Auctus on Friday - 22/12/2023

AUCTUS PUBLICATIONS
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ADX Energy (ADX AU)C; target price of A$0.65 per share: Oversuscribed share purchase plan – ADX has raised a further ~A$1.6 mm as part of a share purchase plan. The terms are in line with the recently announced A$4.8 mm equity raise priced at A$0.10 per share.

Chariot (CHAR LN)C; target price of £0.50 per share: Extending position in electricity trading company – Chariot is acquiring 49% of Etana Energy from the Neura Group, with H1 acquiring 25% of Etana from Chariot, contemporaneously. Etana holds one of the few electricity trading licences granted by the National Energy Regulator of South Africa, enabling it to buy and sell electricity through the national transmission grid. This transaction results in a simplified ownership structure going forward and overall Chariot and H1 are now the only shareholders of Etana with 49% and 51% respectively. Chariot will pay Neura ~US$0.3 mm in cash up front with a further ~US$.7 mm payable at the end of March. An additional contingent payment of ~US$1.6 mm would be payable on financial close of a 250 MW generation project with a further consideration of ~US$2.6 mm payable in 2028 on further significant generation projects reaching financial close. The commercial terms of the acquisition by H1 are the same as for Chariot on a pro rata basis. This increased holding means that Chariot will get a larger split of future revenues but the trading business also unlocks Chariot’s participation in large renewable energy projects that they are looking to develop in South Africa.
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Criterium Energy (CEQ CN)C; target price of C$0.50 per share: Further improvements on Mont d’Or transaction terms – The completion payment by Criterium on the closing of the Mont d’Or acquisition has been reduced by 60% to US$4.5 mm. The pro forma working capital held by Mont d’Or is estimated at ~US$8 mm. Only US$4.1 mm will now be repaid to Mont d’Or debt holders on completing the acquisition (US$9.6 mm previously) with US$0.5 mm being written down (US$4.3 mm previously). With these improved terms, Criterium no longer requires the expensive and dilutive ~US$9 mm (C$12.2 mm) convertible funding (US$8 mm net of costs). The terms of the C$6.7 mm of new equity are unchanged but the overall funding transaction is much less dilutive than previously. While the share count on closing is unchanged (~139 mm shares), the omission of the C$12.2 mm convertible debt results in a fully diluted share count of only 277 mm shares (assuming C$0.14/sh for the conversion price of the existing residual Summit debt) versus 433 mm previously. In addition, interest payments over 2024-2026 will be reduced by ~US$5 mm. The participants in the new equity issue will hold 45% of issued share capital on closing (post money). On completion of the acquisition, Criterium is expected to hold US$25 mm of debt and US$8 mm in cash (including US$4.5 mm of new equity) resulting in US$17 mm in net debt (excluding US$3.0 mm of Mont d’Or residual debt to be converted into equity in 2025). Criterium holds an option to paying down a further US$5.5 mm of debt (triggering a further US$3.8 mm debt write down) in Q1 2024. This payment is anticipated to be funded from cash on hand and will reduce net debt to ~US$8 mm (excluding the Mont d’Or residual debt). This compares very favourably to the previous expectation of net debt of US$20 mm.
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GeoPark (GPRK LN)C; target price of US$25 per share: Further positive exploration results – The Bisbita Centro-1 well (Llanos-123) encountered hydrocarbons in the Guadalupe formation. The well is currently producing ~860 bbl/d of 19 degrees API oil with a water cut of less than 1%. At Llanos-87, the Zorzal Este exploration well that encountered 40 feet of pay in the Guadalupe is currently producing ~660 bbl/d of 33 degrees API oil with a water cut of less than 1%. The Zorzal Este 2 well (Llanos-87) spudded in late November 2023 and is expected to reach total depth in late December 2023/early January 2024. Overall the FY23 exploration programme has added 5.5 mbbl/d gross production, including 3,200 bbl/d at Llanos-123 and Llanos-87 blocks and 2,300 bbl/d at Perico in Ecuador. Importantly these new areas of production are associated with discoveries made since the summer. They should start contributing to the reserves estimate at YE23. Zorzal and Toritos could be particularly material and be important contributors to production and reserves growth in 2024. The 2024 work programme includes 3-9 gross wells to continue delineating these new plays..
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Valeura Energy (VLE CN) C; target price of C$6.40 per share: Positive drilling update – •Valeura has drilled three development wells and one appraisal well at Nong Yao A. The three development wells were in line with expectations and are now in production. The appraisal well has exceeded expectations confirming 50 feet of new net oil pay over several intervals that were not producing. The net oil pay was almost double the predicted amount (pre drill). Valeura anticipates this will give rise to between two and four additional development targets, which will form the basis of a future infill drilling campaign. This is expected to add reserves and to contribute towards replacing the reserves produced during 2023. A typical Nong Yao well recovers ~0.25 mmbbl. The drilling results showcase Valeura’s business model of extending the life of producing assets in the Gulf of Thailand and delaying decommissioning.
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Zephyr Energy (ZPHR LN)C; target price of £0.16 per share: High initial production from Slawson – The six Slawson wells in the Williston Basin have delivered an aggregate IP20-30 of 897 boe/d net to Zephyr. The wells commenced production over the course of November. The overall rate is above the company’s expectations. The YE23 run rate from the Williston is expected to be between 1,450 and 1,700 boe/d. The range results from decline rates and the exact number of wells in production at the time. The new production is expected to contribute to cash flow from 1Q24. The redrill of the high impact State 36-2 well continues to be expected to commence in March. The company will then drill the first helium well in Salt Wash that could be spudded just after the 36 2 well is completed. This upcoming programme is expected to start derisking the large upside in the Paradox and allow the company to book additional reserves. Pending further details on the programme, we currently forecast overall production (net to Zephyr) of 4.6 mboe/d in 4Q24.
See website for full report

IN OTHER NEWS
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AMERICAS

Canacol Energy (CNE CN): Production update in Colombia – Gas sales in November were 169 mmcf/d. Production capacity is expected to increase to 180 mmcf/d for the month of December.

Canadian Overseas Petroleum (COPL LN/XOP CN): Debt holder issuing notice of default – The company's indirect affiliate, COPL America, has received a notice of default that indicated that the senior lender is unwilling to further amend or waive the terms of its senior credit facility. Without an amendment or waiver from the senior credit facility lender, COPL America will be in breach by 1 January 2024. Without additional capital, COPL America would have to seek some form of creditor protection.

Touchstone Exploration (TXP LN/CN): FY24 budget in Trinidad – Touchstone plans to invest ~US$33 mm in 2024 with ~42% of spending on Cascadura and ~38% at Coho. The capital budget contemplates drilling two Cascadura development wells, two CO-1 Block crude oil development wells, one Coho development well and one Coho exploration well. FY2024 production is expected to range between 9.1 mboe/d and 9.4 mboe/d with a YE24 rate of 14.5 mboe/d. The budget requires the credit facilities to be increased from US$7 mm to US$20 mm. YE24 net debt is expected to stand at US$25 mm.

Trinity E&P (TRIN LN): Disappointing well flow rate in Trinidad – In recent days the flow rate from the Jacobin well has begun to decline. The presence of gas and water was not anticipated from the original well log interpretation. Trinity estimates that the undisputed costs incurred to date thus far to be US$8.3 mm. There is an amount of US$2.3 mm which falls outside of the drilling contract provisions and pertains to costs incurred while drilling the well.

ASIA PACIFIC

Baron Oil (BOIL LN): Assigning interests in Indonesia asset – Baron is assigning 15% WI in Chuditch to its existing partner TIMOR GAP. Baron will receive ~US$1 mm in cash relating to back costs covering the period from the signing of the PSC to the anticipated date of completion.

Harbour Energy (HBR LN): Discovery in Indonesia – The Layaran-1 exploration well encountered a gas column with a thickness of more than 230 m on the South Andaman licence (Harbour: 20%). The well flowed more than 30 mmcf/d on test. Layaran-1 is the first of a four well exploration campaign targeting the Oligocene play.

Synergia Energy (SYN LN): Farming out asset in India and increased water production – Synergia is selling 50% WI in Cambay in return for a carry for the full cost of a 12 month programme focused on the Eocene reservoir. Water influx has been observed at the C-77H well.

EUROPE

Ascent Resources (AST LN): Higher revenue claim in arbitration in Slovenia – Following the disclosure of historic production from the Slovenian concession, Ascent has increased its estimate of the revenue award to EUR 8 mm (From >EUR3.5 mm previously).

Capricorn Energy (CNE LN): Contingent payments on sales in the UK North Sea – The contingent payments on the sale of Catcher and Kraken to Waldorf Production have been restructured. Capricorn will now receive payment of US$72.5 mm over the next 13 months (including US$48 mm in December and US$2 mm in 1Q24) and Waldorf’s 25% WI in the Columbus gas field. The initial cash payment is offset by the release by Capricorn of US$48 mm restricted cash held by Waldorf related to a residual liability at Kraken.

EnQuest (ENQ LN): Selling assets in the UK – EnQuest is selling a 15% working interest in each of the Bressay field and the EnQuest Producer FPSO to Viaro Energy. for £46.0 mmm including an initial payment of £34.75 mmm, with the remaining £11.25 mm to be paid from future Bressay cash flows.

Europa Oil & Gas (EOG LN)/Union Jack (UJO LN): Production update in the UK – Production at Wressle has increased from 500 bbl/d to 680 bbl/d.

Harbour Energy (HBR LN): Acquiring upstream assets from Wintershall Dea – Harbour is acquiring most of Dea’s upstream assets for US$11.2 bn. The portfolio includes all of Wintershall Dea's upstream assets in Norway, Germany, Denmark, Argentina, Mexico, Egypt, Libya and Algeria as well as Wintershall Dea's CO2 Capture and Storage licences in Europe. Wintershall Dea's Russian assets are excluded. The Acquisition will add 1.1 bnboe of 2P reserves and more than 300 mboe/d of production. On completion, the combined group will produce over 500 mboe/d and hold ~1.5 bn boe 2P reserves. Post completion, Harbour expects to receive investment grade credit ratings, increasing its access to low cost, diverse sources of capital. The dividend will also be increased by 5% to US$0.2625 per share. The consideration for the acquisition consists of (1) the porting of existing Wintershall Dea Bonds with a nominal value of US$4.9 bn and a weighted average coupon of ~1.8% to Harbour, (2) ~ 921.2 million new Harbour shares issued to Wintershall Dea's shareholders at an agreed value of US$4.15 bn or £3.60 per Harbour share, representing a premium of ~60% to Harbour's 30-day volume weighted average share price and (3) US$2.15 bn in cash to be funded through cash flow generated from Dea’s portfolio between the effective date of 30 June 2023 and completion, and an underwritten bridge facility. On completion, BASF will own 46.5% of Harbour with Harbour's current shareholders owning 53.5%. LetterOne will own 251.5 million non‐voting, non‐listed convertible ordinary shares with preferential rights. If the non-voting shares were to be converted into ordinary shares, Harbour's current shareholders would own 45.5% of Harbour and BASF and LetterOne would own 39.6% and 14.9%, respectively.

Rockhopper Exploration (RKH LN): Monetisation of Ombrina Mare Arbitration Award – Rockhopper has entered into an agreement with an arbitration specialist fund to monetise its ICSID Award against Italy relating to the Ombrina Mare oil field. Rockhopper will retain approximately EUR15 mm of an upfront payment of EUR 45 mm on completion. The balance will be paid to the original arbitration funder. Rockhopper will receive an additional contingent payment of up to EUR65 mm upon a successful annulment outcome. There is also a potential payment of 20% on recovery of amounts in excess of 200% of the specialist fund's total investment including costs.

Scirocco Energy (SCIR LN): Selling anaerobic digestion business in the UK – Scirocco is selling its interest and investment in Energy Acquisitions Group (EAG) for an enterprise value of £2.6 mm (including the transfer of £1.6 mm of loans), plus contingent consideration of up to a further £150,000 to private equity firm OrbeNovo Capital.

FORMER SOVIET UNION

Caspian Sunrise (CASP LN): Operating update in Kazakhstan – Production from the BNG shallow structures is estimated at ~2,000 bbl/d. The interval tested at Well 142 did not prove commercial.

OMV (OMV AG): Potentiall losing Russian assets – According to a new decree regarding the Yuzhno-Russkoye field, OMV's shareholding and its interests in the gas field are to be transferred to new Russian companies. Wintershall Dea’s 50% interest in Achimgaz and its 25% stake in Achim are also expected to be seized.

Zenith Energy (ZEN LN/ZENA NO): Acquisition in Kazakhstan – Zenith is acquiring an initial 50% of the shares in Devonian Petroleum for a total investment in cash and in kind presently assessed at ~US$5 mm. Devonian holds the Akkudukski exploration block of ~1,094 km2 in the Precaspian Basin. Devonian has the hydrocarbon exploration rights to the basement, with the exception of the 2.9 km2 Akkuduk Jurassic oilfield. The current Akkudukski Block Competent Person's Report assigns P50 resources of 120 mmbbl above the salt and 400 mmbbl below the salt. Zenith has paid an initial deposit of US$0.2 mm with a further payment of US$1.8 mm due on completion. An additional consideration of ~US$3 mm will cover the cost of drilling and testing a new well.

MIDDLE EAST AND NORTH AFRICA

DNO (DNO NO)/Genel Energy (GENL LN): Operating update in Kurdistan – Production at the Tawke licence has averaged near 90 mbbl/d in December so far. The oil is sold at prices in the low to mid US$30s/bbl.

United Oil & Gas (UOG LN): Positive exploration well result in Egypt – The ASD S-1X exploration well has encountered 9.5 m of net pay across the targeted ABU Roash C, D and E, Bahriya and Kharita formations.

SUB-SAHARAN AFRICA

Europa Oil & Gas (EOG LN): Acquiring asset in Equatorial Guinea – Europa has acquired a 42.9% equity interest in Antler Global via a US$3 mmm cash subscription in Antler. Antler holds an 80% working interest in the EG-08 production sharing contract.

Helium One (HE1 LN): Raising new equity for Tanzania helium – Helium One has raised £6.1 mm of new equity at a price of 0.25 p per share. This represents ~72% discount to the previous day’s close. The net proceeds will be used for drilling an exploration well (Itumbula West-A) on the Itumbula prospect.

Invictus Energy (IVZ AU): MOU for power – Invictus has signed an updated Gas Supply MOU with Mbuyu Energy for the supply of gas to their proposed 500 MW Gas to Power project.