Auctus on Friday - 07/07/2023
AUCTUS PUBLICATIONS________________________________________
Criterium Energy (CEQ CN)C; target price of C$0.55 per share: Financing priced – The C$22 mm offering for the acquisition of Mont D’Or Petroleum has been priced at C$0.20 per subscription receipt. Each subscription receipt will convert into a unit comprising one share and one warrant with an exercise price of C$0.25 per share valid for 36 months. On completion of the acquisition, Criterium will hold 1,050 bbl/d long life and high netback production and 4.7 mmbbl 2P reserves across 2 PSCs in Indonesia (Tungkal in South Sumatra and West Salawati in Southwest Papua). On closing, the company will have ~US$17 mm in cash (excluding the proceeds from the exercise of the warrants) and US$19.7 mm of debt. The post money market cap will be ~US$26 mm (~US$50 mm when including warrants and options, most of which are currently out of the money or priced at or very near the current share price). As we incorporate the pricing of the transaction, which reflects the current difficult market conditions and is lower than we anticipated, we have reduced our target price from C$0.95 per share to C$0.55 per share, which is close to our new ReNAV per share. With line of sight on production of 8.5-9.6 mboe/d (incl. Bulu) by 2026, the story continues to be about cashflow growth and significant reserves and exploration upside.
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Longboat Energy (LBE LN)C; target price of £0.90 per share: Accretive acquisition of producing assets transforms the profile of Longboat/extending exploration portfolio – Longboat Norge (50.1% owned by Longboat) is acquiring ~300 boe/d production and 1.55 mmboe of 2P reserves (~77% liquid) across 2 assets (4.8% unitized interest in the Statfjord Øst Unit and a 4.32% unitised interest in the Synga Unit) from INPEX Idemitsu for US$12.75 mm. Longboat Norge will also pay a further deferred, post-tax consideration of US$1.75 mm in equal stages over the next 18 months as a decommissioning security, which will be returned at the time of decommissioning in late 2030s. The acquisition triggers the additional US$4 mm contingent cash equity injection into Longboat Norge (US$2 mm net to Longboat) by JAPEX. This transaction transforms the profile of Longboat as it becomes a producer in line with the company’s stated goals. The business will now be underpinned by cashflow. As a producer, the standing of the company as a counterparty in Norway is significantly enhanced. The transaction is accretive as it unlocks trapped 6.2% tax losses that were not recoverable under the 71.8% cash exploration refund (versus a total tax rate of 78%). Based on Longboat’s historic capex programme (until YE23), we estimate that this unlocks an additional ~US$5 mm of value. Overall, the transaction adds ~US$24 mm of NPV to Longboat Norge (US$15.3 mm NPV for the asset as estimated by the CPR + US$5 mm of tax synergies + US$4 mm from additional JAPEX equity) at an acquisition cost of US$12.75 mm. Net to Longboat’s 50.1% stake, this adds ~US$5.5 mm of net value. Importantly, this transaction is entirely funded through the deal with JAPEX (expected to complete imminently). In a separate press release, an extended work period has been granted in licence PL1049 that has been stratigraphically split and renamed PL1049S. Longboat Norge (50.1% Longboat) will hold 40% in the new licence (the shallower horizons of the previous licence). PL1049S contains two prospects in the Tertiary play (that have been derisked by the Kveikje discovery 12 km away): Jasmine and Sjøkreps with 10-30 mmboe and 20-300 mmboe gross prospective resources respectively. The drilling decision has to be made by February 2025.
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PetroTal (PTAL LN/TAL CN)C; target price of £1.50 per share: High production – 2Q23 production was 19,031 bbl/d. This is higher than our forecast (18.5 mbbl/d) and the company’s recently increased 2Q23 guidance (5% higher than 17 mbbl/d). During the quarter, production was affected by the ongoing ONP closure and six days of planned maintenance, which constrained production by ~25%. Well 15H continues to produce at high rates (6,040 bbl/d currently after 25 days of production). Well 16H is expected to commence drilling in late 3Q23. Depending on the Amazon river levels during the dry season, on which the company expects to have visibility by next month, the company could upgrade its FY23 production guidance. The story continues to be about significant free cash flow generation, production and reserves growth with generous shareholders returns with a US$0.015 per share quarterly dividend (~11% annual dividend yield) and share buybacks. High impact exploration drilling could also take place in 2024.
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IN OTHER NEWS
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AMERICAS
88 Energy (88E LN/AU): Acquiring further assets in Texas – 88 Energy is acquiring 465 net acres and 1.1 mmboe net 2P reserves in the Permian from Lonestar for US$1.5 mm in cash. The new acreage is located ~4 miles south of existing Project Longhorn production assets.
Alvopetro Energy (ALV CN): Production update in Brazil – June average sales volumes were 2,068 boe/d.
Canadian Overseas Petroleum (COPL LN/XOP CN): Operations update in the US – 2Q23 production was 1,250 bbl/d.
Desert Mountain Energy (DME CN): Operating update in the USA - Since the commissioning of the McCauley Helium Processing Facility in January, the company has not been able to secure the all the required permits from the Arizona regulatory authorities. Desert Mountain has therefore decide to move the McCauley Processing Facility to the newly acquired West Pecos Abo Gas Field in New Mexico.
EUROPE
Aker BP (AKERBP NO): Operating update in Norway – 2Q23 production was 480.7 mboe/d.
OKEA (OKEA NO): 2Q23 update in Norway – 2Q23 net production was 22,263 boe/d. Net cash at the end of 2Q23 was NOK1,040 mm. The company has re-iterated its FY23 production guidance of 22-25 mboe/d with capex of NOK1.7-2.1 bn. Expected additional production net to OKEA from Statfjord for 2023 has been reduced to 11,000 – 13,000 boe/d from 13,000 – 15,000 boe/d. The reduction reflects the prolonged turn-around at Statfjord C and unplanned shutdowns at Statfjord A.
Repsol (REP SM): 2Q23 production – 2Q23 production was 595 mboe/d.
Shell (SHEL LN): 2Q23 update – 2Q23 production is expected to be 2,600-2,740 mboe/d.
FORMER SOVIET UNION
Block Energy (BLOE LN): Operating update in Georgia – 2Q23 production was 664 boe/d.
EVENTS TO WATCH NEXT WEEK
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13/07/2023: OKEA (OKEA NO) – 2Q23 results
Aker BP ASA engages in the exploration, development, and production of petroleum resources on the Norwegian Shelf. In addition, Co. has a separate Johan Sverdrup business unit to manage its interest.
Alvopetro Energy is a resource company and is engaged in the exploration for, and the acquisition, development and production of, hydrocarbons in the Reconcavo, Tucano, Camamu-Almada and Sergipe-Alagoas basins in onshore Brazil. Co. develops producing hydrocarbons by appraising and developing existing discoveries and exploring in areas considered by management to be prospective for hydrocarbon resources. Co.'s assets consist of interests in three producing fields and 16 exploration blocks comprising 148,500 gross acres onshore Brazil.
Canacol Energy is engaged in core petroleum and natural gas exploration and development activities in Colombia, Brazil and Guyana.
Canadian Overseas Petroleum is engaged in the exploration and development of oil and gas in the United Kingdom North Sea.
Longboat Energy PLC, formerly Longboat Energy Ltd, is a United Kingdom-based investment company. The Company's investment objectives is to create a full-cycle North Sea exploration and production (E&P) company in order to deliver value to investors.
Okea ASA is a Norway-based oil company engaged in the oil and gas exploration and production industry. The Company contributes to the value creation on the Norwegian continental shelf with development and operation systems through the utilization of the result of previous and ongoing exploration activities in order to bring undeveloped oil on stream in strategic cooperation with service companies. Its services do not involve the exploration for petroleum. The Company operates an office in Trondheim, Norway.
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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