AUCTUS ON FRIDAY - 23/02/2024
AUCTUS PUBLICATIONS________________________________________
ADX Energy (ADX AU)C; target price of £A$0.65 per share: Drilling update in Austria - Drilling operations at the high impact Welchau prospect are now expected to commence on 24 February with a duration of ~39 days. ADX will now use the RED E200 rig instead of RED E202.
Arrow Exploration (AXL LN/CN)C; target price of £0.60 per share: Successful appraisal drilling expected to boost reserves – The CN-5 well encountered 45 feet of Ubaque pay to base of sand with 25% porosity and 5 Darcy permeability. The well targeted the Carrizales Noroeste prospect, west of the Carrizales Norte known pool boundary. The boundary fault was not encountered in the Ubaque, which suggests that the Ubaque at Carrizales Norte and Carrizales Noroeste consists of a continuous larger pool that extends to the West. CN-5 confirms that there is a stratigraphic component to the trapping mechanism in the Ubaque which implies greater recoverable reserves. Arrow plans to complete the well for production over the coming weeks. The CN-5 well was very important as Carrizales Noroeste was estimated to hold 6.7 mmbbl gross prospective resources (3.35 mmbbl net to Arrow) with an unrisked NAV of £0.16 per share that will be partially be derisked by the results of the well. In addition, because the Ubaque is continuous across Carrizales Norte and Carrizales Noroeste, the number of wells required to develop the entire area could be lower. The CN-4 well encountered 29 feet of true vertical depth net oil pay in the Ubaque with 26% porosity and 5 Darcy permeability. In a 12 hour of production period, the water cut averaged 7%, and the well produced 758 bbl/d of 13 deg API oil (379 bbl/d net). The well has been put on production at a rate of 478 bbl/d (239 bbl/d net). This is in line with our assumptions of individual well production of 500 bbl/d (250 bbl/d net). The CN-4 well was targeting an area containing part of the 3P reserves and a portion of the associated reserves could be converted from the 3P to the 2P category. Arrow held US$13 mm in cash as at F15 February. This above our expectations. As we increase our chance of development of Carrizales Noroeste from 25% to 50%, we are increasing our target price from £0.55/sh to £0.60/sh.
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GeoPark (GPRK US)C; target price of US$25 per share: 110% Reserve Replacement Ratio in 2023 – 2P YE23 reserves were estimated at 115.1 mmboe. Excluding 14.6 mmboe at YE22 in Chile (being sold), this compares to 113.8 mmboe at YE22. During 2023, GeoPark has added ~14 mmboe of 2P reserves. With 12.7 mmbope production in FY23, this represents a reserve replacement ratio of 110%. The largest contributors to reserve addition are Ecuador (2P increased by 5.3 mmboe to 7.1 mmboe) and the new 2023 discoveries in Colombia with YE23 2P reserves of 3 mmboe at Halcon/Perico (CPO-5) and 3 mmboe at Bisibita, Saltador and Toritos. No reserves were associated to these three new Llanos fields at YE22. We anticipate that the reserves at these fields could continue to grow as GeoPark drill 3-9 further wellsin these new Llanos areas in 2024. The Net debt-adjusted 1P NPV10 and 2P NPV10 (after Tax) were estimated at respectively ~US$14 per share and US$26 per share. The 2023 discoveries are estimated by the reserve auditor to have added US$175 mm NPV10 (after tax). As we incorporate the impact of the reserve additions, we have increased our target price from US$24 per share to US$25 per share in line with our new ReNAV. The key newsflow for 1Q24 includes testing of two exploration wells in Llanos basin in Colombia (Halcon-1 and Zorzal Este-2) and appraisal drilling in Ecuador (Perico Norte 5).
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Panoro Energy (PEN NO)C; target price of NOK47 per share: Hibiscus South discovery potentially 50-100% larger than expected – The FY23 production of 8,471 bbl/d was in line with previous indications. YE23 cash, gross debt and cash advances had been previously reported. The FY24 production guidance is now 11-13 mbbl/d (11-14 mbbl/d previously) as Panoro has incorporated a pause in drilling offshore EG. The main factor driving the adjusted upper limit of guidance range is the timing to secure a new rig in EG and deferral of some associated production. Drilling is currently expected to start in late 2Q24 (based on management’s current estimates). We have left our production forecast of 12.2 mbbl/d for FY24 unchanged. The most important new information is the fact that the discovered resources at Hibiscus South are now expected to materially greater than initially expected (we estimate from 6-7 mmbbl previously to 9-14 mmbbl gross – Panoro holds 17.5% WI). Following the drilling of the development well, the structure appears to be larger than anticipated. Given that Hibiscus South is being developed as a tieback to the existing infrasctructure, the incremental capex and opex is minimal meaning the value of each discovered barrel very high.
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Valeura Energy (VLE CN)C; target price of C$8.50 per share: Wassana: 219% reserve replacement ratio in 2023 – YE23 1P and 2P reserves are estimated at 29.9 mmbbl and 37.9 mmbbl respectively. This represents a reserve replacement ratio of 219%. The reserves addition is much greater than we expected. Valeura has booked 7 mmbbl at Wassana (we expected only 5 mmbbl) and has replaced 112-147% of the 2023 production at each of the other fields. While the YE23 Brent prices assumptions for 2024-2026 are now only ~US$78-80/bbl (US$81-82/bbl at YE22 for the same periods), the after tax NPV10 of the 1P reserves is now estimated at US$194 mm. This is well above the YE22 estimate of US$68 mm. Adding ~US$151 mm of net cash would imply that the company value based on its 1P reserves only is US$345 mm, which is greater than Valeura’s market cap. The after tax NPV10 of the company’s 2P reserves is US$428.5 mm, well above last year (US$261 mm). Adding the YE23 net cash implies C$7.56 per share for the company. These figures do not include the positive impact of the expected tax restructuring of the company to apply the tax losses at Wassana against Manora and Nong Yao profits. The YE23 reserves booking showcases the business model of Valeura with the postponing of the decommissioning of Nong Yao, Jasmine and Manora by 1-2 years to 2026-2028. The Thai assets were estimated to hold ~31.7 mmbbl of 2P reserves at YE18 and have produced ~41 mmbbl from 2019 to 2023. As we incorporate the new reserves and resources, we have increased our target price from C$6.40 per share to C$8.50 per share.
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Tethys Oil (TETY SS)C; target price of SEK100 per share: Drilling permit of key well received – Tethys has contracted a rig to drill the high impact Kunooz-1 prospect. Drilling is expected to start by mid April. Our unrisked NAV for the well is ~SEK200 per share.
IN OTHER NEWS
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AMERICAS
Atome (ATOM LN): Raising new equity for Paraguay – Atome has raised £1.8 mm of new equity priced at £0.50 per share to progress the engineering of its green fertiliser Villeta Project in Paraguay.
Gran Tierra Energy (GTE LN/CN.US): Reserves update in Colombia – FY23 production in Colombia was 32,647 bbl/d. YE23 1P and 2P and 3P reserves were estimated at 90 mmboe, 147 mmboe and 207 mmboe respectively. This represents reserves replacement ratios of 154% for the 1P case, 242% for the 2P case and 303% for the 3P case. Net cash at YE23 was US$511 mm.
EUROPE
Blue Nord (BNOR NO): 4Q23 results – 4Q23 production in Norway was 24.9 mboe/d. YE23 net debt was ~US$1.1 bn. 4Q24 production is expected to be 50-54 mboe/d.
Kistos (KIST LN): Buying UK gas storage assets – Kistos is acquiring two gas storage facilities onshore UK, Hill Top Farm and Hole House Farm, from EDF Energy for £25 mm. Hill Top's gas capacity is 17.8 million therms, with an ongoing programme to increase this working volume to 21.2 million therms in the short term. The Hole House facility is currently non-operational.
Repsol (REP SM): Strategy update – Upstream conventional production is expected to grow by 95 mboe/d in 2027 and by 135 mboe/d in 2030. Unconventionals in the USA is becoming a core area with plan to deploy EUR2.2 bn capex in 2024-2027 with average production over 2024-2027 to reach 180-200 mboe/d. Net capex over 2024-2027 is forecasted at EUR16-19 bn including EUR6-7 bn for upstream. The 2024 dividend will be EUR0.90 per share (+30% vs 2023). The company plans to return up to EUR10 bn to shareholders over 2024-2027 including EUR4.6 bn in dividends.
Wintershall Dea: FY23 results – FY23 production was 323 mboe/d. YE23 net debt was EUR2.4 bn.
MIDDLE EAST AND NORTH AFRICA
Predator Oil & Gas (PRD LN): Well test update in Morocco – The phase 1 of the testing programme has highlighted that the formation is damaged. The company will now move to sandjet testing to intent to establish a gas flow.
EVENTS TO WATCH NEXT WEEK
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26/02/2024: Kosmos Energy (KOS US) – FY23 results
27/02/2024: Africa Oil (AOI SS/CN) – FY23 results
27/02/2024: Woodside Energy (WDS AU/LN) – FY23 results
27/02/2024: Africa Oil (AOI SS/CN) – FY23 results
27/02/2024: Seacrest Petroleo (SEAPT NO) – FY23 results
29/02/2024: Seplat Emergy (SEPL LN) – FY23 results
01/03/2023: Parex Resources (PXT CN) – FY23 results
Front Range Resources is engaged in oil and natural gas exploration and production focusing on horizontal multi-stage frac development in Montney, Bluesky, Wilrich and Falher formations in the Deep Basin area of west central Alberta.
Gran Tierra Energy, together with its subsidiaries, is a company focused on oil and gas exploration and production in Colombia. Co. is primarily engaged in the exploration and production of oil and natural gas. Co. has one reportable segment based on geographic organization, Colombia. As of Dec 31 2017, Co. had total estimated proved reserves of 59.3 million barrels of oil and natural gas equivalent, consisting of 58.9 million barrels of oil and 2.1 million cubic feet of natural gas.
Panoro Energy is an international independent oil and gas company engaged in the exploration and production of oil and gas resources in Brazil and West Africa. In Brazil, Co. participates in a number of oil and gas licenses located in the Santos basin outside the south-east coast of Brazil and in the Camamu-Almada basin in the state of Bahia. In West Africa, Co. participates in a number of licences in Nigeria and Gabon. As of Dec 31 2013, Co.'s commercial production is from the Manati field in Brazil.
Predator Oil & Gas Holdings PLC seeks to consolidate the acquisition of a specific non-operated oil and gas business opportunity in the Republic of Trinidad and Tobago, to generate income for Co., and exploration and appraisal assets in the Licensing Options offshore Ireland that form an existing operating business operated by POGV. Both businesses are consistent with Co.'s focus on responsible, environmentally aware, investment in the fossil fuel industry.
Repsol is an oil and gas company. Co. is engaged in all the activities relating to the oil and gas industry, including exploration, development and production of crude oil and natural gas, transportation of oil products, liquefied petroleum gas (LPG) and natural gas, refining, the production of a wide range of oil products and the retailing of oil products, oil derivatives, petrochemicals, LPG and natural gas, as well as the generation, transportation, distribution and supply of electricity. Co. operates in more than 40 countries. Co.'s operations are divided into four segments: Upstream, Downstream, LNG and Gas Natural Fenosa.
Tethys Petroleum is an oil and gas exploration and production company focused on projects in Central Asia. Through its subsidiaries, Co. is engaged in the exploration for, and the acquisition, development and production of, oil and natural gas resources in Kazakhstan, Tajikistan and Uzbekistan.
Valeura Energy is engaged in the exploration, development and production of petroleum and natural gas in Turkey and Western Canada. As of Dec 31 2010, proven gross reserves for light and medium oil was 116 thousand barrels (net reserves of 104 thousand barrels); proven gross reserves for heavy oil was 10 thousand barrels (net reserves of 9 thousand barrels); proven gross reserves for natural gas was 1,047 million cubic feet (net reserves of 938 million cubic feet); and proven gross reserves for natural gas liquids was 26 thousand barrels (net reserves of 19 thousand barrels).
Auctus Advisors is a specialist Equity Capital Markets and Advisory business with a focus in the Energy Sector.
The partners have complementary skill sets, with decades of experience across Equity Capital Markets, Investment Banking and the Energy industry. We have worked at Société Générale, Canaccord Capital, BMO Capital Markets and Schlumberger. Most recently we have worked together for many years at GMP FirstEnergy.
Auctus has been set up at the beginning of a new decade in which we see significant opportunities in the Energy space. Globally, demand for energy is at record levels and continues to grow. Conversely, investment in traditional energy sources has been severely constrained. We believe this imbalance creates opportunities for both companies and investors.
Auctus provides Corporate Broking, Equity Research and Investment Banking services.
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