AUCTUS ON FRIDAY - 01/11/2024

AUCTUS PUBLICATIONS
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Condor Energies (CDR CN)C; Target price of C$5.80 per share: Another positive operating update – The work-overs of two new existing wells have added 441 boe/d after a combined 20 m of previously unperforated reservoir pay was accessed. The first well is producing 410 boe/d. It was previously shut-in. The second well is producing an extra 31 boe/d (+65%) and continues to clean-up. With a total cost of 100 wells on Condor’s fields including 39 shut-in wells that could be candidates for work-overs. The recent programme has highlighted bypassed gas pay and new gas intervals. This could represent some upside to our estimates of 300 bcf recoverable resources. A second work-over rig will begin activities by early November to accelerate production ramp-up. The first made-in-Canada in-line flow separation system to separate water at the field gathering station is being installed. This is expected to lead to higher flow rates. A total of 13 flow separation systems could be installed. We continue to forecast 10.8 mboe/d in 4Q24 but this may be too conservative given the recent results. We forecast ~13 mboe/d in 1Q25 and 15.5 mboe/d in 4Q25.
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New Zealand Energy (NZ.V CN)C; Target price of C$3.80 per share: The Tariki-5 well needs to be sidetracked – The T-5 development well did not encounter the main reservoir target. The fault delimiting the reservoir is interpreted to be shallower (worst case scenario) than in the base case. The well will now be sidetracked to the west into the reservoir. The results are expected in November. No natural fractures were encountered at the shallower Tikorangi secondary target. The sidetrack will provide a second opportunity to look for a fracture in this horizon. Monumental Energy will fund the work-overs of the CM1 & 2 wells (~US$0.48 mm). In return Monumental will receive 75% of the production proceeds from the two wells until the investment is recouped and 25% thereafter. We have changed our target price to C$3.80/sh in line with our new ReNAV. Our new target price incorporates the recent C$0.95 mm equity raise and some delays. Our NAV for the company’s 2P reserves is ~C$2.25/sh. This assumes a 30% reduction in the Tariki reserves and a production plateau of 15 mmcf/d. This includes (1) C$1.45/sh for the ~0.9 mmboe to be put in production plus (2) C$0.27/sh for ~0.1 mmboe that NZE will keep to take advantage of the volatility of gas prices in New Zealand and (3) C$0.53/sh for the 0.2 mmboe of cushion gas. In addition, NZE anticipates that a domestic utility will fund the conversion capex of Tariki into a gas storage and pay the company a net fee of 50%xUS$9-12 mm/y. This fee represents ~C$0.3-0.4/sh every year. We are currently not carrying any value for this fee in our valuation pending the signature of the gas storage contract. We forecast that NZE will hold US$25 mm in net cash by YE26.
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Panoro Energy (PEN NO)C; Target price of NOK52 per share and Vaalco Energy (EGY US/LN)C; Target price of US$10 per share: Agreements signed for new exploration licence in Gabon – Final terms for the PSCs covering the Niosi and Guduma blocks, offshore Gabon have been signed. Panoro, Vaalco and BWE Energy (BWE NO) will hold respectively 25%, 37.5% and 37.5% WI. The Niosi and Guduma blocks cover a surface area of 2,974 km2 and 1,927 km2 respectively and are adjacent to the Dussafu Marin Permit (Panoro WI: 17.5%) and the Etame Marin Permit which is operated by Vaalco.

Panoro Energy (PEN NO)C; Target price of NOK52 per share: Goo flow rate at EG development well – The C-45 infill well has been put on production at an initial gross rate of >5,000 bbl/d on a restricted choke. While the rate is in line with expectations, this adds ~700 bbl/d net to Panoro 14.25% WI. Drilling of the second planned infill well, OF-19 has also been concluded and the well is expected onstream shortly.

Sintana Energy (SEI.V CN)C; Target price of C$1.60 per share: Drilling on multiple licences in coming months –Drilling operations have started at the Mopane 1-A appraisal well on PEL 83. This appraisal well is the first of an up to four well programme potentially consisting of two appraisal wells and two exploration wells. While the programme is expected to increase the value of this asset, this comes at no cost to Sintana as they are fully carried by Galp. The main purpose of Mopane 1-A is to confirm the continuity of the reservoir characteristics and liquid content at AVO-1. The potential phase 1 development is based on all the associated natural gas being re-injected into the reservoir. The liquid content is therefore critical to estimating the required capex and opex. Galp, the operator, estimates that 10 bn boe of in-place hydrocarbons have already been encountered at PEL 83. The Mopane complex is expected to extend beyond the area already defined by the existing wells. There are also multiple additional large prospects. Galp has started a process to farm-out a stake in PEL 83. This would provide a readthrough valuation for the Sintana’s interest in the asset. We value Sintana’s interests in the Mopane complex at C$0.76 per share. Chevron is also expected to start drilling at PEL 90 around the end of 2024. Sintana holds an indirect 4.9% WI in PEL 90. Our unrisked NAV for Sintana’s interest in PEL 90 is C$0.85 per share. Sintana is carried for this well.
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Serica Energy (SQZ LN) C; Target price of £2.90 per share: UK budget better than feared – While the new fiscal regime for UK upstream oil and gas in yesterday’s budget incorporates a 3% increase in EPL (to 38%) and the elimination of the 29% investment uplift allowance for EPL purposes, this is a better outcome than feared. While these changes were expected, the industry and investors had been concerned by the possibility that capex investment might not be fully deductible for EPL purposes. That risk has now been removed. In addition, the 62.5% investment uplift allowance for SCT purposes (10% rate) remains in place. Overall, this means that £1 of spending triggers 84.15% of tax shield vs a 78% tax rate. This is better than our assumption of 78%/78%. Importantly, the new fiscal regime provides stability and visibility to the industry for the duration of the current government until 2030. The new fiscal regime allows Serica to continue to invest in the UK North Sea. Of particular interest is the Bruce area where multiple growth opportunities have been identified. No new wells have been drilled at Bruce since 2012. The same subsurface team (from Tailwind Energy) that successfully encountered new development opportunities at Triton will now focus on Bruce. A stable fiscal regime will also probably make UK M&A transactions more likely. While economics are now strong enough to sanction the Buchan Horst development, the key risk there remains the environment permitting process. The result of the ongoing consultation that will define the new rules is expected in the spring. We therefore do not anticipate much capex spending at Buchan in 2025. With the fiscal uncertainty now removed and a sustainable dividend (yield is ~16% assuming current commodity prices), Serica Energy is a “must own” stock.
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Tethys Oil (TETY SS) C; Target price of SEK80 per share: Encouraging results at Kunooz-1 – Large and extensive natural fractures have been encountered over 500 m (gross thickness) in the Birba and Buah formations at the Kunooz-1 well, resulting in very high permeabilities. The matrix porosity is low. The presence of these large fractures could support significant volumes of fluids or gas in the formation. Due to the fractures, 80 mbbl of drilling fluids were lost in the formation and no cuttings could be recovered. The nature of the formation fluid (gas, oil or water) is therefore uncertain. Tethys will now perform a well test to clean-up and produce the well to understand the hydrocarbon potential of the Birba and the Buah. We view this update as positive as it reduces the geological risk of the well down to the nature of the formation fluid. We are therefore increasing our chance of success from 21% to 30%. However, we have removed the resources associated with the Khufai (~32 mmbbl) from our ReNAV. • The acceptance period for the offer expires on 2 December, which leaves ~ one month to test the Kunooz-1 well. This is a very material well and, in case of success, Tethys shareholders might seek a higher price to sell the company. We continue to view the offer by Roc Oil as a put option with a strike price of SEK58.70 per share if the Kunooz well test is not successful. Tethys’ shares currently trade below this price, which suggests an asymmetric return in favour of existing shareholders.
See website for full report

IN OTHER NEWS
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AMERICAS

Borders and Southern (BOR LN): Licence extension in the Falklands – The expiry date for Production Licences PL018, PL019, PL020, including the Darwin Discovery Area has been extended from YE24 to YE26.

Equinor (EQNR NO): Acquiring US assets – Equinor is acquiring 100% of EQT’s remaining working interest in Northern Marcellus gas units for US$1.25 bn. The transaction adds approximately 80,000 boe/d to Equinor’s US production in the near-term.

Galp Energia (GALP LI): 3Q24 results – 3Q24 production was 112 mboe/d (mostly in Brazil). Net debt at the end of September was EUR1.5 bn.

Seacrest Petroleo (SEAPT NO): 3Q24 Operating update in Brazil – 3Q24 net production in Brazil was 6,843 boe/d. Seacrest is farming out 25% WI plus an optional 7.5% in its assets to MBD partners for up to US$217 mm.

EUROPE

Aker BP (AKERBP NO): 3Q24 results - 3Q24 production in Norway was 415 mboe/d. The FY24 production guidance is now 430-440 mboe/d (420-440 mboe/d previously). All the development projects are on schedule. Net debt at the end of September was US$2.5 bn.

bp (BP LN): 3Q24 results – Adjusted net profit for the period was US$2.3 bn with 2,378 mboe/d production. bp expects 4Q24 production to be lower compared with 3Q24.

Deltic Energy (DELT LN): Resources update at UK discovery – The Selene discovery is expected to hold 95-176 bcf recoverable resources, which is at the lower end of pre-drill estimates. This reflects the fact that the gas column was smaller than expected. However, the bulk of the recoverable resources is concentrated in the higher quality B-Sand up-dip from the 48/8b-3Z well location which should support a simpler and cheaper development option with greater gas production per well than was envisaged pre-discovery.

Europa Oil & Gas (EOG LN): Annual results for the year ending 31/07/2024 – WI production in the UK was 137 boe/d with increased downtime and water cut. Net cash at the end of July was £1.5 mm.

OKEA (OKEA NO): 3Q24 results – 3Q24 net production in Norway was 37.3 mboe/d. The company held ~NOK1 bn in net cash at the end of September. The FY24 production guidance has been narrowed from 36-40 mboe/d to 37-39 mboe/d with capex of NOK3.2-3.5 bn. OKEA expects to produce 28-32 mboe/d with NOK3.3-3.7 bn capex in 2025 and 26-30 mboe/d with MOK3.2-3.8 bn capex in 2026.

OMV (OMV AG): 3Q24 results – Adjusted net income for the period was EUR346 mm with 332 mboe/d production. FY24 production is expected to be 330-350 mboe/d with capex of EUR3.8 bn.

Repsol (REP SM): 3Q24 results – Net income over the period was EUR166 mm with 553 mboe/d production.

Shell (SHEL LN): 3Q24 results – Adjusted net earnings over the period were US$6 bn with 2,752 mboe/d production. 4Q24 production is expected to be 2,640-2,910 mboe/d.

TotalEnergies (TTE FP): 3Q24 results/Discovery in Denmark – 3Q24 adjusted net income was US$4.1 bn with 2.41 mmboe/d production. The 3Q24 dividend is EUR0.79 per share (+7% vs last year). 4Q24 production is estimated at 2.4-2.45 mmboe/d. The HEMJ-1X well has encountered 48 meters of net gas condensate pay in a good quality reservoir in the Eastern part of the Harald field.

Var Energi (VAR NO): Selling asset in Norway – Var has sold the Boyla field to Concedo for US$24 mm.

FORMER SOVIET UNION

Eni (ENI IM): Dry hole in Kazakhstan – The Abay-1 wildcat offshore Caspian was dry.

Nostrum Oil & Gas (NOG LN): 3Q24 update in Kazakhstan - 3Q24 production was 13,758 boe/d. Well 41 at Chinarevskoye encountered a new Devonian hydrocarbon-bearing formation that will be perforated in 4Q24. Gas processing from Ural O&G is expected to increase by YE24. Nostrum held US$155 mm in unrestricted cash at the end of September.

SUB-SAHARAN AFRICA

Africa Oil (AOI SS/CN): Nigerian licences renewed –Petroleum Mining Lease 52, containing the Agbami field, has been renewed for a period of 20 years effective from November 24, 2024.

Seplat Energy (SEPL LN): 3Q24 results. Increased dividend – 3Q24 production in Nigeria was 45,768 boe/d. The company now expects to produce 46-50 mboe/d in 2024 (44-52 mboe/d previously) with capex at the top end of the US$170-200 mm guidance. First gas at ANOH has been delayed to 2Q25. Net debt at the end of September was US$270 mm. Gas realizations in Nigeria have increased from US$2.87/mcf over the first 9 months of 2024 to US$3.18/mcf in 3Q24. The company has declared a core dividend of US$3.6 cts per share for 3Q24, up 20%.

Tlou Energy (TLOU LN): Delisting from AIM – Tlou intends to cancel the trading of its shares on AIM.

EVENTS TO WATCH NEXT WEEK
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04/11/2024: Gran Tierra Energy (GTE CN/LN/US) – 3Q24 results
04/11/2024: Kosmos Energy (KOS US/LN) – 3Q24 results
05/11/2024: Tethys Oil (TETY SS) – 3Q24 results
06/11/2024: Parex Resources (PXT CN) – 3Q24 results
06/11/2024: Frontera Energy (FEC CN) – 3Q24 results
06/11/2024: Canacol Energy (CNE CN) – 3Q24 results