AUCTUS ON FRIDAY - 26/07/2024
AUCTUS PUBLICATIONS________________________________________
ADX Energy (ADX AU)C; target of A$0.75 per share: Diversified and high impact newsflow over the balance of 2024 – ADX has confirmed a very busy programme of activity from September. The overall unrisked value of the programme is ~A$1.70 per share, which represents 17x the current share price. In early September, ADX will drill the Anshof-2A side track. The well is expected to intersect thick Eocene reservoirs similar to that encountered by the Anshof-2 well which were ~6 times thicker than the producing Anshof-3 discovery well. The well is expected to add production and potentially derisk some of the possible reserves at Anshof. Our unrisked NAV for Anshof including the possible reserves is ~A$0.25 per share. In early October, a gas exploration well is expected to be drilled with MND. It will be either the LICHT-1 prospect that is already permitted or the larger IRR-1 prospect (permitting expected in August). Our unrisked NAV for ADX’s interest in the LICHT-1 prospect is ~A$0.04 per share. A revised resources estimate at Welchau is expected to be published in early September. This will incorporate the recent drilling results at Welchau-1 including the much larger than expected gas column. A submission has been made to the environmental authority to undertake production testing operations during the winter period from 1 October 2024 to 31 March 2025. A successful well flow test would have a very positive impact on the risk of the project. Our unrisked NAV for Welchau based on the current resources estimate is A$1.13 per share.
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Chariot (CHAR LN)C; target of £0.45 per share: Potentially entering Namibia offshore and boosting balance sheet – Chariot has raised US$6.4 mm of new equity (US$7 mm before expenses) priced at 6.5 p per share. Management and insiders have contributed ~US$1 mm to the raise. The company was initially looking to raise only US$6 mm (before expenses) but the fundraising was oversubscribed. Up to an additional US$2 mm could be raised through an open offer. The proceeds from the fundraising will (1) boost the balance sheet ahead of the commencement of drilling at Anchois, (2) progress the commercialisation of onshore gas in Morocco and (3) secure a material new high impact opportunity offshore Namibia. While the targeted acreage has not been disclosed, we note that Chariot holds a 10% back in right in its previously operated Blocks 2714A&B in Namibia. This acreage is adjacent to Block PEL83 where Galp and Sintana Energy have encountered at least 2 bn boe recoverable resources. Galp is planning an extensive appraisal drilling programme in 4Q24 to map the precise extent of the discovery. Rhino Resources and Azule Energy (Eni/BP) are also planning to drill an exploration well in the area in 3Q24. We view the current weakness of the share price as an opportunity given the materiality of the near term newsflow. With a stronger balance sheet, the company is expected to test the Dartois discovery (£0.04 per share unrisked NAV) in 3Q24. In addition, the high impact Anchois East well will spud mid August. A drilling success could increase the size of Anchois to over 1 tcf (300 bcf net to Chariot). Our overall unrisked NAV for Anchois, including Anchois East Footwall and Anchois East North Flank, is £0.40 per share.
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GepPark (GPRK US)C; Target price of US$30 per share: Strong performance in Argentina – 2Q24 production was 35,608 boe/d, which is in line with 2Q24 but below April production of ~37.5 mboe/d, as the company has experienced sporadic blockades and weather-associated flooding at Llanos 34. As a result production in Colombia was only 33,956 boe/d (we forecasted 35.5 mboe/d). The waterflood programme now generates 3.7 mbbl/d. GeoPark’s new Argentinian asset is performing very well with current WI production of 5.7 mboe/d with the Mata Mora Norte 2223 well producing 2,136 boe/d gross average production in 2Q24, in line with the best producing well in the block. The current production is already above our estimate of 5.5 mboe/d WI production for 3Q24. We only forecast 6 mboe/d in 4Q24.
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Zephyr Energy (ZPHR LN)C; Target price of £0.12 per share: Positive well test result in the Paradox but still some uncertainties to be lifted – The State 36-2R LNW-CC well has been tested at peak production rates of 1,350 boe/d with the well still choked and production constrained. Initial reservoir pressure was ~8,600 psi, which is very high. The condensate yield of 180 bbl/mmcf is much higher than at well State 16-2LN-CC and higher than expected, which is a positive surprise. This suggests that the well is producing slightly more condensate than gas. We only expected a condensate yield of 50 bbl/mmcf. With 58 deg API for the condensate and the much higher realizations for liquids (~US$80/bbl for WTI) versus gas (~US$2/mcf for Henry Hub), this has very positive implications for the economics of the larger development. Overall, Zephyr’s position in the Paradox could be much more liquids rich as ~50% of the acreage could be located in the liquids rich window with similar condensate yields. The flow test did imply that the natural fracture network could be partially restricted from the greater reservoir at this well location. This could be due to residual heavyweight drilling mud used in both the initial well and the redrill. Not all the mud used to kill the initial well has been recovered. This could also be due to compartmentalization by faulting. The company will run a larger acidization operation to further remove any drilling mud emulsion from the network. A small acid job already had a very positive impact and the larger job could improve further the flow rate. This operation is expected to take place in the next few weeks and will be immediately followed by a second production test. The production test has to be read in the context of an horizontal section of only 150’ long. The design of the initial horizontal well was for a 4,000’ lateral and the well could therefore be re-entered accordingly. Such a well would target a much larger area of natural fractures and have hydraulic stimulation. Everything else being equal, it would deliver a higher flow rate.
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IN OTHER NEWS
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AMERICAS
Atome (ATOM LN): Key ammonia offtake agreement for Paraguay – Atome has signed offtake heads of terms for 100% of its production at the 145MW Villeta project with Yara. The offtake agreement will cover 264,000 tonnes per annum of green Calcium Ammonium Nitrate. This makes the project bankable and this is a key step to progress the project to FID.
Galp (GALP LS): 2Q24 results – Production in 2024 (mostly from Brazil) is expected to be >105 mboe/d. The FY24 dividend has been increased by 4%. Net debt at the end of June was EUR1.2 bn; which represents a reduction of ~EUR$0.35 bn since the end of March.
Karoon Energy (KAR AU): 2Q24 results – 2Q24 production in Brazil and the USA was 25.2 mboe/d. Net debt at the end of June was US$129.5 mm.
Mosman Oil & Gas (MSM LN): Buying more helium asset in the US – Mosman has acquired a further 10% WI in the Vecta Helium Project in Las Animas County, Colorado, from Vecta, increasing Mosman's total WI in the project to 20%. The consideration for the additional 10% WI is 650,000,000 shares in Mosman (US$0.6 mm at current price).
Pantheon Resources (PANR LN): Raising new equity for Alaska – Pantheon has raised US$29 mm of new equity at a price of £0.17 per share to fund the drilling of the Megrez-1 well in the Ahpun Eastern Topset. The holder of the convertible bond has participated in the placing for US$4.9 mm.
Seacrest Petroleo (SEAPT NO): Operating update in Brazil – 2Q24 production was 7,959 boe/d with the quarter ending at ~8.4 mboe/d. The company does not expect to be in a position to meet the required leverage ratio under the US$300 mm credit agreement and the US$80 mm Nordic bonds as at 2Q24. The FY24 production and capex guidances have been reduced from respectively 9.5-12.5 mboe/d and US$70-100 mm to 8.3-8.6 mboe/d and US$60-65 mm. The 2024 exit rate is now expected to be only 9.5-12.5 mboe/d versus 12-17 mboe/d previously.
Trinity E&P (TRIN LN): Update in Trinidad and new potential take over offer – 2Q24 production was 2,522 bbl/d. The Company maintains its FY24 sales volume guidance of 2,600-2,700 bbl/d. Net cash at the end June was US$5 mm. Trinity has received an indicative proposal from Lease Operators to acquire the company for £0.68 per share in cash.
Woodside Energy (WDS LN/AU): Acquiring LNG assets in USA – Woodside is acquiring Tellurian and Driftwood LNG for ~US$1.2 bn (EV) including US$900 mm of equity and the balance in debt.
ASIA AND AUSTRALASIA
Woodside Energy (WDS AU/LN): 2Q24 results – 2Q24 production was 488 mboe/d. The FY24 production guidance of 505-533 mboe/d with US$5.0-5.5 bn capex is unchanged.
EUROPE
Eni (ENI IM): Potentially selling stake in renewable business and 2Q24 results – Eni has signed an exclusivity agreement with KRR to sell 20%-25% stake in Eniline based on a valuation for the company of EUR11.5-12.5 bn. Enilive is Eni's company dedicated to biorefining, biomethane production, smart mobility solutions, and the distribution of all energy carriers for mobility. 2Q24 adjusted net income was EUR1.5 bn with 1,712 mboe/d production. FY24 hydrocarbon production is expected towards the top of the anticipated range of 1.69-1.71 mmboe/d. Shareholder distributions could also be increased.
Equinor (EQNR NO): 2Q24 results – Adjusted net income for the period was US$2.42 bn with 2,048 mboe/d production. The Argerich exploration well did not result in a commercial discovery. Equinor will continue the extraordinary dividend of US$0.35 per share for 2Q24 (in addition to an ordinary dividend of US$0.35 per share). The company continues to expect to distribute US$14 bn to shareholders in 2024.
Repsol (REP SM): 2Q24 results – Adjusted net income for the period was EUR859 mm with 589 mboe/d production.
Star Energy (STAR LN): Operating update in the UK – 1H24 production was 2,012 boe/d. Net debt at the end of June was £1.9 mm.
TotalEnergies (TTE FP): 2Q24 results – Adjusted net income over the period was US$3.8 bn with 2.4 mmboe/d. 3Q24 production is expected to be 2.4-2.65 mboe/d.
Trillion Energy (TCF CN): Operating update in Turkey – Production at South Akcakoca-2 has stabilized at a rate of 1.94 mmcf/d with pressure of 371 psi. Guluc-2 is currently producing at 3.35 mmcf/d with a WHP of 484 psi.
Var Energy (VAR NO): 2Q24 results – 1H24 production in Norway was 393 mboe/d. The company continues to anticipate production of 400 mboe/d by YE25. A dividend of US$270 mm has been declared for 2Q24. The company anticipate to pay a similar dividend for 3Q24. The Cerisa discovery has gross recoverable resources of between 18-39 mmboe. Net debt at the end of June was US$4.3 bn.
SUB-SAHARAN AFRICA
Europa Oil & Gas (EOG LN): Prospective resources update in EG – Europa is estimated to hold 726 bcf WI prospective resources (Pmean) in EG.
TotalEnergies (TTE FP): Selling assets in Nigeria – Total is selling its 10% interests in SPDC for US$0.86 bn to Chappal Energies. Production from these licences represented ~14 mboe/d net to Total in 2023. Chappal has previously announced the acquisition of Equinor’s interests in Nigeria for ~US$1 bn.
EVENTS TO WATCH NEXT WEEK
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29/07/2024: Jadestone Energy (JSE LN) – Trading update
30/07/2024: BP (BP LN) – 2Q24 results
30/07/2024: Seplat Energy (SEPL LN) – 2Q24 results
31/07/2024: Gran Tierra Energy (GTE CN/LN/US) – 2Q24 results
01/08/2024: Shell (SHEL LN) – 2Q24 results
Chariot Oil & Gas is an independent oil and gas exploration company focused offshore in West Africa with a portfolio of assets located in the under-explored regions of Namibia, Mauritania and Morocco.
Eni is engaged in the oil and gas exploration and production, gas marketing operations, management of gas infrastructures, power generation, petrochemicals, oil field services and engineering industries. Co.'s operations are divided into three segments; Exploration and Production (oil and natural gas exploration and field development and production, as well as LNG operations), Gas and Power (supply, trading and marketing of gas and electricity, managing gas infrastructures for transport, distribution, storage, re-gasification, and LNG supply and marketing), and Refining and Marketing (supply of crude oil, refining and marketing of refined products). Co. maintains operations in 73 countries.
Equinor is engaged in oil and gas exploration and production activities. Co. is primarily focused on exploration, development and production of oil and gas on the Norwegian continental shelf (NCS). Co.'s operations are organized into four segments. The Development and Production Norway and Development and Production International segments explore, develop, produce and extract crude oil, natural gas and natural gas liquids. The Marketing, Processing and Renewable Energy segment markets, trades, transports and processes oil and natural gas and renewable energy. The Other segment consists of global well and project delivery, research and develpoment, and business development.
Europa Oil & Gas is an exploration and production company focused on Europe. The principal activity of Co. and its subsidiaries (the Group) is investment in oil and gas exploration, development and production. The Group's assets and activities are located in Ireland and the U.K.
Galp Energia is a holding company. Through its subsidiaries, Co. operates in the following segments: exploration and production, with activities relating to exploration, development and production of hydrocarbons, particularly in Angola, Brazil and Mozambique; refining and marketing, which owns refineries in Portugal and also includes activities relating to the retail and wholesale commercialization of oil products; and gas and power, which covers the purchasing, commercialization, distribution and storage of natural gas and electric and thermal power production. As of Dec 31 2014, Co. had proved and probable reserves of 638.0 million barrels of oil equivalent.
Karoon Gas Australia is an independent oil and gas company. Co. is engaged in the investment in hydrocarbon exploration and evaluation in Australia, Brazil and Peru. Co.'s operations are organized into three areas: Australia exploration, Brazil exploration and Peru exploration. The Australia segment is involved in the exploration and evaluation of hydrocarbons in two offshore permit areas. The Brazil segment is involved in the exploration and evaluation of hydrocarbons in five offshore Blocks. The Peru segment is involved in the exploration and evaluation of hydrocarbons in two Blocks, onshore and offshore.
Mosman Oil and Gas is a New Zealand and Australia oil exploration and development company. Co. is engaged in examining resource opportunities in overlooked and emerging resource areas. Co. objective is to discover economic oil and gas reserves and realize value through the development, joint venture or sale of its oil and gas interests.
Pantheon Resources is engaged in the investment in oil and gas exploration and development. Co. operates in the U.K. through its parent undertaking and in the U.S. through subsidiary companies. Co. operates in two reportable segments: USA and Head Office. Non-current assets, income and operating liabilities are attributable to the USA, whilst most of the corporate administration is conducted through Head Office. As of June 30 2017, Co. held 58% working interest in the VOBM#1 & VOBM#2H wells in Polk County. Co. also held 75% working interest in VOBM#4 in Tyler County.
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.
Total is an international integrated oil and gas company also active in solar and biomass energy sources. Co. engages all aspects of the petroleum industry, including Upstream operations (oil and gas exploration, development and production, and LNG (Liquefied Natural Gas)) and Downstream operations (refining, petrochemicals, specialty chemicals, marketing and marketing and trading and shipping of crude oil and petroleum products). In addition, Co. is engaged in the coal mining and power generation sectors. Co.'s worldwide operations are conducted through three business segments: Upstream, Refining & Chemicals, and Marketing & Services.
Rose Petroleum is an oil and gas (O&G) and mining company with exploration assets and an operational crushing and flotation mill. Co.'s principal activities are the exploration and development of O&G resources together with the evaluation and acquisition of other mineral exploration targets, principally gold, silver, uranium and copper, and the development and operation of mines in Mexico. In Co.'s O&G division, the area of focus is on two unconventional oil and gas basins in the U.S.: the Uinta Basin and the Paradox Basin. In its mining division, Co. continues its milling operations through its subsidiary, Minerales VANE S.A. de C.V., which owns the SDA Mill in Mexico.
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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