AUCTUS ON FRIDAY - 16/08/2024

AUCTUS PUBLICATIONS
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Chariot (CHAR LN)C; Target price £0.45 per share: Commencing drilling operations at high impact well in Morocco – Drilling operations have commenced on the Anchois East well (now named Anchois-3). The well has three objectives. An initial pilot hole will be drilled to evaluate the potential of the Anchois Footwall prospect, located in an undrilled fault block to the east of the main field with a 2U Prospective Resource estimate of 170 bcf in the main O Sand target. Our unrisked NAV for this prospect is £0.05/sh. A side-track will then be drilled to intersect and further evaluate the discovered gas sands in the Anchois field, with a current gross 2C Contingent Resource estimate of 637 bcf, in the eastern part of the main fault block of the field. Firming-up the 2C resources is important for the development. Our unrisked NAV for the 2C resources is £0.27/sh. The deeper Anchois North Flank prospect will then be drilled, which has additional 2U Prospective Resource estimate of 213 bcf. Our unrisked NAV for Anchois North Flank is £0.07/sh. A success at Anchois North Flank will also de-risk the nearby Anchois South Flank prospect with a 2U Prospective Resource estimate of 372 bcf with an unrisked NAV of £0.11/sh. Depending on the results of the drilling, sections of the well will then be flow tested. This will allow Chariot to size the facilities. This is one of the most material wells to be drilled by a company in our coverage universe. The total unrisked NAV of the well represents 7.5x the current share price.
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New Zealand Energy (NZ CN)C; Target price of C$5.00 per share: Small delay to start drilling high impact well – Commencement of drilling operating at the high impact Tariki field is likely to be be delayed by two weeks. This has no impact on our valuation. Our unrisked NAV for the Tariki-5 well is C$4.90 per share including C$2.50 per share for the oil target and the balabce for the low risk gas target (2P reserves). In addition, this would open the future gas storage business (unrisked NAV (C$0.80 per share).

Panoro Energy (PEN NO)C; Target price of NOK52 per share: Reserves addition in Gabon. Strong financials – Panoro generated ~US$54 mm cash from operations (we expected ~US$48 mm) with a US$22 mm positive working capital movement. At the end of June, current accounts receivable of ~US$72 mm were well above the current payables of ~US$43 mm. Production currently stands at 10-10.5 mbbl/d. This excludes any contribution from the new EG wells, the first of which is expected to start production in early September. Overall, we forecast that WI EG production will increase by ~2 mbbl/d by YE24. Panoro continues to expect total corporate production to be over 13 mbbl/d by YE24. There are some cost inflationary pressures and the FY24 capex guidance could be increased. This would also incorporate the greater number of wells drilled in Gabon in 2024. We are also assuming a buy-back programme of NOK100 mm for 2024 (NOK150 mm previously) and we have kept our assumptions on future dividend distributions in line with the latest payment (~NOK50 mm per quarter). There is upside to these assumptions given that FY25 capex is expected to be only US$40 mm (FY24: ~US$75 mm), which leaves ample room for further shareholder distributions. The 2024 exploration programme in Gabon has added ~23 mmbbl gross 2P reserves (WI: ~4 mmbbl). The volume is 30% above our expectations. This also represents an increase of >25% to the YE23 2P reserves estimates in Gabon. As the entire block is covered by a production licence, Panoro has enough time to maximize the value of the exploration upside. In addition, any exploration capex is incorporated in the cost oil pool of the existing development, resulting in very low effective exploration costs. Overall, remaining WI prospective resources are estimated at ~25 mmbbl, which represents >100% of the current 2P reserves in Gabon.
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Southern Energy (SOUC LN/SOU CN)C; Target price £0.80 per share: Improved gas fundamentals expected in 4Q24. Material oil opportunities in the Cotton Valley – 2Q24 production of 2,578 boe/d was in line with our forecasts (2,680 boe/d). In addition, ~150 boe/d are currently shut-in pending low-cost workovers. Net debt (based on cash and debt) at the end of June was ~US$18.7 mm. This compares with our forecasts of US$19.1 mm but Southern has sold two compressors for US$1.36 mm. While the company will not increase its capex programme until gas prices in the US improve, we note that the 3Q24 and 4Q24 futures for Henry Hub are now standing at ~US$2.3/mcf and ~US$2.8/mcf respectively. The expected 1.6 bcf/d increase in LNG export capacity by YE24 should support much more constructive fundamentals for US gas. AI data centres and new LNG export terminals could each add 10 bcf/d of demand within the next three to five years. With an increasing number of gas companies in the area entering distressed asset sales or Chapter 11 processes, there is a growing number of low-cost opportunities to add production. During 2Q24, Southern acquired a portion of the Cotton Valley rights in Williamsburg it did not own at no cost. The acquisition came with an existing wellbore that can be re-entered (at a cost US$1.5-2.0 mm), so Southern now has two potential re-entry candidates with which to test the oil play. Southern now holds a high WI (> 90%) in both Williamsburg and another asset in Mechanicsburg, both targeting the liquids-rich Cotton Valley formation. No information has been disclosed for Mechanicsburg but >40 mmboe resources were estimated at Williamsburg. Southern is now looking for partners to progress this play. While this is still early stage, this could be very material to the company and diversify its profile.
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Tethys Oil (TETY SS)C; Target price SEK100 per share: Spudding high impact well. July Production – Drilling operations on the exploration well Kunooz-1 in the Fahd area on Block 58 onshore have commenced. The unrisked NAV for Kunooz is ~SEK200 (6.5x the current share price) with the overall unrisked value of the prospective resources at Block 58 alone (453.9 mmboe) is >SEK700 per share. WI production at Blocks 3&4 in July was 7,687 bbl/d, in line with 2Q24.

IN OTHER NEWS
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AMERICAS

Diversified Energy (DEC LN/US): Acquisition in the USA – Diversified is acquiring 21 mmcfe/d (69% gas) production and 70 bcfe PDP reserves in East Texas for US$69 mm with US$35 mm in shares and the balance in cash.

Gran Tierra Energy (GTE CN/LN/US): Acquiring i3 Energy (I3E LN) – Gran Tierra is acquiring i3 Energy with cash and shares. i3 Energy shareholders will receive one new Gran Tierra share per every 207 i3 Energy shares held plus
10.43 pence in cash per i3 Energy share. In addition, each i3 Energy shareholder will receive a cash dividend of 0.2565 pence per i3 Energy share in lieu of the ordinary dividend in respect of the three month period ending 30 September 2024. The acquisition price represents a 49% premium to i3’s share price on the close of 16 August.

Helix Exploration (HEX LN): Helium gas shows at US exploration well – The Click-1 well has encountered gas shows in the Amsden formation with helium concentration reaching peak readings at 50x over background levels at a depth of 1,185 m. The well is currently in the Charles Formation at a depth of 1,570 m with elevated helium in multiple gas-shows from 1,480 m reaching peak values at 130x over background level.

Touchstone Exploration (TXP LN/CN): Declaring the offer to buy Trinity E&P (TRIN LN) final – Touchstone has waived some conditions for the offer and declared the offer final. While the board of Trinity has recommended an alternative (and higher) offer to its shareholders, irrevocable undertakings were provided to Touchstone by Trinity shareholders representing, in aggregate, approximately ~38.9% of Trinity's ordinary share capital.

ASIA PACIFIC

Jadestone Energy (JSE LN): Update in Indonesia – Raw gas production into the Akatara Gas processing facility has been steadily increased to 20 mmcf/d, resulting in current gas sales in the range of 11-14 mmcf/d (up from 4 mmcf/d at the end of July). However, the export compressors, which pressurise the sales gas for export into the regional gas transportation pipeline system, require further commissioning work, which will allow the plant to achieve the full raw gas volume of ~25 mmcf/d.

EUROPE

Ithaca Energy (ITH LN): 1H24 results – 1H24 production in the UK was 53 mboe/d. Adjusted net debt at the end of June was US$506 mm. The company intends to increase the FY24 and FY25 dividend to up to US$500 mm (from US$100 mm per quarter). The FY24 combined group production has been reduced to 76-81 mboe/d (revised from 80-87 mboe/d) with the FY24 capex guidance (US$410-480 mm) for the producing assets unchanged. The FY24 net Rosebank project capital cost guidance range has been lowered from US$190-230 mm to US$170- 195 mm due to phasing of FPSO upgrades.

OMV (OMV AG): Discovery in Norway – 30-140 mmboe have been encountered at the Haydn/Monn prospect.

Var Energi (VAR NO): Project delay in Norway – The Balder X development project is now expected to start in 2Q25 instead of late 2024. The FY24 production guidance of 280-300 mboe/d is unchanged but the company anticipates spending only US$2.4 bn in 2024 instead of US$2.7-2.9 bn. The estimated cost of the project has been increased by US$400 mm. The YE25 production guidance is estimated ~400 mboe/d.

FORMER SOVIET UNION

Nostrum Oil & Gas (NOG LN): 2Q24 results – 1H24 production was 12,220 boe/d. Net debt at the end of June was US$376 mm.

SUB-SAHARAN AFRICA

Africa Oil (AOI SS/CN): Acquiring further interests in Impact – Africa is increasing its stake in Impact to 32.4%. The total price is US$18.6 mm.

Orca Energy (AOI SS/CN): 2Q24 results – Gross gas production averaged 94.4 mmcf/d for 2Q24, of which 62.8 mmcf/d was additional gas. Orca forecasts FY24 additional gas sales to be in the range of 70-80 mmcf/d. Net cash (defined as working capital mines long term loan) at the end of June was US$44 mm.

EVENTS TO WATCH NEXT WEEK
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27/08/2024: Woodside Energy (WDS AU/LN) – 2Q24 results
29/08/2024: Gulf Keystone Petroleum (GKP LN) – 1H24 results
29/08/2024: BW Energy (BWE NO) – 1H24 results