AUCTUS ON FRIDAY - 30/08/2024

AUCTUS PUBLICATIONS
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Arrow Exploration (AXL LN/CN)C; Target price £0.70 per share: Key horizontal wells outperforms expectations – Arrow has now drilled 3 horizontal wells in Carrizales Norte. The flow rates of the wells are exceeding our expectations. The first CN horizontal well (CNB HZ-1) is being restricted to a current oil flow rate of 2,090 bbl/d with approximately 41% water cut. The average oil production for the first 60 days of production was 2,375 bbl/d. This compares with our expectations of IP90 of 1.5 mbbl/d. The second CN Horizontal well (CNB HZ-3) is being restricted to a current gross flow rate of 1,920 bbl/d gross with approximately 31% water cut. The average production for the first 30 days of production was 2,212 bbl/d gross. The third CN horizontal well (CNB HZ-4) is now on production at a current oil flow rate exceeding 2,500 bbl/d gross and production is continuing to increase. Currently the well has an 8% water cut while still recovering load fluid. Management's expectations are that the CNB HZ-4 well will reach IP production rates similar to the Company's first two horizontal wells. Overall current net production is now 5 mboe/d. This is above our production forecasts of ~4.2 mboe/d in 3Q24 with three further back-to-back horizontal wells to be drilled. Our production forecast of ~5.7 mboe/d in 4Q24 might be too conservative. The success of the horizontal drilling programme unlocks the upside and Arrow is becoming an M&A target. Key near term newsflow includes the drilling of the Chorreron-1 exploration well (formerly known as Baquiano-1) and the publication of an updated reserve report for Carrizales Norte that could incorporate the impact of the horizontal drilling and increase Arrow’s 2P reserves. We have increased our target price from £0.65 to £0.70 per share in line with our ReNAV that reflects the drilling results at CN.
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Pulsar Helium (PLSR CN)C; Target price of C$1.90 per share: Material increase to the size of the prize. CO2 upside. Listing on AIM – The 2C (mid case) contingent helium gross recoverable resources at Topaz have been estimated at 22.9 mmcf (+44% vs previous estimate). We view the Pmean estimate of 79 mmcf as more representative. The deeper and more laterally extensive gross recoverable prospective helium resources estimated to at 1.3 bcf (Pmean) with an upside case of 2.8 bcf (P10).The overall resources estimate is much larger than previously estimated (C3 continent plus P10 prospective resources of 0.3 bcf) and more than we carried in our valuation (0.6-1.0 bcf). 50-80% (contingent and prospective, respectively) of these resources are associated with the proportion of the structure on adjacent State lands over which Pulsar is in discussions to secure access. The new contingent resources estimate reflects the result of the Jetsteam#1 well with gas with high helium concentration (9.9% on average) encountered across multiple fractures rather than a single fracture. Pulsar has been ascribed no contingent resources associated with vugular permeability. This could be due to mud invasion during drilling, which could offer some upside to the estimated volumes if this can be proven. The contingent resources have been ascribed a chance of development of 65% (in line with our expectations). The prospective resources are associated with an extended gas filled fracture network deeper than the penetration of the Jetstream #1 well and more laterally extensive. Pulsar is planning to raise £5 mm of new equity through a listing on AIM by the end of October to fund the deepening of the Jetstream#1 well (+500 m) and a step out well to derisk these volumes. Our unrisked NAV for Topaz including the Pmean prospective resources is ~C$3.80/sh. As we incorporate the value of the new volumes partially offset by the dilution associated with the upcoming equity raise, we have increased our target price to C$1.90/sh.
See website for full report

Valeura Energy (VLE CN)C; Target price C$10.00 per share: High production – Net production at Nong Yao has reached a stable level of ~12.1 mbbl/d. This compares with 6.3 mbbl/d in 2Q24. This production, when combined with the Wassana field being back online, has resulted in stable aggregate WI oil production over the past week of 26.2 mbbl/d. We are assuming only 20.4 mbbl/d for 3Q24, which might be too conservative. Valeura plans to maintain production at ~25 mbbl/d for at least the next four months. We are forecasting 24.8 mbbl/d production in 4Q24. The key near term catalyst is the corporate restructuring associated with Manora, Nong Yao and Wassana. The company is carrying ~US$330 mm of losses. Corporate tax in Thailand is ~50%. We also anticipate that Valeura will grow its 2P reserves during 2024. Sanctioning the redevelopment of Wassana in early 2025 is expected to increase further the company’s 2P reserves position.
See website for full report

Zephyr Energy (ZPHR LN)C; Target price £0.12 per share: Helium operations have commenced – Initial operations at the Salt Wash helium commitment well have commenced. In the coming weeks, a 30-inch hole will be drilled to a depth of ~100 feet and 20-inch conductor casing will be set. Starting drilling operations by 1 September was a condition for the farm-in transaction. Zephyr does not expect full drilling operations to commence until the first half of 2025. The result of the State 36-2R well production test is expected to be announced within the next 10 days.

IN OTHER NEWS
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AMERICAS

Parex Resources (PXT CN): Guidance downgrade – 3Q24 production to date averaged only 47,600 boe/d. The company has reduced its average production guidance midpoint to 49,000 boe/d from 57,000 boe/d and decreased midpoint capital expenditure guidance to US$380 mm from US$410 mm. While production profiles at LLA-34, Cabrestero and Capachos for FY24 are broadly in line with previous management budgeting, there has been a rapid productivity decline at Arauca and slower-than-expected volume additions from LLA-32. The CFO of Parex is resigning.

ASIA AND AUSTRALASIA

Woodside Energy (WDS AU/LN): 1H4 results – Adjusted net income for the period was US$1.6 bn with 491 mboe/d production. The company has declared a dividend of US$0.69 per share for 1H24 representing an annualized dividend yield of 7.3%.

MIDDLE EAST AND NORTH AFRICA

Gulf Keystone Petroleum (GKP LN): 2Q24 results – 1H24 gross average production was to 39,252 bbl/d increasing to ~47,900 bbl/d in July and ~48,200 bbl/d in August. The realised prices have fluctuated between US$25/bbl - US$28/bbl and are currently at ~US$27/bbl. The company held ~US $102.3 mm in cash as at 30 June 2024.

Tag Oil (TAO CN): Operating update in Egypt – Gross production at the BED4-T100 well from when the jet pump was installed on 21 June, through to the end of July averaged 373 b/d of fluid (~256 b/d of oil). Tag held C$7.7 mm in cash at the end of June.

SUB-SAHARAN AFRICA

Africa Oil (AOI CN/SS): Increasing stake in Impact Oil & Gas – Africa Oil has signed a call and put option agreement with three shareholders in Impact Oil and Gas to purchase a further 7.0% interest in Impact. If exercised, the option agreement will increase Africa Oil’s Impact shareholding to 39.5%. Under the agreement, Africa Oil has the right to acquire an additional 80,160,198 shares in Impact at an exercise price of £0.57 per share for a period of up to six months. Africa Oil has purchased the call option feature at a price of £0.08 per underlying Impact share. If Africa Oil has not exercised its call option by the end of a fourth month period, the selling shareholders have the right to put their Impact shares to Africa Oil at an exercise price of £0.57 until the expiry of the option period.

BW Energy (BWE NO): 2Q24 results – In Brazil, the company has decided to postpone the Golfinho infill campaign due to increased subsea costs. Total production net to BW Energy from Gabon and Brazil for 2024 is projected to be between 27.4 mbbl/d and 30.1 mbbl/d. Net debt at the end of June was ~US$344 mm.

Helium One (HE1 LN): Well test results in Tanzania. Acquisition of US helium asset. Raising new equity – The Itumbula West-1 well has flowed 786 bbl/d of fluid from the Faulted Karoo interval on test. The gas in solution (volume not disclosed) yielded a compositional mix of up to 7.6% helium, 1.7% argon, 0.7% oxygen and 90% nitrogen. Helium One is also acquiring a 50% interest in ASX listed Blue Star Helium's (BNL AU) Galactica-Pegasus project in Colorado, and in the leases associated with 246 km2 (61,000 gross acres) of acreage in the helium fairway of Las Animas County, southern Colorado. Helium One has raised gross proceeds of ~US$8.2 mm of new equity at a price of 1.09 p per share to fund the acquisition. Helium One will pay US$1.5 mm to Blue Star on completion and fund the drilling of six development wells to earn a 50% interest in the Galactica/Pegasus project. The Galactica project contains discovery wells in the region flowing up to 6% helium (average of 3%). Helium One’s internal gross resource estimates, assuming a P50 Helium concentration of 3%, are 675 mmcf.

PETRONAS: Litigation against South Sudan – PETRONAS has initiated arbitration proceedings at the International Centre for Settlement of Investment Dispute on the divestment of its operations in the Republic of South Sudan.

EVENTS TO WATCH NEXT WEEK