AUCTUS ON FRIDAY - 26/04/2024

AUCTUS PUBLICATIONS
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ADX Energy (ADX AU)C; target price of A$1.00 per share: Important step to unlock Sicily – The Italian ministry has informed ADX that it will be granted the d 363C.R-.AX gas exploration permit in the Sicily Channel. In addition, the Regional Administrative Court of Rome has annulled the Plan for the Sustainable Energy Transition of Eligible Areas that prevented the oil redevelopment, appraisal and exploration activities on the licence. The annulment, if not contested, will result in reversion to the 2018 legislation enabling oil as well as gas within the d 363C.R .AX permit to be exploited. ADX has high graded five prospects in the area with a total of 369 bcf prospective resources (best case). In addition, contingent resources of 19.2 - 65.6 mmbbl of remaining recoverable oil had been estimated in 2018. An oil redevelopment project at Nilde will target the production of 34.1 mmbbl of 2C contingent resources from 3 wells at an estimated initial production rate of 22,000 bbl/d. The Nilde field produced 20.5 mmbbl of light oil from 1980-1989 from subsea infrastructure tied back to the Firenze FPSO. The field was prematurely shut in due to the inability of the FPSO to handle water production and a collapse in oil price from around US$30/bbl to US$14/bbl. The near term focus continues to be (1) the drilling of further wells at Anshof that are expected to add production and reserves, the drilling of a gas prospect with MND, high impact well testing activities at the Welchau discovery in 4Q24 as well as the deepening of Welchau where in excess of 1,000 m of sediments remain untested.
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GeoPark (GPRK US)C; target price of US$26 per share: Current net production of >38 mboe/d including 9 mbbl/d at CPO-5 – 1Q24 production of 35,473 boe/d., Production from CPO-5 was impacted by blockades over 22 days. As a result, net production at CPO-5 was only ~5.6 mbbl/d (vs our forecast of 7.5 mbbl/d). Production at CPO-5 has now been restored. In addition, the Indico well started production in April with current gross rate of 3.71 mbbl/d. Overall net production at CPO-5 is now ~9 mbbl/d, the highest rate achieved on the block. Production in the Manati gas field has been temporarily suspended since mid-March, when it was producing approximately 1,200 boe/d, due to unscheduled maintenance activities Production is expected to be restored in May. The horizontal drilling programme at Llanos-34 is delivering good results, with net current net production of 24.3-24.8 mbbl/d (up ~1 mbbl/d vs 1Q24). Overall, current net production is over 38 mboe/d. The FY24 production guidance of 35.5-39.0 mboe/d is unchanged. Further visibility on the Argentina acquisition could be a catalyst for the share price.
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Panoro Energy (PEN NO)C; target price of SEK47 per share: Drilling to restart in EG in June. 70% 2P reserves replacement ratio in 2023 – A drilling contract has been awarded for the Noble Venturer drill ship to recommence infill drilling at the Ceiba Field and Okume Complex in June. Owing to limitations arising from the shallower water depth at one of the planned infill well locations, the drilling campaign will now comprise of two infill wells. The third infill well will be deferred as part of a potential future drilling campaign. This allows production in EG to return to growth. In addition, the rig will then drill the high impact Akeng Deep ILX exploration on Block S with 180 mmbbl gross prospective resources. The YE2P WI reserves in Gabon were estimated at ~17 mmbbl, flat compared to YE22, with reserves additions associated with the Hibiscus South discovery and the increased size of Hibiscus, offsetting FY23 production (1.1 mmbbl) and lower oil price assumptions (US$77-78 bbl/d from 2024 to 2027 increasing to US$80-89/bbl from 2028 to 2031 versus US$80/bbl in 2024 increasing 3% per year previously), which resulted in ~1 mmbbl reclassified from 2P reserves to 2C contingent resources. The YE23 WI reserves in EG were estimated at ~11.7 mmbbl, down from 14.2 mmbbl at YE22, reflecting FY23 production (1.3 mmbbl), lower oil price assumptions and adjustments to decline curves on specific wells due to lower field performance (~1.2 mmbbl). The YE23 gross reserves in Tunisia broadly reflects the YE22 reserves estimate less FY23 production. Overall and including the acquisition of a further interest in the Tunisian assets, the company has replaced ~70% of its FY23 production.
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Sintana Energy (SEI.V CN)C; target price of C$1.60 per share: Constrained test rate of 14 mboe/d at Mopane-1X. 10+ bn boe in place confirmed - Multiple tests over multiple zones in multiple horizons were run at the Mopane-1X exploration well. The flows achieved during the well test reached the maximum allowed limits of 14 mboe/d. The flow rate was constrained by the size of the available surface facilities. The AVO-1 horizon encountered at Mopane-1X and Mopane-2X are in the same pressure regime, suggesting that the entire area (8 km diameter) between the two wells is connected. Overall, in the Mopane complex alone, and before drilling additional exploration and appraisal wells, hydrocarbon in-place estimates are 10 bn boe or higher. The reservoirs log measures confirm good porosities, high pressures and high permeabilities in large hydrocarbon columns. Fluid samples present very low oil viscosity and contain minimal CO2 and no H2S concentrations. This is an important difference from the Venus discovery, where the reservoir quality is understood to be lower. This has an important positive impact on recovery factors (we assume 30%). As a result of this and the materially shallower water depth, drilling and development costs should be significantly lower than at Venus. We are increasing our target price from C$1.35/sh to C$1.60/sh as we have increased our estimated chance of development for the Mopane complex from 60% to 90%. We are not attributing any value yet to the potential material upside on the block until better visibility on the drilling programme is provided.
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Southern Energy (SOUC LN/SOU CN)C; target price of £0.80 per share: Managing the balance sheet in the context of low US gas prices - 4Q23 production of 2,793 boe/d and YE23 net debt of US$26.7 mm were in line with forecasts. The GH 14-06 #3 Upper Selma Chalk well delivered an IP30 rate of 5.2 mmcf/d. This is a good rate compared to the other Upper Selma Chalk wells of 2022-2023 which had IP30 rates of 3.3-6.5 mmcf/d. The overall completion cost was only US$2.1 mm, ~40% lower than the two previous 18-10 pad Upper Selma Chalk wells that were completed earlier in 2023. With low US gas prices, we are now assuming that the 2nd DUC will not be completed before 4Q24 (2Q24 previously) with further DUCs being completed in 1Q25 and 2Q25. Southern can accelerate the DUC timing if US gas prices recover sooner. We assume that new wells will be drilled according to available cashflow. Overall, in the context of a slower increase in US gas price (US$2.55/mcf in 2024 and US$3.9/mcf in 2025), our production ramp-up is shallower with FY24 production now marginally below 2023 and increasing to 4.7 mboe/d in 2027. Higher gas prices or more capital would allow Southern to grow production faster. The YE23 2P reserves at Southern’s legacy assets (excluding the 2Q23 acquisition) have been reduced from 25.5 mmboe to 22.2 mmboe, which reflects FY23 production (-1 mmboe), lower gas prices (-0.3 mmboe) and the expected recovery per well based on recent drilling (-~2 mmboe). Only 10 out of 20-25 well 2P locations have been booked as 2P reserves at the 2Q23 acquisition. This suggests potential upside to the YE23 reserves. We have changed our target price to £0.80/sh to reflect the slower production growth profile. Southern continues to be a play on the recovery of US gas prices.
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Zephyr Energy (ZPHR LN)C: target price of £0.12 per share: Drilling in the Paradox has started – Drilling operations at the State 36-2 LNW-CC-R well redrill in the Paradox basin have started. Drilling operations are expected to take about 30 days. Our unrisked NAV for this well is £0.12 per share. On success, the well will start unlocking the basin’s resources and add production and reserves.

IN OTHER NEWS
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AMERICAS

88 Energy (88E AU/LN): Raising equity for Alaska and Namibia – 88 Energy has raised A$9.9 mm of new equity priced at £0.0016 per share. The proceeds will be used to fund the appraisal programme in Alaska and progress the exploration activities in Namibia.

Ascent Resources (AST LN): Entering US onshore gas and helium/New financing – Ascent has provided a US$1 mm convertible loan to GNG Partners that has been formed to acquire the assets of Paradox Resources out of Chapter 11 Bankruptcy. The assets comprise a midstream gas processing and helium purification business with a liquefaction unit and access to over 500 miles of gas gathering pipelines as well as a downstream helium truck distribution business. This includes the 60 mmcf/d Lisbon Plant, in Utah's Lisbon Valley (35 miles southeast of Moab).

LNG Energy (LNG CN): Entering Venezuela – LNG Energy Group has been conditionally awarded two Productive Participation Contracts to develop and produce hydrocarbons in Venezuela. The contracts cover five onshore fields in the Anzoátegui and Monagas States that are currently producing ~3,000 bbl/d of oil.

Royal Helium (RHC CN): Raising new equity for helium in Canada – Royal is raising C$6 mm of new equity at a price of C$0.09 per share. Participants will also receive one warrant per share with an exercise price of C$0.12 per share. The net proceeds from the Offering will be used for new high-impact drilling on the 40 Mile project in southern Alberta, development through the Saskatchewan helium corridor, completion and testing of an existing discovery at the Ogema project, working capital and general corporate purposes.

Seacrest Petroleo (SEAPT NO): 1Q24 production update in Brazil – 1Q24 production was 8,377 boe/d.

Trinity E&P (TRIN LN): 1Q24 update in Trinidad - By mid-January production rates and flowing pressures from Jacobin had fallen to approximately 10 bbl/d with the well struggling to flow naturally, so the decision was taken to convert the well to pump. Significant quantities of sand were also being produced and, by late March, the pump failed with a sand blockage. 1Q24 production was 2,669 bbl/d. Net cash at the end of March was US$4.6 mm.

ASIA AND AUSTRALASIA

Falcon Oil & Gas (FOG LN/FO CN): Operating update in Australia - The SS-1H well in EP117 achieved an IP90 flow rate of 2.9 mmcf/d over the 1,644-foot, 10 stage stimulated length within the Amungee Member B-Shale, normalised to 5.8 mmcf/d over 3,281-feet. At the end of March, Falcon held ~US$4.3 mm in cash, US$4.9 mm was raised in April.

TotalEnergies (TTE FP): Acquiring the remaining 50% of SapuraOMV – TotalEnergies is acquiring the remaining 50% interest in SapuraOMV Upstream that it does not already own for US$530 mm plus the release of US$175 mm obligation related to a financing facility. SapuraOMV’s main assets are its 40% operated interest in block SK408 and 30% operated interest in block SK310, both located offshore Sarawak in Malaysia. In 2023, SapuraOMV’s operated production was about 500 mmcf/d of natural gas, as well as 7 mbb/d of condensates. On block SK408, the development of Jerun gas field is on track for a startup in the second half of 2024.

EUROPE

i3 Energy (I3E LN): FY24 budget for Canada – The FY24 capital budget has been set at US$50.9 mm to deliver 15 wells. YE24 production is estimated to be 20.25-21.25 mboe/d.

Aker BP (AKERBP NO): 1Q24 results – 1Q24 production in Norway was 448 mboe/d. The company has declared a dividend of US$0.60 per share for 1Q24. The company anticipates a similar dividend for 2Q24. Net debt as at the end of March was US$3.2 bn. 13-23 mmboe resources were encountered at the Ringhorne North prospect while 6-19 mmboe were encountered at Ametyst. The FY24 guidances are unchanged.

Eni (ENI IM): 1Q24 results/Increasing share buyback programme – Adjusted net profit for the period was EUR1.6 bn with 1,741 mboe/d production. The FY24 share buy-back is now expected to be EUR1.6 bn, a 45% increase versus previous indications.

Equinor (EQNR NO): 1Q24 results – Adjusted net earnings for the period were US$2.57 bn with 2,164 mboe/d production. The company will pay an extraordinary dividend of US$0.35 per share (in addition to the ordinary dividend of the same amount) for 1Q24 and expects to distribute US$14 bn in 2024. A second tranche of the share buy-back programme of up to US$16 bn will be initiated.

Ithaca Energy (ITH LN): Combination with Eni UK – Ithaca and Eni UK are combining their business. Eni will be issued new shares in Ithaca. At completion Eni will hold 38.5% of Ithaca. Pro-forma production in 2024 is expected to average 100-110 mboe/d with 2P reserves plus 2C resources of 658 mmboe. Production is expected to remain >100 mboe/d until at least 2028. Shareholder distributions are expected to be up to US$500 mm per year. Production is expected to grow to >150 mboe/d by the early 2030s.

OKEA (OKEA NO): 1Q24 results – 1Q24 production in Norway was 42.1 mboe/d. The company held ~NOK0.8 bn of net det at the end of March. OKEA continues to expect to produce 35-40 mboe/d in 2024.

Repsol (REP SM): 1Q24 results – Adjusted net income over the period was EUR1.3 bn with 590 mboe/d production.

Serica Energy (SQZ LN): FY23 results/Initiating a share buyback programme/increasing dividend distribution – FY23 pro-forma production in the UK was 40,121 boe/d. YE23 2P reserves were estimated at 140.3 mmboe. The YE23 2P reserves estimate reflects a net upward revisions of 23.5 mmboe for better than expected production performance in the Rhum and Gannet E fields, the movement of Belinda from contingent resources to 2P reserves and the maturing of projects to enhance production from the Bruce and Rhum fields. The company has declared a final dividend of £0.14 per share resulting in a total dividend distribution for 2023 of £0.23 per share (£0.2 per share for 2022). YE23 net cash was £78 mm. FY24 production is now expected to be 41-46 mboe/d (41-48 mboe/d previously). YTD production was 45.4 mboe/d. The company is initiating a £15 mm share buyback programme.

Star Energy (STAR LN): FY23 results – FY23 production in the UK was 2.1 mboe/d. FY24 production is expected to be ~2 mboe/d. YE23 net debt was £1.6 mm.

TotalEnergies (TTE FP): 1Q24 results. Dividend increase – Adjusted net income over the period was US$5.1 bn with 2.46 mmboe/d production. The first interim dividend for 2024 has been set at EUR0.79/sh (+7% year on year).

Trillion Energy (TCF CN): Reserve update in Turkey – 2P reserves at YE23 were estimated at ~56 bcf.

Var Energi (VAR NO): 1Q24 results – 1Q24 production in Norway was 299 mboe/d. 1Q24 dividend has been set at US$270 mm. 2Q24 dividend is expected to be the same. Net debt at the end of March was US$3.8 bn. The company continues to expect to produce 280-300 mboe/d in 2024 increasing to 400 mboe/d by YE25.

FORMER SOVIET UNION

Nostrum Oil & Gas (NOG LN): FY23 results – FY23 production was 10,091 boe/d. The tie-back project from Ural Oil & Gas commenced with 300,000 m3/d of raw gas (~10.6 mmcf/d) from U-21 well in December 2023 and continues to ramp-up. Ural plans to connect an additional four wells during 2H24 with an estimated 1.5 mn m3/d (~53 mmcf/d) of raw gas from these four wells. Net debt at YE23 was US$310 mm.

MIDDLE EAST AND NORTH AFRICA

Sound Energy (SOU LN): FY23 results – The micro-LNG development at Tendrara in Morocco is now expected to be ready to receive gas into the plant by YE24 with LNG sales thereafter. Sound held £3 mm in cash ay YE23 with £33.3 mm borrowings.

SUB-SAHARAN AFRICA

Trident Energy/TotalEnergies (TTE FP): Asset transactions in Congo – Trident is acquiring 31.5% interest in the Moho, Nkossa and Nsoko licences from Chevron. 10% of the Moho licence interest is being sold by Trident to Total. The Moho field currently produces ~100 mboe/d. Total is also selling 53.5% in interest in the Nkossa and Nsoko licences to Trident

EVENTS TO WATCH NEXT WEEK
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29/04/2024 - Jadestone Energy (JSE LN): FY23 results
29/04/2024 – Arrow Exploration (AXL LN/CN): FY23 results
30/04/2024 – Galp Energia (GALP LS): 1Q24 results
01/05/2024 – Gran Tierra Energy (GTE LN/CN/US): 1Q24 results
02/05/2024 – Eni (ENI IM): 1Q24 results
25/04/2024 – Shell (SHEL LN): 1Q24 results