Report
Stephane Foucaud

AUCTUS ON FRIDAY - 20/12/2024

AUCTUS PUBLICATIONS
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Arrow Exploration (AXL LN/CN)C; Target price of £0.80 per share: Material discovery at Alberta Llanos - The AB-1 (Alberta Llanos) exploration well has encountered four main hydrocarbon bearing reservoirs with a total true vertical depth of 121 feet, including the C7, Gacheta, Guadalupe, and Ubaque formations. The main pre-drill targets were the C7 and the Ubaque formations. The Gacheta and Guadalupe formations carried a higher risk, and encountering these two formations is a positive. The success of this well could open a new area of development and add reserves. Pre-drill, the company estimated 1.2 mmbbl of net prospective resources with a total of three producing wells. With horizontal wells from the CNC pad, they now believe there could be in excess of 5 wells in the Alberta Llanos area. Before the well was drilled, the Guadalupe had a lower probablility of success than the C7 or the Ubaque. Initial log interpretation shows very strong potential for the Guadalupe. Because the Ubaque and the Guadalupe are thick reservoirs, horizontal drilling techniques are more likely to be successful. This has positive implication for production. The AB-1 well will be tested shortly and then put on production in the Ubaque. Arrow will then drill the AB-2 well to further appraise the discovery. We have increased our target price from £0.75 per share to £0.80 per share. We anticipate production will exceed 7 mbbl/d by YE25. The FY25 exploration programme (excluding Alberta Llanos) is targeting ~10 mmboe prospective resources with an aggregate unrisked NAV of £0.38 per share.
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Condor Energies (CDR CN)C; Target price of C$5.60 per share: Further production increase in Uzbekistan -Production in Uzbekistan in December to date has averaged 11,354 boe/d. Adjusting for one day of shutdown implies a production capacity of almost 12 mboe/d. The average production in December to date (11,354 boe/d) represents an increase of over 600 boe/d compared to the latest announcement (10,706 boe/d from 5 November to 11 November) and 1,344 boe/d compared to the 3Q24 average production. This production increase has been achieved through simple and low-cost workover operations and the addition of surface equipment, highlighting the potential upside of Condor’s assets. We believe that production growth is set to accelerate as a third workover rig and a second wireline unit will be imported in early 2025. The second in-field flowline water separator is expected to be installed later this month, with three additional units expected to be added in 1Q25. Before YE24, there are two areas of significant potential production addition: (1) A thick non depleted Jurassic-aged pay zone that had been bypassed is being perforated. (2) Shallower Cretaceous-aged stacked channel sands not previously penetrated on Condor’s fields have been perforated with gas indications observed at surface. these will now be tested. A multi-well vertical and horizontal drilling campaign is expected to commence in 2Q25. Condor is on track to grow production to 14-15 mboe/d by mid 2025 and 15.5-17 mboe/d by YE25.
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Sintana Energy (SEI.V CN)C; Target price of C$1.85 per share: QatarEnergy enters Sintana’s PEL 90. First well to spud by YE24 – QatarEnergy has acquired 27.5% WI in PEL 90 from Chevron. While no details have been disclosed, it's noteworthy that QatarEnergy is a partner of TotalEnergies on the adjacent PEL 56 license, where the Venus discovery is located. QatarEnergy is also a partner of Shell on PEL 39. We view QatarEnergy’s decision to enter PEL 90 as a very positive sign regarding the block's prospectivity. A rig is mobilizing to PEL 90 to drill the Kapana-1X well in the second half of December. This is an ultra-deepwater offshore well, in water depths similar to those drilled by TotalEnergies at PEL 56 (Venus discovery). We anticipate that the Kapana-1X well will take around three months to drill complete and analyze at a cost of approximately US$100-150 mm, in line with the wells drilled by TotalEnergies. Sintana is carried for these costs. TotalEnergies is looking for basin floor fan prospects at PEL 56, and we believe that the targeted play at PEL 90 is similar. We believe that the first prospect has been high-graded from an inventory of potential targets. We anticipate multiple high-impact drilling newsflows on Sintana assets in 1H25. In addition to the Kapana-1X on PEL 90, we expect the results of the Mopane-2A appraisal well on PEL 83 around mid-1Q25. The Mopane-3X exploration well (PEL 83) is expected to be spud in April. We estimate the additional unrisked value of the upcoming drilling program at PEL 83 (Galp), PEL 90 (Chevron), and PEL 87 at C$2.80 per share.
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Zephyr Energy (ZPHR LN)C; Target price of £0.12 per share: Funding secured for the Paradox - Zephyr has now entered into binding documentation to fully-fund all expected drilling, completion and production test costs for the 5,500 ft extension and acidization of the State 36-2R well. The funding has increased to US$7.5 mm (US$7.0 mm previously). In return, the funding partner will earn a 50% WI in the well. The wellbore investor will cover its pro rata portion of the well's operating and overhead costs. Net revenues from the well will be split 50:50 between Zephyr and the wellbore investor from the time of first production, with no catch-up period or other preferential rights to the investor. This is a very favorable transaction for Zephyr. There is no issuance of Zephyr's equity or any form of debt as part of the funding, and the wellbore investor will not receive any further interest or option in the Paradox project. This transaction highlights the quality and potential of the project and provides an implied value for the project at this early stage of maturity. We have considered two approaches to estimate the implied value of the transaction. (1) The investor provides Zephyr with a net funding of US$3.75 mm in return for 50% interest in the well. This values the well at US$7.5 mm (US$3.75 mm x 2). (2) The investor is investing US$7.5 mm in the well in return for 50% of the production. This suggests that 50% of the well has a Present Value >US$7.5 mm (US$15 mm PV for 100% of the well). On a 20-30 well development, the implied value for the Cane Creek formation is therefore US$150-450 mm (£0.06-0.18 per share). The US$7.5 mm is risked capital and as the project matures, the value of the project should increase. There are also eight further overlaying formations that have not yet be appraised.
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IN OTHER NEWS
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AMERICAS

Alvopetro Energy (ALV CN): Production update in Brazil – November sales volumes averaged 1,465 boe/d including 8.1 mmcf/d of natural gas. The November sales were impacted by reduced demand in the state of Bahia resulting mainly from facility turnarounds. During this period Alvopetro also shut in all production for a 2-day period to complete mandatory turnaround and inspection works at all facilities. Natural gas sales volumes to-date in December have averaged 11.6 mmcf/d.

Ascent Resources (AST LN): Acquisition of US assets – Ascent has acquired a 49% interest in American Helium Utah and Colorado upstream acreage which includes direct interests in a proportionate share of 119,000 acres of helium rich oil and gas licenses across the two states. The acreage is in the helium rich Paradox Basin and has up to 1% helium contained within the producible natural gas streams. The portfolio has averaged 3.2 mmcf/d of natural gas production (net to American Helium) over the last three months. The company has acquired this position for a total consideration of US$2.0 mm which is to be satisfied via payment of US$1.75 mm in new Ascent shares issued at 5 pence per new share as well as US$0.25 mm in cash. Ascent has raised ~US$0.48 mm of new equity at a price of 5 p per share. The issue price represents a 203% premium to the closing price on the day before announcement. The new equity has new warrants attached to it equal to three warrants for every two new equity shares subscribed for which are exercisable at a price of 2.3 p per share.

Frontera Energy (FEC CN): Further share buyback – Frontera will commence a second share buyback programme. The company will offer to purchase from shareholders up to 3,500,000 Shares for cancellation at a purchase price of C$12.00 per share, for an aggregate purchase price not exceeding C$42 mm.

ASIA AND AUSTRALASIA

EnQuest (ENQ LN): Gas contract in Malaysia – EnQuest has signed a contract to develop and commercialize the non-associated gas resources in the PM8E PSC contract area and supply around 70 mmcf/d of sales gas.

Indus Gas (INDI LN): Financials results and operating update in India – Indus continues to see disruption to the quantity of gas supplied to its ultimate customer's power plant. As a result, the company will seek further external funding and/or shareholder funding in near future if required. Indus held US$0.2 mm in cash at the end of September. With US$1.42 bn in assets and US$0.36 bn in equity, the total liabilities are >US$1 bn.

OMV (OMV AG): Not selling New Zealand assets anymore - OMV will no longer pursue the sales process of its E&P portfolio in New Zealand.

EUROPE

Aker BP (AKERBP NO): Dry hole in Norway – The Kaldafjell exploration well was dry.

BlueNord (BNOR NO): Operational delays in Denmark - Based on current weather forecasts the timeline for reactivating all satellite wells at Tyra required to achieve plateau production has been extended by approximately three weeks. As a result, plateau production is now expected to be reached in the second half of January.

DNO (DNO NO)/Equinor (EQNR NO): Discovery in Norway – 2-13 mmboe recoverable resources have been encountered at Ringand.

OKEA (OKEA NO)/DNO (DNO NO): Asset swap in Norway – DNO has entered into a swap agreement with OKEA to farm into a 10% interest in PL1119 containing the Mistral prospect. In exchange, OKEA will pick up a 10% interest in PL1109 containing the Horatio prospect.

Prospex Energy (PXEN LN): Higher than expected flow rate at well in Spain – The Viura-1B well has achieved flow rates of up to 17.7 mmcf/d (2.6 mmcf/d net to Prospex) on test. The well will now be placed on long term production rates of 10.6 mmcf/d (1.5 mmcf/d net). Prospex net production has reached 2.9 mmcf/d. This production increase does not include the production from the existing Viura-1ST3 well which has been producing intermittently since mid October at rates up 7.1 mmcf/d (1.0 mmcf/d net to Prospex), as water handling issues are managed until the completion of the current workover on the Viura-3 water injection well.

Tenaz Energy (TNZ); FY25 guidance in the Netherlands – FY25 production is expected to be 2.9-3.1 mboe/d with US$30-34 mm capex.

Var Energy (VAR NO)/Equinor (EQNR NO): Appraisal success in Norway – Following appraisal drilling, the Countach discovery is estimated to hold 10-52 mmboe recoverable resources.

Viaro Energy: Acquiring fossil and energy transition assets in the UK and Germany – Viaro is acquiring Evoterra. Evoterra’s assets include interests the Mullheite oil and gas licence in the Molasse basin in Bavaria and interests in four onshore licences in the UK. Viaro will assume ownership of 138 wind turbines which generate over 0.5 GWh of clean energy per year.

FORMER SOVIET UNION

Cadogan Energy (CAD LN): Settlement – Cadogan has reached a settlement with Proger. Proger will pay Cadogan EUR10 mm in cash. Cadogan will exit from the loan and call option agreement between both parties.

MIDDLE EAST AND NORTH AFRICA

bp (BP LN): Forming a gas JV – bp and ADNOC have established a new regional gas platform named Arcius Energy to initially focus on development of gas assets in Egypt. bp will hold 51% of the JV and ADNOC the balance.

TAG Oil (TAO CN): Operating update in Egypt - The BED4-T100 horizontal well continues to produce at an average rate of 100 bbl/d. TAG resumed production from the BED 1-7 vertical well in December at approximately 40 bbl/d on natural flow. TAG intends to drill a vertical well in 2Q25 to further develop the ARF formation in a high intensity natural fractured area. A second horizontal well is tentatively scheduled for drilling in 4Q25. The company is selling the New Zealand royalty interests and is looking for a farm-in partner for its Egyptian assets.

Zenith Energy (EN LN): Tribunal award against Tunisia - The Arbitral Tribunal has ordered ETAP to pay a principal amount of US$6.1 mm, ~US$2.7 mm as late payment interest, US$0.4 mm as reimbursement for procedural costs associated with the ICC-1 Arbitration, and US$0.4 mm in legal costs for a total amount of approximately US$9.7 mm.

SUB-SAHARAN AFRICA

Kosmos Energy (KOS US/LN): No offer to acquire Tullow Oil (TLW LN) – Kosmos does not intend to make an offer to acquire Tullow.

Orca Energy (ORC.A/B CN): Operating update in Tanzania – Workover operations at the SS-7 well at Songo Songo have failed to deliver sustained gas flow. The total expected project cost has increased to US$27 mm from US$22 mm.

EVENTS TO WATCH NEXT WEEK
Underlyings
AKER BP ASA

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 Ltd

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.

Arrow Exploration Ltd

Front Range Resources is engaged in oil and natural gas exploration and production focusing on horizontal multi-stage frac development in Montney, Bluesky, Wilrich and Falher formations in the Deep Basin area of west central Alberta.

ASCENT RESOURCES PLC

Ascent Resources is an independent oil and gas exploration and production company. The principal activities of Co. comprise gas and oil exploration and production. Co.'s oil and gas interests are in Slovenia. As of Dec 31 2016, Co.'s net attributable proven reserves were 41.00 billion cubic feet equivalent.

Cadogan Petroleum

Cadogan Petroleum is engaged in oil and gas exploration, development and production. Co. also conducts gas trading and provides services to other operators.

CONDOR ENERGIES INC

DNO ASA Class A

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.

EnQuest PLC

Enquest is an oil and gas production and development company. As of Dec 31 2016, Co.'s principal U.K. assets were its interests in the producing operated oil fields Heather/Broom, Thistle/Deveron, the Dons area, the Greater Kittiwake Area, Alma/Galia and Scolty/Crathes. In addition, Co. had interests in the Kraken development and also a non-operated interest in the producing Alba oil field. In Malaysia, Co.'s operated assets comprise the PM8/Seligi Production Sharing Contract and the Tanjong Baram Risk Services Contract. At Dec 31 2016, Co. had proven and probable reserves of 215.0 million barrels of oil equivalent.

Frontera Energy Corp

Frontera Energy is a publicly traded oil and gas company engaged in the exploration, development and production of heavy crude oil and natural gas in Colombia, Peru, Brazil, and Guatemala.

Kosmos Energy Ltd.

Kosmos Energy is a holding company. Through its subsidiaries, the company operates as a deepwater independent oil and gas exploration and production company focused along the Atlantic Margins. The company's assets include production offshore Ghana, Equatorial Guinea and U.S. Gulf of Mexico, as well as gas development offshore Mauritania and Senegal. The company also maintains a sustainable exploration program balanced between proven basin infrastructure-led exploration (Equatorial Guinea and U.S. Gulf of Mexico), emerging basins (Mauritania, Senegal and Suriname) and frontier basins (Cote d'Ivoire, Namibia and Sao Tome and Principe).

Okea

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.

OMV AG

OMV is an international energy company with activities in Exploration and Production (E&P), Refining and Marketing including petrochemicals (R&M), and Gas and Power (G&P). Co. explores and develops oil and gas resources and supply energy to over 100 million people. OMV has three operating segments: Exploration and Production (E&P), Refining and Marketing, including petrochemicals (R&M), and Gas and Power (G&P), as well as the segment Corporate and Other (Co&O).

Orca Exploration Group Cl B

Orca Exploration Group is an international company engaged in hydrocarbon exploration, development and supply of gas in Tanzania, the establishment of a coastal gas pipeline network in East Africa, oil appraisal and gas exploration in Italy and the acquisition of exploration opportunities in Europe and Africa.

PROSPEX ENERGY PLC

Sintana Energy

Sintana Energy is a development stage company engaged in oil and gas exploration and development activities in the United States.

Tullow Oil plc

Tullow Oil is an independent oil and gas exploration and production company. Co.'s focus is on finding oil in Africa and South America. Co.'s primary activities include targeted exploration and appraisal, selective development projects and growing its production. As of Dec 31 2017, Co.'s portfolio included 90 licences in 16 countries. Co.'s operations are organized into three business delivery teams: West Africa; East Africa; and New Ventures. As of Dec 31 2017, on a working interest basis, Co. had commercial reserves of 245.7 million barrels of oil, 268.90 billion cubic feet of gas, and 290.5 million barrels of oil equivalent (petroleum).

Zephyr Energy

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.

Provider
Auctus Advisors
Auctus Advisors

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. 

Analysts
Stephane Foucaud

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