AUCTUS ON FRIDAY - 24/01/2025

AUCTUS PUBLICATIONS
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ADX Energy (ADX AU)C; Target price of A$0.30 per share: Historic permit award in Italy opens a new growth area - ADX has been offered and accepted the “d 363 C.R-.AX” permit in the Sicily Channel, offshore Italy, covering a maximum area of 346 km2. ADX applied for the permit in 2018, but the moratorium on awarding new exploration blocks in Italy was only lifted last year. ADX will become a licensed operator in Italy as well as Austria and Romania. While the permit is estimated to contain oil contingent resources, ADX has chosen to focus on natural gas which is also proven in the block, with 369 bcf prospective resources across five high-graded prospects based on structural closures alone. The existing seismic indicates the likelihood of stacked pay and stratigraphic trapping which could provide much larger resource potential. The Nilde-2 oil well, drilled on the permit by ENI and Shell in the 1980s, encountered high-quality sweet gas in shallower horizons. The targeted gas reservoirs are high-quality sandstones at a vertical depth of only 700-1,300 m, in a water depth of 100 m. An offshore gas well in the area could cost approximately EUR 15 mm. An analog and a tie in opportunity in the Sicily Channel is the recently developed ENI/Energean Argo-Cassiopea offshore gas field (in c. 660 m of water), which started production in August 2024. The field's ~360 bcf gross reserves will be developed with four subsea wells (one already online) tied back to shore, with a peak rate of 150 mmcf/d. Fiscal terms in Italy are very attractive, with a 10% royalty and a 29% effective tax rate. Pending further visibility on the next steps at Welchau, following the suspension of testing activities (awaiting clarification from the State Administrative Court of Upper Austria on the approval situation), ADX anticipates being able to monitor pressure build up on the well and potentially sample inflow from the Upper Reifling Formation
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Criterium Energy (CEQ CN)C; Target price of C$0.30 per share: Onshore gas development takes centre stage with potentially much lower capex - 4Q24 production was 957 bbld (880 bbl/d in 3Q24). January's production so far is 1,020 bbl/d. This excludes the impact of the last four workovers of the 2024 programme. These workovers could boost production to 1,100-1,150 bbl/d. This level of production could be sustained throughout 2025 with a 10-13 workover programme costing less than US$1 mm. 4Q24 G&A plus opex is estimated at US$2.97 mm, down from ~US$3.3 mm in 3Q24. The MGH-43 well has not yet been brought into production. Potential formation damage or reservoir depletion in the selected oil zones is suspected. Further activities including acidization will be undertaken. The Bulu divestment has not completed yet. Criterium is exploring other options in the event the divestment does not complete as originally intended. Focus in 2025 is likely to be on the SE MGH gas development. Criterium has signed an MOU with PT BlueEnergy in 4Q24 to monetize its gas using Galileo Technologies’ microLNG technology. This offers a lower capex alternative to constructing gathering lines and connecting to the main regional gas pipeline 12 kilometres away. Gas sales could commence in 1Q26. We have now excluded the proceeds from the Bulu divestment and any production contribution from the MGH-43 well from our forecasts. The negative impact on cash inflow is offset by assumptions of much lower FY25 capex as we now assume a gas development based on microLNG. We have changed our target price to C$0.30/sh in line with our new ReNAV.
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GeoPark (GPRK US)C; Target price of US$17 per share: Low 2025 production on strategy shift but 50% increase in Argentina’s 2P reserves - 4Q24 production was 31,489 boe/d. Excluding Argentina (as the acquisition has not completed yet), this is ~1.4 mboe/d below our forecasts. The shortfall is primarily due to CPO-5, which experienced more blockades than anticipated, resulting in actual production of 6.4 mbbl/d compared to our expectation of 7.5 mbbl/d. The highlight of the 4Q24 operating update is the 50% increase in net 2P reserves at Mata Mora as of the end of June, reaching ~75 mmboe compared to 49 mmboe. We believe this could further increase at YE24, given the success at Confluencia Norte. GeoPark has changed its strategy to focus on material growth assets. In 4Q24, gross production in Argentina reached 15,052 bbl/d (GeoPark WI: 45%). With a large reserve base and significant running room, the Vaca Muerta portfolio is a key component of this strategy. Argentina's gross production is expected to grow to ~45 mboe/d (~20 mboe/d net to GeoPark) by 2028. As a result of this strategic shift, GeoPark will reduce investment in smaller assets and lower-return projects. The FY25 capex budget of US$275-310 mm will allocate US$195-220 mm for Argentina and US$80-90 mm for Colombia. In comparison, the FY24 budget included US$140-170 mm for Colombia. As we factor in the performance of the Colombian assets, which reflects lower future investments, reduced production (and likely lower reserves), and more modest exploration upside, partially offset by the higher value of Argentina, we have adjusted our target price to US$18/sh in line with our new ReNAV. The US$30 mm annual dividend remains a priority, implying a yield of approximately 5.7%.
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Pharos Energy (PHAR LN)C; Target price of £0.50 per share: FY24 in line. All eyes on Vietnam drilling and licence consolidation in Egypt – FY24 production was 5,801 boe/d including, 1,440 bbl/d in Egypt and 4,361 boe/d in Vietnam. This is in line with expectations. The FY25 production guidance has been set at 5.0-6.2 mboe/d, including 3.6-4.6 mboe/d in Vietnam and 1.4-1.6 mboe/d. The FY25 production guidance for Egypt is below our expectations, which had assumed a normalization of the business environment. This normalization would have led to increased investment and production. Consequently, we have deferred this growth in Egypt to 2026. Finalizing the consolidation of the Egyptian concessions will enable the company to commit more capital to Egypt and enhance production. The FY25 capex budget is US$33 mm, including US$8 mm for Egypt (Auctus: US$22 mm), US$15 mm for TGT and CNV in Vietnam (in line) and US$8 mm for long items for Blocks 125 & 126 (Auctus: US$5 mm). A positive result at the TGT appraisal well in 4Q25 could derisk ~3.5 mmboe and unlock further development wells. The well will be put on production if successful and boost FY26 production. Pharos held US$16.5 mm in cash at YE24. Our forecast of US$18 mm assumed a faster repayment of receivables in Egypt (down by US$1.5 mm since the end of September). As we incorporate YE25 net cash, the FY25 production guidance and work programme and a slower repayment of receivables in Egypt during 2025 (US$6 mm vs US$15 mm previously), we have changed our target price to £0.50/sh. The approval of the new FDPs for TGT and CNV, would increase our Core NAV by £0.03/sh. Successful appraisal at TGT and CNV would derisk ~5 mmboe of resources with an unrisked value of £0.15/sh..
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Serica Energy (SQZ LN)C; Target price of £3.00 per share: 40 mboe/d production in 2025. Expect generous shareholders’ distribution in 2025 - FY24 production of 34.6 mboe/d had been reported previously. The GE-05 well (Serica WI: 100%) has been brought into production at a stable rate of 6 mbbl/d after having flowed 9 mbbl/d on test. This exceeds our estimate of 3 mbbl/d. The recent B6 well had a net IP rate of over 5 mboe/d (~8 mboe/d gross) when brought online. YE24 net debt was US$71 mm; which is below our estimate of US$105 mm. The company expects an additional US$12 mm cash inflow from a December lifting post YE24 (to be received in January). At Triton, the resumption of operations with two compressors continues to be expected in 1Q25. This is crucial for providing redundancy and addressing operational vulnerabilities at Triton. Serica expects to produce ~40 mboe/d in 2025 with capex of US$220-250 mm. This compares with our expectations of ~41 mboe/d and capex of US$250 mm. The FY25 production guidance includes numerous contingencies due to the operating challenges faced in 2024. In 2024, Serica’s oil production was sold under a contract with a fixed price in the low US$60’s/bbl. This contract has ended and FY25 oil production will be sold at a level consistent with Brent. Based on our Brent and NBP assumptions for 2025 (~US$74/bbl for Brent vs. ~US$80/bbl currently and 94p per therm vs. FY25 futures in excess of 115p per therm), we forecast that Serica will generate free cash flow of >US$185 mm. This suggests that Serica can continue to fund generous shareholder distributions (~US$133 mm in 2024). The publication of the first contingent resources estimate in April will provide further visibility on growth opportunities beyond the 2P reserves.
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Vaalco Energy (EGY US/LN)C; Target price of US$10 per share: Good 4Q24 WI production and sales - 4Q24 WI production and sales were respectively 24.7-25.2 mboe/d and 23.6-24.1 mboe/d; which is in the middle of the guidance range of 23.8-26.7 mboe/d for production and 22.9-25.3 mboe/d for sales. 2025 should be an important year for value creation with potential reserves additions in Gabon and the FPSO upgrade in Cote d’Ivoire. The detailed 2025 programme will be disclosed by March. In addition to the FPSO maintenance and upgrade in Cote d’Ivoire allowing the restart of production in the country in 2026, it will also include a seven well drilling programme in Gabon starting mid-2025 and 10-13 new wells in Egypt. The focus will be on execution with two large drilling and redevelopment programmes running in parallel. Vaalco's strong execution capabilities were demonstrated during the reconfiguration of the surface infrastructure at Etame Marin in Gabon. We currently carry a total of ~20 mmbbl of contingent resources in Gabon. These are associated with the redevelopment of the Ebouri field plus the extension of production from Etame Marin beyond 2028. Our total unrisked NAV for these resources is US$2.18 per share. The redevelopment programme in Cote d’Ivoire could include some contingent resources. We currently carry 20 mmbbl contingent resources for Baobab with an unrisked NAV of US$1.14 per share.
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Zephyr Energy (ZPHR LN)C; Target price of £0.12 per share: Drilling operations have started in the Paradox – Operations to drill the extended lateral on the State 36-2 LNW-CC-R well have commenced. Drilling operations are expected to take ~30 days. The well will then be tested with results expected to be available by the end of March.

IN OTHER NEWS
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AMERICAS

Gran Tierra Energy (GTE LN/CN/US): FY25 budget and reserves update in Colombia – FY24 production was 34,710 boe/d. Gran Tierra expects to produce 47-53 mboe/d in 2025 with US$240-280 mm capex. YE24 2P reserves were estimated at 159 mmboe (+12 mmboe vs. YE23).

Helix Exploration (HEX LN): Helium reserves estimates in the USA and new equity raise – An estimated 0.21 bcf of net 2P helium reserves (0.31 bcf of net 3P reserves) have been identified on the northern dome. Additionally, there are 0.24 bcf of net 2C resources and 0.1 bcf of net 3C resources. Helix has raised £5 mm of new equity priced at £0.15 per share. The proceeds of the raise will fund (1) the installation the Processing Plant and Membrane Unit at Rudyard and (2) the drilling of two additional production wells at Rudyard.

Interoil (IOX NO): Production update in Colombia and Argentina – December net production was 1,217 boe/d.

Nostra Oil & Gas (NTOG LN): Production update in the USA – Current net oil production is 120 bbl/d.

Pantheon Resources (PANR LN): Resources increase in Alaska - Preliminary volumetrics for the Upper Schrader Bluff (Topsets 1 & 3) and Upper & Lower Prince Creek formations indicate the potential for a 15% - 50% increase in resource estimates vs. pre-drill estimate of 609 mmbbl. Additional potential thick oil-bearing horizons have been identified in the shallow section above the initial major target zones of the Upper Schrader Bluff and Prince Creek formations which appear to be high quality oil-bearing sands. Four initial well tests will be conducted in the Upper Schrader Bluff and Prince Creek formations, starting in 1Q25.

Predator Oil & Gas (PRD LN): Acquisition in Trinidad – Predator has acquired 51% in Caribbean Rex for US$0.17 mm. Caribbean Rex’ sole asset is a 100% interest in the Bonasse Field in the SW Peninsular. This investment will also give ownership of the Bonasse field facilities, including oil storage tanks, some of which will be required for the Cory Moruga workovers and ultimate field development.

ASIA AND AUSTRALASIA

EnQuest (ENQ LN): Acquiring Harbour Energy’s assets in Vietnam – EnQuest is acquiring Harbour Energy's business in Vietnam, which includes the 53.125% equity interest in the Chim Sáo and Dua production fields. The headline value of the transaction is US$84 mm (effective date 01/01/2024) and, net of interim period cash flows, the consideration to be paid by EnQuest on completion is expected to equal ~US$35 mm. As at 01/01/25, net 2P reserves and 2C resources across the fields total 7.5 mmboe and 4.9 mmboe, respectively. Net production in 2025 is forecast to average ~5.3 mboe/d.

Georgina Energy (GEX LN): Acquisition of helium assets in Australia – Georgina is acquiring 100% WI of EPA1558 (Mt Winter) from Mosman Oil & Gas for A$0.35 mm. Mosman will also receive a 2.5% royalty.

Jadestone Energy (JSE LN): Production update – YE24 production was ~24 mboe/d.

EUROPE

Harbour Energy (HBR LN): Trading update – FY24 production was 258 mboe/d. YE24 net debt was US$4.7 bn. The FY25 production guidance has been set at 450-475 mboe/d with US$2.4-2.6 bn capex. Harbour expects to pay US$455 mm in total dividends, comprising a US$227.5 mm final dividend for 2024 and a US$227.5 mm 2025 interim dividend.

OKEA Energy (OKEA NO): 4Q24 trading update – 4Q24 production was 37.8 mboe/d.

Shell (SHEL LN): Dry hole in Norway – The Tomcat well was dry.

Var Energi (VR NO): 4Q24 update – Gas has been discovered at the Elgol prospect. However, preliminary estimates indicate that the discovery is not commercial.

FORMER SOVIET UNION

Enwell Energy (ENW LN): 4Q24 update in Ukraine – 4Q24 production was 2,014 boe/d. Enwell held US$99 mm in cash at YE24. The suspension order related to the MEX-GOL, SV and VAS licences has been re-instated.

MIDDLE-EAST AND NORTH AFRICA

Energean (ENOG LN): Trading update – FY24 production was 153 mboe/d including 112 mboe/d in Israel. YE24 net debt was US$2.9 bn. The divestment of Egypt, Italy and Croatia to Carlyle is now expected to complete in 1Q25. The FY25 production guidance has been set at 120-130 mboe/d with US$400-430 mm development capex and US$55-65 mm decommissioning expenditure.

Gulf Keystone Petroleum (GKP LN): 4Q24 update in Kurdistan – FY24 gross production was 40,689 bbl/d. The company held US$102 mm in cash at YE24. The FY25 gross production guidance has been set at 40-45 mbbl/d with net capex of US$25-30 m. Gross production YTD is ~47.9 mbbl/d.

SUB-SAHARAN AFRICA

Afentra Energy (AET LN): Operating update in Angola – FY24 net production was 6,229 bbl/d. The company held US$12.8 mm in net cash at YE24.

Impact Oil & Gas: Dividend distribution – Impact will distribute US$80 mm in dividends. The company’s main asset is a carried interest in PEL 56 (in Namibia) where the Venus discovery is located.

Savannah Energy (SAVE LN): Trading update in Nigeria – FY24 gross production was 23.1 mboe/d. YE24 net debt was US$634 mm including US$32.6 mm in cash.

EVENTS TO WATCH NEXT WEEK
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27/01/2025 – Gran Tierra Energy (GTE CN/LN/US): Capital Markets Day
30/01/2025 – OKEA Energy (OKEA LN): FY24 results
30/01/2024 – Shell (SHEL LN): FY24 results
31/01/2025 – BW Energy (BWE NO): FY24 results