, the Heisenberg oil and gas discovery is now estimated to hold recoverable volumes in the range of 24 to 56 mmboe.

UK Oil & Gas (UKOG LN): Planning permission for geothermal project in the UK denied – The application to extend the planning consent at its Broadford Bridge site, primarily to assess the viability of converting the site to harness geothermal heat and power, was refused by West Sussex County Council.

MIDDLE EAST AND NORTH AFRICA

Energean (ENOG LN): FY23 results – FY23 production was 123 mboe/d with YE23 net debt of US$2.8 bn. The company continues to anticipate to produce 155-175 mboe/d in 2024 with US$US$570-720 mm capex. Energean held 1,115 mmboe 2P reserves at YE23 (YE22: 1,161 mmboe).

Gulf Keystone Petroleum (GKP LN): FY23 results and operating update – FY23 gross production in Kurdistan was 21,891 bbl/d. Year to date gross average sales of 33,300 bbl/d, with gross average sales in March to date of c.43,000 bbl/d, as at 19 March. The company held net cash balance of US$86 mm at 20 March. It does not expect to consider a return to development of the Shaikan Field until exports have restarted and there isconfidence in KRG payments and the commercial environment. The company estimates that the development delay has reduced YE23 gross 2P reserves by 40 mmbbl to 458 mmbbl, as recoverable volumes are pushed beyond licence expiry in 2043. Subject to local sales demand and considering a limited capital programme, the gross production potential is currently between 43,000 - 45,000 bbl/d.in 2024. Natural decline is estimated to be 6-10% per year. The company expects to maintain aggregate net capex, operating costs and other G&A monthly run rate at or below c.US$6 mm in 2024:

TAG Oil (TAO CN): Operating update in Egypt – The BED4-T100 horizontal well in the Abu Roash “F” limestone formation encountered an over-pressured reservoir with regions of very high porosity and permeability. During drilling operations, there have been signs of free oil flowing into the wellbore and to surface, accompanied by consistently elevated gas readings across the ARF formation. Given the notably higher reservoir pressure and gas readings observed during drilling, TAG Oil has decided to reduce the lateral length to 308 meters as a safety measure. The company is now optimizing the multistage hydraulic fracture completion design, poised to maximize the stimulated reservoir volume of the wellbore.

SUB-SAHARAN AFRICA

Africa Oil (AOI SS/CN): Acquiring 8% in Impact Oil & Gas – Africa Oil has offered to acquire up to 8% of Impact at a price of US$0.728 per share for a total of up to US$64 mm. This values Impact at US$804 mm. Africa Oil currently holds a 31.1% interest in Impact.

Invictus Energy (IVZ AU): High condensate yield in Zimbabwe – Sample analyses at Mukuyu highlight condensate yield of 10-25 bbl/mmcf and less than 2% CO2..

Savannah Energy (SAVE LN): Acquisition in Nigeria. Reserves update in Nigeria – Savannah is acquiring Sinopec International Petroleum Exploration and Production (SIPEC) from Sinopec and Jagal. SIPEC’s principal asset is a 49% non-operated interest in the Stubb Creek oil and gas field where Savannah already owns 51%. The consideration for the acquisition includes US$59.5 mm in cash payable on completion plus US$2 mm in deferred cash. At YE21, SIPEC held 8.1 mmbbl of oil 2P reserves plus 227 bcf of 2C gas contingent resources. SIPEC FY24 production is estimated at 1.4 mbbl/d. Savannah’s gross 2P reserves are estimated at 88.6 mmboe plus 99.7 mmboe gross 2C contingent resources.

Sudan and South Sudan: Force Majeure on export pipeline – Sudan has declared force majeure on oil exports from South Sudan due to a major rupture in one of the pipelines oil to Port Sudan on the Red Sea.

EVENTS TO WATCH NEXT WEEK
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Week of the 25/03/2024: Arrow Exploration (AXL LN/CN): Operating update
26/03/2024: Valeura Energy (VLE CN) – FY23 results
27/03/2024: Genel Energy (GENL LN) – FY23 results
27/03/2024: Pharos Energy (PHAR LN) – FY23 results
27/03/2024: Ithaca Energy (ITH LN) – FY23 results
28/03/2024: Cairn Energy (CNE LN) – FY23 results
28/03/2024: EnQuest (ENQ LN) – FY23 results