AUCTUS ON FRIDAY - 15/11/2024

AUCTUS PUBLICATIONS
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Arrow Exploration (AXL LN/CN)C; Target price of £0.70 per share: 1.9 mbbl/d at latest CN well. Water disposal infrastructure operational. High net cash – The fifth horizontal well at Carrizales Norte (CNB HZ-6) is producing 1.9 mbbl/d of oil (0.95 mbbl/d net to Arrow) with a water cut of 31%. The well reached TD ~ one month ago. After ~1 month of production, CNB HZ-1 and CNB HZ-3 were also producing >30% water with ~1 mbbl/d oil production (gross). Overall current gross oil production from the existing horizontal wells (CNB HZ-1, HZ-3, HZ-4 and HZ-5 but excluding HZ-6) is 4.36 mbbl/d (2.18 mbbl/d net to Arrow) with each well producing 1-1.16 mbbl/d (gross). The water cut at CNB HZ-1, HZ-3, HZ-4 and HZ-5 stands at 52%-71% with the higher end of the range reflecting the older wells. The water cut is in line with our expectations. We are assuming water cut of 60-80% after six months. The water cut at CNB HZ-1 (on production since mid June) is 71%. Overall current net production is now 5,305 boe/d (5,835 boe/d six weeks ago). However, Arrow has now completed the water disposal facility at the CNB pad. The facility began operating on 2 November. Combined with the water disposal facilities at the CN and RCE pads, Arrow believes it has the ability to dispose of all water to be produced from those pads and increase the speed of the well pumps, adding initially 600-800 bbl/d of oil production (300-400 bbl/d net to Arrow). The CNB HZ-7 development well spud on 22 October and will add further production. The company will then drill the Alberta Llanos prospect (formerly Chorreron-1/Baquiano-1). Our unrisked value for Alberta Llanos is £0.05/sh. Arrow plans to utilize two drilling rigs in 2025 to develop the Alberta Llanos prospect and drill development wells at the RCE and CN fields. Also in 2025, the Mateguafa Oeste, Mateguafa Attic and Capullo prospects will be drilled.
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Condor Energies (CDR CN)C; Target price of C$5.80 per share: Good quarter. Positive signals at high value LNG project for the mobility sector – 3Q24 production was 10,010 boe/d; which is line with our expectations. Production has increased to 10,706 bo/ed in the last seven days following low cost work-over activities. With the expansion of the workover programme upon the arrival of the second work-over rig and the installation of additional in-field flowline water separation systems, we expect that this trend will continue. We forecast 10.8 mboe/d production in 4Q24 (that might be too conservative) increasing to ~13 mboe/d in 1Q25 and 15.5 mboe/d in 4Q25. Condor has been invited to present its Kazakhstan LNG project at the COP29 conference in Baku. The purpose of the project is to replace diesel with more environmentally friendly LNG as a fuel for the mobility sector (rail locomotives, marine and heavy trucks). We see this invitation by Kazakhstan as a positive signal. This highlights the commitment of the Kazakh government to the project. Condor has already been allocated sufficient feed gas to produce ~740 t/d of LNG. Our unrisked NAV for the first LNG plant alone is >US$4.30 per share.
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GeoPark (GPRK US)C; Target price of US$26 per share: Success at Confluencia Norte: material reserves and production boost – The three exploration wells at Confluencia Norte in Argentina are now in production with an aggregate gross flow rate of 4 mbbl/d (Geopark WI: 50%). The wells are still cleaning-up and production is increasing towards its peak within 90 days. This is a very good result that derisks the area where no reserves have been booked so far. We understand that the performance of the wells currently tracks GeoPark’s P10 case. We are increasing our expected total YE24 WI production for GeoPark in Argentina from 6.1-6.5 mboe/d to >8 mboe/d. This will also have a positive impact on FY25 production in Argentina. 3C contingent resources at Confluencia Norte are estimated at ~39 mmboe. This represents ~80% upside to GeoPark’s ~50 mmboe net 2P reserves in Argentina. We believe that a proportion of these resources will now be converted into reserves. The balance of the resources will also be attributed a lower risk factor. Pending further visibility on the FY25 production guidance and the YE24 reserves, we have increased our chance of development for the 39 mmboe 3C resources at Confluencia Norte from 35% to 55%. We are increasing our target price from US$25 per share to US$26 per share. This success showcases the quality of GeoPark’s assets in Argentina where the running room is important. GeoPark’s net 3C contingent resources at Mata Mora Sur and Confluencia Sur are estimated at respectively ~23 mmboe and 56 mmboe.
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Panoro Energy (PEN NO)C; Target price of NOK52 per share: 3Q24 update – 3Q24 production was 9,401 bbl/d. Current production has increased to ~12.5 mbbl/d following the production ramp-up to 40 mbbl/d at Dussafu. Only one of the two new EG wells are on stream. The second well is expected to take Panoro’s production to >13 mbbl/d by YE24. The Production Sharing Contract for offshore Block EG-23 has been signed. Panoro now holds 80% participating interest and operatorship of Block EG-23. The block is adjacent to the producing Alba gas and condensate field. Panoro has identified a number of prospects and leads in addition to the existing discoveries estimated to hold contingent resources of ~104 mmbbl of oil and condensate and 215 bcf of gas.

PetroTal (PTA LN/TAL CN)C; Target price of £1.40 per share: Production >21 mbbl/d. Buying a new rig will provide operational flexibility and reduce costs – 3Q24 production was 15,203 bbl/d. This is in line with previous indications. The cash position at the end of September had been previously reported and there are no surprises in the rest of the balance sheet. With the end of the dry season, production has rapidly increased from 10.7 mbbl/d during the first week of October to >21 mbbl/d currently. PetroTal is buying a new rig that will be imported into Peru in 1Q25. Having a more modern rig will reduce downtime and minimize mobilization and demobilization costs. It will also improve operational efficiency as it will be easier to deploy the rig on different locations as required and on short notice. The purchase price of the rig will be financed through a lease agreement over 36 months with a monthly lease cost of US$0.5 mm. There will be some savings on drilling costs (a well currently costs ~US$14 mm). We have changed our target price to £1.30 per share as we have reduced our Brent price forecasts. Petroperu is working through restructuring issues, which has led to some gridlock throughout Peru’s oil and gas industry. A resolution of the situation and the re-opening of the ONP would be very material for PetroTal. PetroTal has 1.9 mmbbl of pending crude sales with Petroperu. In addition, the re-opening of the ONP would allow PetroTal to increase its production. This route would not be impacted by seasonal levels of the rivers.
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Vaalco Energy (EGY US/LN)C; Target price of US$10 per share: High production. Balance sheet strength ahead of expectations – 3Q24 WI production was 26,709 boe/d. This is above our expectations of 25,740 boe/d and towards the higher end of the guidance range of 24.9-27.6 mboe/d. Vaalco has narrowed its FY24 production guidance range from 23.6-26.5 mboe/d to 24.1-25.4 mboe/d with lower capex (US$110-130 mm vs US$115-140 mm previously). Success at the 4Q24 exploration well in the southern area of the Canada licence could derisk 8-12 mmboe and add ~US$0.45/sh to our Core NAV. The detailed 2025 programme will be disclosed in early 2025. However, Vaalco has confirmed that it will include (1) a seven well drilling programme in Gabon starting mid-2025, (2) the potential drilling of 10-13 new wells in Egypt (a rig has been contracted and will drill at least two wells in 4Q24) and (3) the FPSO maintenance and upgrade in Cote d’Ivoire to restart production in 2026. The key near term risk is the potential cost overrun and delays at the FPSO upgrade project in Cote d’Ivoire, particularly given that Vaalco will be running simultaneously a large drilling programme in Gabon, particularly given that Vaalco will simultaneously be running a large drilling programme in Gabon. The Cote d’Ivoire project is managed by CNR but Vaalco has assigned four personnel to the team in charge of the project including one at the yard where the work will take place. Vaalco has strong execution capabilities, as highlighted during the reconfiguration of the surface infrastructure at Etame Marin in Gabon. The nature of the cost recovery mechanism in Gabon also mitigates Vaalco’s financial exposure in case of delays in Cote d’Ivoire. Vaalco will drill the lower risk development wells at the beginning of the programme, maximizing production and the proportion of cashflow available for cost recovery for the riskier wells later in the program.
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Valeura Energy (VLE C)C; Target price of C$10 per share: High production in 4Q24. Launching a share buyback programme – The 3Q24 production and cash position at the end of September had been reported previously. Production in September and October stood at ~26.4 mbbl/d. This is very high. The company expects production to be ~26 mbbl/d over 4Q24. We only assumed 24-25 mbbl/d. The high production combined with (1) the settlement in early October of a 0.18 mmbbl lifting sold at the end of 3Q24 and (2) above average liftings in 4Q24 suggests high cashflow and free cashflow in 4Q24. As previously reported, Valeura held crude oil inventory of 1.2 mmbbl at the end of September (30% higher than three months earlier) of which 0.51 mmbbl were lifted on 1 October. The FY24 production guidance has been narrowed from 21.5-24.5 mbbl/d to 22-24 mbbl/d. The FY24 opex and capex guidance is unchanged. Valeura has launched a share buyback programme for up to 10% of its free float (7.4 mm shares). This is expected to provide support to the share price. This also sends a send a positive signal with regards to the strength of the fundamentals of the business and of the balance sheet following the corporate restructuring given that Valeura continues to look for acquisitions. We anticipate a high reserve replacement ratio in 2024 given the positive drilling results and the performance of the fields, particularly at Nong Yao. Sanctioning the redevelopment of Wassana in 1Q25 is expected to add further reserves.
See website for full report

IN OTHER NEWS
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AMERICAS

Diversified Energy (DEC LN/US): 3Q24 update in USA – 3Q24 production was 138 mboe/d increasing to 142 mboe/d at the end of September.

Helix Exploration (HEX LN): Drilling update in USA – Darwin #1 has encountered 330 ft of potential gross pay over multiple horizons with helium gas shows of up to 1,312 ppm in the drilling mud. The company will now run wireline logs

Nostra Terra (NTOG LN): Production update in USA – Net oil production currently averages 120 bbl/d. The waterflood programme is expected to add 15-30 bbl/d. Additional work-over candidates have been identified.

Touchstone Exploration (TXP LN/CN): High flow rate at Cascadura/3Q24 results/Reducing guidance – The Cascadura-2ST1 well produced an average rate of ~4,950 boe/d, consisting of 26.4 mmcf/d of natural gas and 547 bbl/d of NGLs. The Cascadura-3ST1 well achieved an average production rate of ~1,100 boe/d, including 786 bbl/d of crude oil and 1.9 mmcf/d of natural gas. 3Q24 production was 5,211 boe/d. The company held ~US$23 mm of net debt at the end of September. Net sales in October were 3,993 boe/d. The company now expects to produce 5.6-6.2 mboe/d in 2024 with YE24 net debt of US$32 mm (7.7-8.3 mboe/d with US$28 mm net debt previously).

ASIA AND AUSTRALASIA

Jadestone Energy (JSE LN): Intermittent production at Akatara. Re-iterating guidance – During October, the Akatara field intermittently achieved its daily contract quantity rate of ~20 mmcf/d. The company’s overall production was >22 mboe/d in October with production in excess of ~24 mboe/d for various periods. FY24 production continues to be expected to be towards the lower end of the 18.5-21.0 mboe/d guidance.

EUROPE

Eni (ENI IM): Further investment in renewable energy business – Energy Infrastructure Partners (EIP) will invest EUR209 mm in Eni’s Plenitude. On closing EIP will hold 10% of Plenitude for a total investment of ~EUR800 mm.

Equinor (EQNR NO)/VAR Energi (VAR NO): Discovery in Norway – The Rhombi well in the Fram licence encountered gross recoverable resources of 13-28 mmboe.

Kistos (KIST LN): Investment in tidal power – Kistos is investing £0.8 mm in Spiralis Energy. Spiralis has developed the Axial Skelter tidal power solution to build tidal energy generator from fully recyclable, 3D-printed segments. Kistos will hold up to 20% in Spiralis (10% equity plus 10% warrants).

Shell (HEL LN): Court ruling overturns previous decision on emissions - Shell has won its appeal in the Netherlands to overturn a previous ruling from 2021 that ordered the company to cut its emissions by 45% from 2019 levels by 2030.

Star Energy (STAR LN): Selling asset in the UK – Star is selling its land in Alton for £6.3 mm. The land was the location of the Company’s now decommissioned Holybourne Oil Terminal and is not being used in any of the Group’s operations.

FORMER SOVIET UNION

Petro Matad (MATD LN): Operating update in Mongolia – The Heron-1 well has a maximum production deliverability estimated to be similar to or greater than the 821 bbl/d achieved on drill stem testing in 2019. However, the oil has more associated gas than expected. This is causing pressure fluctuations at surface and the production is being choked back to 200-300 bbl/d. The Heron-2 well is producing a mixture of oil and what is interpreted to be stimulation fluids with productive potential estimated to be ~30 bbl/d. This is significantly lower than the rates observed in Heron-1 although it is in line with flow rates reported from some other wells in the basin.

MIDDLE EAST AND NORTH AFRICA

Chevron (CVX US): Selling stake in exploration asset in Egypt – Chevron is selling 23% WI in the North El-Dabaa block, offshore Egypt to QatarEnergy.

Genel Energy (GENL LN): 3Q24 results – 3Q24 WI production in Kurdistan was 21,050 bbl/d. The production was sold domestically at ~US$37/bbl. Net cash at the end of October was US$125 mm. Genel retains an overdue receivables balance of nominal US$107 mm owed by the KRG. Genel owes US$50 mm to the KRG.

SUB-SAHARAN AFRICA

Africa Oil (AOI CN/SS): 3Q24 results – 3Q24 production was 17.9 mboe/d. Net debt at the end of September was US$165 mm in. FY24 production is now expected to be 16.5-18.5 mboe/d (16.5-19.5 mboe/d previously) with US$80-110 mm capex (US$100-130 mm previously). The completion of the amalgamation of Prime into Africa Oil is now expected by the end of 1Q25.

BW Energy (BWE NO): 3Q24 results – 3Q24 production in Gabon and Brazil was 25,550 bbl/d. Net debt at the end of September was US$247 mm.

EVENTS TO WATCH NEXT WEEK
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19/11/2024: Maha Energy (MAHA-A SS) – 3Q24 results
19/11/2024: Nostrum Oil & Gas (NOG LN) – 3Q24 results
20/11/2024: Ithaca Energy (ITH LN) – 3Q24 update
20/11/2024: Panoro Energy (PEN NO) – 3Q24 results
20/11/2024: Seacrest Petroleo (SEAPT NO) – 3Q24 results