AUCTUS ON FRIDAY - 16/08/2024
AUCTUS PUBLICATIONS________________________________________
Criterium Energy (CEQ CN)C; Target price C$0.35 per share: New drilling expected to start in September – A drilling rig is scheduled to be mobilized to site in August. The two-well infill program, targeting a previously undrilled section of the MGH Field, is anticipated to commence in early September with the wells expected to come on production in early November at a forecasted combined rate of 300 bbl/d. While this is a bit later than we anticipated, we continue to forecast that Criterium will exit 2024 with ~1,250 boe/d production. The programme is expected to cost only US$4.5 mm with payback in less than 6 months. Following the strong performance of the first work-over campaign in early 2024, Criterium has launched a second campaign of five new work-overs which began in late July. To date, two workovers have been completed and early indications are that production levels exceed internal expectations of ~ 30 bbl/d per workover. The remaining three workovers are expected to be completed by mid-August. Completing the divestment of Bulu for US$7.75 mm by the end of August remains a key event as this would allow the company to reduce its debt and/or accelerate its drilling programme. Further progress on the onshore gas development is another key area of near term potential value creation.
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GeoPark (GPRK US)C; Target price of US$28 per share: Strong financials on low cash tax. FY24 production impacted by blockades and decline – 2Q24 production of 35,608 boe/d had been already reported. Production in Brazil has not been restored yet and is expected to restart only at the end of October. In light of (1) the longer than expected shutdown and uncertain restart date in Brazil (FY23 production was ~1 mboe/d) and (2) increased frequency and duration of blockades around the operations in Colombia, there is a downside risk of 1.5-2.5 mboe/d to the FY24 production guidance of 35.5-39 mboe/d (excluding Argentina and the contribution of any exploration success). New well activity and performance in the Llanos 34 Block may not offset the natural base decline of the fields. The downtime at CPO-5 and Llanos-34 due to blockades was respectively 12% and 3%, 4x and 2x expectations. Cash tax in Colombia was much lower than expected (~US$95 mm expected in 2024 versus our forecast of ~US$150 mm). GeoPark’s cash position at the end of June was US$40 mm above our expectations. GeoPark has signed a new 12 month offtake contract with Trafigura for CPO-5 with lower differentials leading to increased netbacks at the field by ~US$2.65/bbl. Given the increasing shortages of light crude in Colombia, we anticipate that CPO-5 crude will continue to benefit from higher netbacks. The Lark exploration well at CPO-5 was dry..
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Pulsar Helium (PLCR CN)C; target of C1.80 per share: Operating update – The acquisition of a 20.4 km long 2D seismic line has commenced. This will help further confirm the scale of Topaz. Acquiring new and extensive structural data will be used to assist the placement of step out appraisal wells from Jetstream #1.
Valeura Energy (VLE CN)C; Target price C$10 per share: Starting production at Nong Yao C – Production at Nong Yao C has started from three out seven wells. Additional wells will be brought online thereafter. Production is expected to reach 11 mbbl/d within the coming weeks, versus recent rates in the first half of August of ~7 mbbl/d. Valeura intends to sustain Nong Yao production rates at approximately 11 mbbl/d for the remainder of the year.
Zephyr Energy (ZPHR LN)C; Target price C$10 per share: Production guidance for non op. assets in line. Waiting for results of well test in the Paradox – 2Q24 production in the Williston Basin was 1,226 boe/d. This excludes natural gas liquids (historically 150-200 bbl/d). This represents an increase of 7% compared to 1Q24 but 2Q24 production from the six wells Slawson wells continues to be partially impacted by gas export infrastructure constraints. The FY24 production guidance for the Williston Basin has been set at 1.1-1.3 mboe/d excluding natural gas liquids. Including natural gas liquids, we estimate that this would equate to 1.25-1.5 mboe/d. This is in line with our expectations. The key near term newsflow is the upcoming result of the acidization and subsequent well test at the State 36-2R LNW-CC well in the Paradox Basin. The purpose of the acidization test is to further remove any drilling mud emulsion from the fracture network. In the event the acidization does not remove sufficient mud from the fracture network, we note that the design of the initial horizontal well was for a (up to) 10,000’ lateral and the well could therefore be re-entered accordingly. Such a well would target a much larger area of natural fractures and have hydraulic stimulation.
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IN OTHER NEWS
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AMERICAS
Diversified Energy (DEC LN/US): 2Q24 results – 2Q24 production in the US was 746 mmcfe/d with a June exit rate of 855 mmcfe/d. Net debt at the end of June was US$1.6 bn.
Equinor (EQNR NO)/ExxonMobil (XOM US): Exiting Suriname licence - Media reports indicated that Equinor and ExxonMobil have exited block 59.
Gran Tierra Energy (GTE CN/LN/US): Discovery in Ecuador – The Charapa B6 exploration well encountered 45 ft of net pay in the Holin reservoir. The well flowed 2,118 bbl/d of 28.2 degree API gravity oil on test with, a 2.2% water cut.
i3 Energy (I3E LN): 2Q24 results – 2Q24 production in Canada was 18,271 boe/d. Net cash at the end of June was ~US$7 mm. The company continues to expect to produce 18,000 – 19,000 boe/d in 2024 with a YE24 exit rate of 20,250 – 21,250 boe/d.
Touchstone Exploration (TXP LN/CN): 2Q24 results. Lowering production guidance – 2Q24 production in Trinidad was 5,432 boe/d increasing to 5,816 boe/d in July. Net debt at the end of June was ~US$29 mm. Production from Cascadura-2ST1 and Cascadura-3ST1 is expected by the end of September. The FY24 capital programme has been increased from US$33 mm to US$35 mm. However, the FY24 production guidance has been reduced from 9,400 boe/d to 8,000 boe/d on steeper declines than expected at Cascadura.
MIDDLE EAST AND NORTH AFRICA
DNO (DNO NO): 2Q24 results – 2Q24 net production was 79,400 boe/d, of which Kurdistan contributed 59,800 boe/d, the North Sea 16,300 boe/d and West Africa 3,300 boe/d. Net cash at the end of June was US$158 mm. The 2Q24 dividend has been increased by 25% to NOK0.3125 per share from prior quarterly distributions.
Serinus Energy (SENX LN): 2Q24 results – 2Q24 production was 607 boed including 559 boe/d in Tunisia and the balance in Romania. The company had a working capital deficit of US$4.2 mm at the end of June.
SUB-SAHARAN AFRICA
Africa Oil (AOI SS/CN): 2Q24 results – Net debt at the end of June was US$36.6 mm including Prime. 2Q24 WI production in Nigeria was ~15,800 boe/d increasing to 18.1 mboe/d post 2Q24. The FY24 production and capex guidance are unchanged.
EVENTS TO WATCH NEXT WEEK
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20/08/2024: Nostrum Oil & Gas (NOG LN) – 2Q24 results
22/08/2024: Panoro Energy (PEN NO) – 2Q24 results
Diversified Gas & Oil is an Appalachian Basin focused natural gas and crude oil operations company.
DNO is a Norwegian exploration and production company focused on the Middle East and North Africa. Co. holds stakes in oil and gas blocks in various stages of exploration, development and production, both onshore and offshore, in the Kurdistan region of Iraq, Yemen, Oman, the United Arab Emirates, Tunisia and Somaliland.
Equinor is engaged in oil and gas exploration and production activities. Co. is primarily focused on exploration, development and production of oil and gas on the Norwegian continental shelf (NCS). Co.'s operations are organized into four segments. The Development and Production Norway and Development and Production International segments explore, develop, produce and extract crude oil, natural gas and natural gas liquids. The Marketing, Processing and Renewable Energy segment markets, trades, transports and processes oil and natural gas and renewable energy. The Other segment consists of global well and project delivery, research and develpoment, and business development.
Exxon Mobil operates or markets products in United States and other countries through its divisions and affiliated companies. The company's business involves exploration for, and production of, crude oil and natural gas and manufacture, trade, transport and sale of crude oil, natural gas, petroleum products, petrochemicals and other products. In United States, the company's development activities are focused on the onshore United States, in the Permian Basin of West Texas and New Mexico and the Bakken oil play in North Dakota. Gas development activities are also focused on the Marcellus Shale of Pennsylvania and West Virginia, the Utica Shale of Ohio and the Haynesville Shale of East Texas and Louisiana.
Gran Tierra Energy, together with its subsidiaries, is a company focused on oil and gas exploration and production in Colombia. Co. is primarily engaged in the exploration and production of oil and natural gas. Co. has one reportable segment based on geographic organization, Colombia. As of Dec 31 2017, Co. had total estimated proved reserves of 59.3 million barrels of oil and natural gas equivalent, consisting of 58.9 million barrels of oil and 2.1 million cubic feet of natural gas.
i3 Energy is engaged in the development and production of oil and gas in the UK North Sea. Co.'s strategy is to focus on the development of discoveries located close to existing infrastructure and the exploitation of producing fields, whilst maintaining limited exploration exposure.
Serinus Energy is engaged in the exploration for and development of oil and gas properties in Ukarine, Brunei and Syria.
Touchstone Exploration Inc., formerly Petrobank Energy and Resources Ltd., is an oil and gas exploration and production company. The Company's segments include Trinidad and Canada. The Company's core producing properties are located onshore within Trinidad. The Company's producing properties in Trinidad include Coora 1, Coora 2, New Dome, South Palo Seco, Barrackpore, Fyzabad, Icacos, Palo Seco and San Francique. The Company's exploratory properties in Trinidad include Bovallius, Moruga, New Grant, Ortoire, Otaheite, Piparo, Rousillac, Siparia and St. John. Its exploratory properties in Canada include Beadle, Druid, Luseland and Winter. The gross acres of the properties include approximately 106,604. The Company operates a total of approximately 370 wellbores on the Coora blocks. The New Dome block is located onshore in the southwest portion of Trinidad in the Ward of Siparia. The Barrackpore Block is located approximately 11 kilometers southeast of the city of San Fernando.
Valeura Energy is engaged in the exploration, development and production of petroleum and natural gas in Turkey and Western Canada. As of Dec 31 2010, proven gross reserves for light and medium oil was 116 thousand barrels (net reserves of 104 thousand barrels); proven gross reserves for heavy oil was 10 thousand barrels (net reserves of 9 thousand barrels); proven gross reserves for natural gas was 1,047 million cubic feet (net reserves of 938 million cubic feet); and proven gross reserves for natural gas liquids was 26 thousand barrels (net reserves of 19 thousand barrels).
Rose Petroleum is an oil and gas (O&G) and mining company with exploration assets and an operational crushing and flotation mill. Co.'s principal activities are the exploration and development of O&G resources together with the evaluation and acquisition of other mineral exploration targets, principally gold, silver, uranium and copper, and the development and operation of mines in Mexico. In Co.'s O&G division, the area of focus is on two unconventional oil and gas basins in the U.S.: the Uinta Basin and the Paradox Basin. In its mining division, Co. continues its milling operations through its subsidiary, Minerales VANE S.A. de C.V., which owns the SDA Mill in Mexico.
Auctus Advisors is a specialist Equity Capital Markets and Advisory business with a focus in the Energy Sector.
The partners have complementary skill sets, with decades of experience across Equity Capital Markets, Investment Banking and the Energy industry. We have worked at Société Générale, Canaccord Capital, BMO Capital Markets and Schlumberger. Most recently we have worked together for many years at GMP FirstEnergy.
Auctus has been set up at the beginning of a new decade in which we see significant opportunities in the Energy space. Globally, demand for energy is at record levels and continues to grow. Conversely, investment in traditional energy sources has been severely constrained. We believe this imbalance creates opportunities for both companies and investors.
Auctus provides Corporate Broking, Equity Research and Investment Banking services.
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