Auctus on Friday - 19/01/2024

AUCTUS PUBLICATIONS
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GeoPark (GPRK US)C; target price of US$24 per share: Further exploration success in Colombia – The Perico-1 exploration well at CPO-5 encountered hydrocarbons in the Barco (Guadalupe) formation. The well is currently producing 650 bbl/d of 14 deg API oil with 8% water cut. This is an important well that confirms the extension of the Llanos-34 Guadalupe play into CPO-5 and is probably derisking further prospects. This is the fifth discovery made in the Llanos since mid 2023. The Halcon-1 well at CPO-5 that also encountered potential hydrocarbons in the Guadalupe flowed at intermittent rates. There could be some potential well damage. A workover to repair the well is planned for January. The company is re-iterating its FY24 production guidance of 37-40 mboe/d (still including Chile) with US$150-200 mm capex. Zorzal, Toritos and the Guadalupe at CPO-5 could be particularly material for reserves addition and upside. Zorzal and Toritos could be important contributors to production growth in 2024 with 3-9 gross wells to continue delineating these new plays. As we incorporate the impact of the divestment of Chile and reduce our Brent price forecast for 2024, we have changed our target price to US$24 per share in line with our new ReNAV. The key newsflow for 1Q24 includes testing of two exploration wells in Llanos basin in Colombia (Halcon-1 and Zorzal Este-2) and appraisal drilling in Ecuador (Perico Norte 5).
See website for full report

Longboat Energy (LBE LN)C; target price of £0.60 per share: New licence in Norway – Longboat JAPEX (50% Longboat) has been awarded a 20% interest in Licence PL 1212 S which contains the Magnolia prospect (39 mmboe gross prospective resources – 34% chance of success), together with partners Equinor (operator - 40%) and DNO (40%). The Magnolia area includes the company’s Kveikje discovery (Longboat 10%), the Kjøttkake/Lotus exploration well (Longboat 15%) which is expected to spud in 3Q24, and the Jasmine and Sjøkreps prospects (Longboat 25%) located in PL1049. The Lotus and Jasmine/Sjøkreps prospects were recently subject to a farm-down by Longboat JAPEX to Concedo. The acquisition of the interests in the Statfjord satellites is expected to complete at the end of January. Production the Statfjord Øst and Sygna fields is expected to start ramping up production during 1Q24.

Pharos Energy (PHAR LN)C; target price of £0.50 per share: Reducing net debt by a further US$10 mm – FY23 production was 6,508 boe/d, which is the middle of the production guidance of 6.35-6.75 mboe/d. This includes 5,127 boe/d for Vietnam (guidance of 5.0-5.3 mboe/d) and 1,381 boe/d in Egypt (guidance of 1.35-1.45 mbbl/d). YE23 net debt is just ~US$6.5 mm, down from US$16.4 mm at the end of June. The US$10 mm net debt reduction has been achieved despite a US$6.4 mm increase in EGPC receivables from US$30.9 mm at the end of June to US$37.3 mm at YE23. This implies an underlying free cash flow generation of US$16.3 mm during 2H23. Following a principal repayment of US$12.6 mm in December, the remaining drawn amount under the existing RBL is US$30 mm. Pharos expects to produce 5.2-6.5 mboe/d in 2024 with net capex of US$27.3 mm. While the production guidance is below our expectations of 6.8 mboe/d, the net capex forecast is also below our numbers (US$30 mm). The key newsflow in 2024 is the securing of a farm-in partner (process ongoing) and a well drilling slot for the high impact Block 125. The licence has been extended until November 2025. The approval of an updated development plan for CNV, incorporating some horizontal wells, could also have a positive impact on reserves. As we incorporate the actual YE23 net debt, lower Brent price assumptions for 2024 and the FY24 guidance, we have changed our target price to £0.50 per share. Our new target price also reflects the rolling forward of our DCF by one year to YE24.
See website for full report

Pulsar Helium (PLSR CN)C; target price of C$0.80 per share: Additional equity provides funding for key well test and additional drilling – Pulsar Helium has raised C$4.255 mm of new equity through a placement of 18.5 mm new unit at a price of C$0.23 per unit. Each unit consists of one share and one warrant with a strike price of C$0.36 per share. The warrants have a duration of 24 months. The proceeds of the raise will allow the company to fund the well test of the high impact Jetstream#1 appraisal well scheduled to spud in February at the Topaz project in Minnesota. Jetstream#1 will twin the LOD-6 discovery well that encountered a helium-rich gas flow but could not be tested at the time. We have changed our target price to C$0.80 per share as we incorporate the dilution associated with the new equity raise. Our unrisked NAV for the 0.26 bcf of contingent resources of helium at Topaz is C$1.57 per share. The recently acquired passive seismic suggests a potentially much larger prize. 0.3-1.0 bcf of additional resources could add C$1.60-5.25 per share (unrisked).
See website for full report

Southern Energy (SOUC LN/SOU CN)C; target price of £1.20 per share: Positive results at first DUC. Completion costs below expectations – The recently completed GH 14-06 #3 Upper Selma Chalk well at Gwinville has delivered average natural gas flow rate in excess of 6.5 mmcf/d over the first days of production. The well is still cleaning up with ~33% of load fluid recovered so far. This is one of the best well results so far by Southern and it is tracking the Gen 2 IP30 type curve. By comparison, the 18-10#2 Upper Selma Chalk well completed in 1Q23 had an IP rate of only 3.3 mmcf/d. During 2022, the GH 19-3 #2, GH 19-3 #3 and the GH 19-3 #4 wells (all Upper Selma Chalk) flowed at IP30 rates of respectively 6.5 mmcf/d, 3.6 mmcf/d and 4.0 mmcf/d. The Upper Selma Chalk well results to-date are directly influenced by the length of effective lateral in high-graded reservoir, and the positive results of this GH 14-06 #3 well highlight the importance of the horizontal steering improvements that Southern achieved in the 1Q23 drilling program. The overall completion cost was only US$2.1 mm, significantly below previous indications of US$3 mm per well and ~40% lower than the two previous 18-10 pad Upper Selma Chalk wells that were completed earlier in 2023. The timing of the completion of the remaining three drilled and uncompleted wells (DUCS) will be driven by US gas prices. For the time being, we continue to assume this will happen from late 1Q24 (we assume US$3.0/mcf for Henry Hub in 2Q24).
See website for full report

Tethys Oil (TETY SS)C; target price of SEK100 per share: Production update in Oman – December WI production at Blocks 3&4 was 8,540 bbl/d. This compares to 8,361 bbl/d in November.

VAALCO Energy (EGY US/LN) C; target price of US$9.00 per share: Good operational performance in 4Q23 - 4Q23 NRI sales were 21,725-22,125 boe/d, at the top end of expectations of 19,800-22,000 boe/d. 4Q23 WI production of 23.1-23.5 mboe/d was comfortably within the management guidance of 22.9-24.6 mboe/d. VAALCO held >US$120 mm in cash and cash equivalents at the end of December, up from US$103 mm at the end of September. This is after having paid >US$25 mm in dividends and bought back >US$22 mm in shares. The YE23 cash position was impacted by the fact the Egyptian sales during 4Q23 were for the domestic market rather than exported (domestic sales carry a lower value than exported cargoes). The change in working capital during the quarter difficult to read given the end of the drilling programme. Given the strong performance of Egypt and Canada, we are now assuming an increasing level of continuous investments at these two assets resulting in higher production in future periods. In Canada, we are now anticipating a production growth of 3-5% per year.
See website for full report

Valeura Energy (VLE CN) C; target price of C$6.40 per share: ~US$47 mm free cash flow in 4Q23. ~12% production growth in 2024 – 4Q23 production was 19,165 bbl/d (we expected ~21,300 boe/d) with minimal production at Wassana and declining production at Jasmine only partially offset by growing production at Nong Yao. Production in January stands at 22.6 mbbl/d in line with our estimates for 1Q24. The FY24 capex budget has been set at US$135-155 mm plus US$8 mm for exploration. This compares with our previous expectations of US$142 mm (and no exploration). The capex programme includes US$50 mm for Jasmine and US$47 mm for the new Nong Yao C development. FY24 opex is estimated at US$205-235 mm, in line with our expectations of US$216 mm. The capex programme includes an opex reduction programme at Jasmine and we are reducing our opex estimates for the field from ~US$105 mm per year to US$90 mm. Valeura anticipates producing 21.5-24.5 mbbl/d in 2024 (we estimated 25.1 mbbl/d). The mid-point of the guidance represents production growth of ~12% compared to 2023.
See website for full report

IN OTHER NEWS
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AMERICAS

Aker BP (AKERBP NO): 4Q23 update in Norway – 4Q23 net production was 444.3 mboe/d.

Maha Energy (MAHA-A SS): Acquiring shares in Brazilian company – Maha has acquired 5% of 3R Petroleum. Maha has also proposed that 3R’s onshore oil concessions would be combined with PetroReconcavo. In return shareholders of 3R would receive shares in PetroReconcavo. 3R would only retain offshore assets.

Parex Resources (PXT CN): Operating update in Colombia. FY24 guidance – 4Q23 production was 57,329 boe/d. FY24 production is expected to be 54-60 mboe/d with US$390-430 mm capex. The Arauca-8 exploration well encountered the expected Guadalupe, Gacheta, and Une zones. A gas discovery has been made in the Une zones that tested at ~9 mmcf/d and over 1,000 bbl/d of condensates. An oil discovery was made in the Gacheta zone was tested that tested at over 6,000 boe/d. Parex has also announced a new share buybacks programme for up to 10% of its outstanding shares.

ASIA PACIFIC

Jadestone Energy (JSE LN): Corporate update and FY24 guidance – FY23 production is expected to have averaged ~13.8 mboe/d. FY24 production is expected to average 20-23 mboe/d with capex of US$80-110 mm and other net cash expenditure expected to total ~US$77 mm, primarily reflecting the CWLH 2 acquisition abandonment funding payments. The life-of-field costs at Montara and Stag are now expected to be higher than anticipated, primarily due to increases in repair and maintenance costs to maintain both facilities in an appropriate condition. Net debt at the end of December was ~US$5 mm.

EUROPE

Deltic Energy (DELT LN): Resources estimate in the UK – The Pensacola Zechstein Reef discovery is estimated to hold 15-21.8 mmboe 2C contingent resources (net to Deltic).

Europa Oil & Gas (EOG LN): Update in the UK – Production at Wressle-1 is currently averaging 665 bbl/d. The company held £4.26mm in cash at the end of November.

Exploration licence award in Norway – 62 new licences are offered in Norway. Aker BP has been awarded interests in 27, Equinor 39, Wintershall Dea, 13, Var Energi 16, Neptune Energy, 4, Sval Energi, 2, DNO, 14 and OKEA 3.

Harbour Energy (HBR LN): Operations update – FY23 production was 186 mboe/d. Net debt at YE23 was US$0.2 bn. FY24 production is estimated at 150-165 mboe/d. Harbour expects to distribute US$200 mm in dividends in 2024.

Repsol (REP SM): 4Q23 update – 4Q23 production was 595 mboe/d.

Trillion Energy (TCF CN): Reiterating guidance in Turkey – Trillion has re-iterated its WI production guidance of 7.5 mmcf/d before royalties (15.4 MMCF/d 100% Gross interest to lease) for the initial six wells for 2024.

FORMER SOVIET UNION

Enwell Energy (ENW LN): Operating update in Ukraine – 4Q23 production was 2,212 boe/d. The GOL-107 development well flowed gas at a rate below expectations. The company held US$77 mm in cash at YE23.

MIDDLE EAST AND NORTH AFRICA

DNO (DNO NO): 4Q23 update in Kurdistan, Norway and Cote d’Ivoire – 4Q23 gross production in Kurdistan was 65,773 boe/d, while net production in Norway and Cote d’Ivoire was respectively 16,879 boe/d and 3,476 boe/d.

Energean (ENOG LN): Operational update – FY23 production was 123 mboe/d. 4Q23 production was 135 mboe/d. Net debt at YE23 was US$2.8 bn. The FY24 production guidance has been set at 155-175 mboe/d with development capex of US$400-500 mm, exploration and appraisal capex of US$130-170 mm and decommissioning expenditure of US$40-50 mm. First gas at Karish North and Cassiopea is estimated in 1Q24 and during the summer of 2024.

SUB-SAHARAN AFRICA

Shell (SHEL LN): Selling Nigeria onshore – Shell is selling its onshore Nigerian assets to Renaissance for US$1.3 bn. The buyer will make additional cash payments to Shell of up to US$1.1 bn, primarily relating to prior receivables and cash balances in the business, with the majority expected to be paid at completion of the transaction. At closing, Shell will provide secured term loans of up to US$1.2 bn, to cover a variety of funding requirements. Shell is providing additional financing of up to US$1.3 bn over future years to fund the share of the development of the gas resources to supply feedgas to NLNG. Renaissance is formed of ND Western, Aradel Energy, First E&P, Waltersmith and Petrolin.

EVENTS TO WATCH NEXT WEEK
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22/01/2024: PetroTal (PTAL LN/TAL CN) – FY24 budget
24/01/2024: Genel Energy (GENL LN) - 4Q23 trading update