Auctus on Friday - 26/05/2023

AUCTUS PUBLICATIONS
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Hartshead Resources (HHR AU)C; target price of A$0.18 per share: On tack for first gas in 2025 – The FDP for Phase I is nearing completion and will be submitted in two weeks. The project continues to be expected to reach first gas in 2025.

Panoro Energy (PEN NO)C; target price of NOK50 per share: Executing on plans. Declaring a ~US$3 mm quarterly dividend – 1Q23 production of 6,320 bbl/d had already been reported and net debt of US$25.5 mm at the end of March is close to previous indications (US$27 mm). In addition the company holds accounts receivable of US$53 mm with accounts payable of US$15 mm. The new Hibiscus Ruche Phase I well is producing at a stabilized gross rate of 6 mbbl/d. This is at the top end of our expectations. Current production is ~8.5 mbbl/d. The new gas lift compressor on the Gabon FPSO is about to come on line. This will allow production from the existing six Tortue wells to be maximized. The second Hibiscus Phase I well is expected to come on stream in June. The company has re-iterated its FY23 production guidance of 9.5 11.5 mbbl/d with production expected to reach over 13 mbbl/d once the six new Hibiscus Ruche wells are online. The production guidance does not include any contribution from the three well drilling programme expected to start in early 4Q23 in EG. A dividend of NOK31 mm has been declared for 2Q23. This follows the maiden dividend of about the same amount declared in February.
See website for full report

Pharos Energy (PHAR LN)C; target price of £0.55 per share: Flow rate at new Vietnam well above expectations. Discovery in Egypt – The recently drilled VNV-2PST1 lateral in Vietnam is flowing at 3 mbbl/d gross (750 bbl/d WI). The well has been in production since late March and continues to perform very well. The flow rate represents 3x the pre-drill production estimates. This could have a positive impact on 2023 production expectations. The lateral was drill from an existing well at a much lower cost compared to a new drill. It is still early stage but this could open-up the possibility of lower further development costs. The NBS-1X well in Egypt made a commercial discovery after encountering multiple pay zones in the Abu Roash G Formation. The stabilized production test rate pre-frac is 470 bbl/d gross. The result of the well could add a few 100,000’s bbl of 2P reserves and opens a new area. A second well will be drilled in the area later this year. Total WI production from January to April was 6,805 boe/d including 5,477 boe/d in Vietnam and 1,328 bbl/d Pharos in Egypt. This is ~400 boe/d below our forecasts but with the new Vietnam lateral starting production in late March and the Egyptian discovery well on stream in 3Q23, production over the last 8 months of 2023 could be high. Pharos has re-iterated its FY23 production guidance of 6,050-7,500 boe/d including 4,700-5,700 boe/d for Vietnam and 1,350-1,800 bbl/d for Egypt (3,000-4,000 bbl/d gross) with ~US$23 mm cash capex. In Vietnam, drilling will resume at TGT in 2Q/3Q24. An extension to the licence term on Block 125 continues to be expected to be obtained in 2023.
See website for full report

Southern Energy (SOUC LN/SOU CN)C; target price of £1.60 per share: Taking advantage of low gas price to make an accretive acquisition – Southern is acquiring the remaining producing acreage (>8,500 acres) in the Gwinville field it does not own from PetroTx Energy for US$3.2 mm in cash. PetroTX will also be granted a minor overriding royalty over two of the acquired wells that were previously producing 0.4 mmcf/d. These wells are currently not producing and would require remedial work to re-commence production. The transaction adds 400 boe/d net production, 1.8 mmboe PDP reserves and 14.5 mmboe 2P reserves (+57% versus the YE22 2P reserves of 25.5 mmboe) in the Selma Chalk to Southern with 20+ new drilling locations. While the City Bank is not expected to be present on the new acreage, the deeper sands (Hosston/Rodessa/Cotton Valley) are likely to be encountered.
The NPV10 for the PDP reserves is estimated at US$7.7 mm including US$5 mm for synergies with Southern’s existing operation. This represents >2x the price paid by Southern. The operating costs associated with the new acreage could be reduced at the same level as at Southern’s existing operations, representing savings of >30%. The acquisition price implies operating cashflow multiples of 0.9x (relative to 2022 cashflow). This acquisition significantly boosts the materiality of the prize as Southern will be able to deploy modern drilling and completion techniques used on the existing acreage (~12,500 acres) to the new acreage (8,500 acres representing an additional 65% of the existing position at Gwinville). We increase our target price from £1.50/sh to £1.60/sh.
See website for full report

IN OTHER NEWS
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AMERICAS

ATOME Energy (ATOM LN): Baker Hughes becoming material shareholder – ATOME has issued £2.4 mm of new equity to Baker Hughes at a price of £0.95 per share. This represents a premium of 3.2% compared to the previous day.

Canacol Energy (CNE CN): Well test result in Colombia – The Lulo 1 exploration well flowed at rates of 3.9 mmcf/d to 22.2 mmcf/d on various chokes. The well is currently producing at ~17 mmcf/d.

Enauta: Discovery in Brazil – Enauta has discovered up tp 230 mmbbl in place at Atlanta NE.

First Helium (HELI CN): Helium supply agreement in Canada – First Helium has entered into a long-term take-or-pay helium supply agreement with a major global industrial gas supplier for an initial period of 10 years to sell helium gas production from its Worsley Property. First Helium will sell 80%-100% of its produced helium volumes. Depending on the pace of helium production growth at Worsley, the agreement is worth up to US$100 mm in potential revenue to First Helium over the first five years of production.

Talos Energy (TALO US): Selling assets in Mexico – Talos is selling 49.9% of Talos’ assets in Mexico that includes 17.4% WI in Zama for US$124.75 mm (US$74.85 mm at closing with the remaining US$49.9 mm at first production).

EUROPE

Aker BP (AKERBP NO): Discovery in Norway – The Øst Frigg Beta/Epsilon exploration well has encountered 40 90 mmboe or recoverable resources. This is above previous indications (18-45 mmboe).

Barryroe Offshore Energy (BEY LN)/ Lansdowne Oil & Gas (LOGP LN): Lease undertaking rejected in Ireland - The Barryroe Lease Undertaking has not been approved by the Ireland government on grounds of financial capability. Barryroe and Lansdowne will now resort to legal proceedings.

EnQuest (ENQ LN): Operating update in the UK and Malaysia – Production from January until the end of April was 47.7 mboe/d including 7.8 mboe/d in Malaysia, 15.9 mboe/d at Kraken and 16.5 mboe/d at Magnus. Net debt at the end of March was US$678 mm. The FY23 production guidance of 42-46 mboe/d is unchanged.

UK Oil & Gas (UKOG LN): No flow yet at well test in Turkey – The 4.5-inch perforating guns have been unable to establish direct contact with the formation through the casing and cement at the Pinarova-1 well. Testing operations have been suspended testing pending access to larger, more powerful, 7-inch perforating guns.

MIDDLE EAST AND NORTH AFRICA

Gulf Keystone Petroleum (GKP LN): Operating update in Kurdistan. Suspending dividend – The Iraq-Turkey pipeline remains shut-in. The final 2022 ordinary annual dividend of US$25 mm has been cancelled.

Maha Energy (MAHA-A SS): 1Q23 results and well test results in Oman – 1Q23 production was 233 boe/d. The company held US$110.4 mm in cash at the end of March (US$19.5 mm excluding cash from assets held for sale). The Mafraq-9 well flowed 300-350 bbl/d of oil on test (water cut: 5%). The Mafraq-8 and Mafraq-10 wells reached estimated production of 430 bbl/d and 600 bbl/d respectively with a water cut of ~10% and 5%. The oil produced during the testing phase is heavy oil of 11-13 degrees API, with viscosity higher than pre-testing estimates.

SUB-SAHARAN AFRICA

Africa Oil (AOI SS/CN) and TotalEnergies (TTE FP): Existing Kenya project – Africa Oil and TotalEnergies are withdrawing from Blocks 10BB, 13T and 10BA in the Lokichar Basin. Tullow Oil will now hold 100% of the project.

Tullow Oil (TLW LN) : Operating update – 1Q23 production was 53.7 mboe/d including 28.1 mbbl/d at Jubilee, 11.2 mbbl/d at TEN and 14.4 mbbl/d in Gabon and Cote d’Ivoire. The FY23 production guidance of 58-64 mbbl/d is unchanged.

EVENTS TO WATCH NEXT WEEK
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30/05/2023 – Southern Energy (SOU CN/SOUC LN): 1Q23 results
31/05/2023 – Ithaca Energy (ITH LN): 1Q23 results