Auctus on Friday - 06/04/2023
AUCTUS PUBLICATIONS________________________________________
Arrow Exploration (AXL LN) C; Target price of £0.45 per share: The RCE-5 well encounters one of the largest net pay to date in the RCE field – The RCE-5 well encountered 90 feet of net oil pay across the Carbonera C7 (36 feet) and the Lower Gacheta sands (54 feet). This is the third successful well in the 2023 campaign. RCE-5 encountered the largest net pay in the current programme. The well is expected to add production and reserves and will be put in production in early April. The rig will now move to Carrizales Norte where three wells will be drilled. We estimate current production at approximately 2,100-2,400 boe/d including 350 bbl/d net at RCE-4 (natural flow) and 400 bbl/d net at RCE-3 (now on pump with the pump rate being progressively increased). Overall, the remaining eight wells in the FY23 programme (including RCE-5 not on stream yet) could add a further 2,200 bbl/d to 3,800 bbl/d net production by YE23 (before decline and in a success case). We continue to conservatively forecast 3.6 mbbl/d production in 2023 and 4.4 mbbl/d in 2024.
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Hartshead Resources (HHR AU) C; Target price of A$0.17 per share: Delivering a re-rating farm-in transaction – Hartshead is farming out 60% WI of its UK assets to RockRose Energy for a combination of cash (US$34.4 mm/A$52.9 mm) and net free carry (US$61.8 mm/A$95 mm) for Phase I. A further US$5.9 mm cash payment is contingent on NSTA approval of the FDP for the Phase II Lovelace or Hodgkin. RockRose currently produces ~27 mboe/d in the UK North Sea. The fact that a proportion of the proceeds is in cash (US$34.4 mm/A$52.9 mm) allows Hartshead to directly fund a larger share of capex and capture the generous tax benefits on UK capex. ~90% of UK capex can be deducted from payable taxes. If this amount had been provided as net carry, RockRose would have kept the associated tax benefit (~US$31 mm/A$48 mm). Hartshead is also raising A$20 mm of new equity priced at A$0.04 per share to boost the balance sheet. The total cash and net carry that Harshead is receiving amounts to ~US$96 mm/A$148 mm or A$0.053/sh. This is well above the price of the equity raise. Adding the tax benefits would lead to overall net proceeds for the Phase I farm-out of ~US$128 mm/A$196 mm or A$0.07/sh. The read through value of the retained 40% in Hartshead’s UK assets is US$64 mm/A$99 mm (A$0.035-0.047/sh). Overall, this transaction provides an industry valuation on Harsthead’s equity of A$0.088-0.117/sh, which is well above the current share price. it also provides Hartshead with enough funding to reach first gas.
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Valeura Energy (VLE CN)C: Target price of C$5.20 per share: Waiting for formal guidance for 2023 – With the acquisition of the Mubadala assets having been completed only recently, Valeura has not provided any guidance on pro forma YE22 reserves, FY23 production and capex guidance or working capital on completion. This is now expected to be provided in the coming weeks as Valeura management engages fully with the team joining from Mubadala. Through the first week of operations following completion of the acquisition from Mubadala Energy, oil production has averaged approximately 21,500 bbl/d (net to Valeura’s interest), very close to the October 2022 production rate reported at the time the deal was agreed in December. The fields are performing very well. During start-up preparations at Wassana, the MT Jaka Tarub oil storage vessel impacted the field’s Catenary Anchor Leg Mooring buoy, resulting in damage to certain offloading components. There was no discharge of fluids and no personnel were injured. Valeura is now assessing the impact of the incident. Once the underwater inspections are finished over the next 1-2 weeks, the company will be able to provide further visibility on a new start date. Until then and pending further details on (1) the working capital at completion of the Mubadala assets acquisitions, (2) the FY23 production guidance and (3) the YE22 reserves estimates at the new assets, the only change we have made to our forecast is a month delay at Wassana. This has no impact on our valuation.
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IN OTHER NEWS
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AMERICAS
Alvopetro Energy (AV CN): Production update in Brazil – March average sales volumes of 2,690 boe/d.
Canadian Overseas Petroleum (COPL LN/XOP CN): 4Q22 update in the USA – 4Q22 WI crudes sales were 1,177 bbl/d. The company held US$4 mm in cash at YE22.
Canacol Energy (CNE CN): Operation update in Colombia – Realized contractual sales in March were 182 mmcf/d.
Gran Tierra Energy 9GTE CN/LN): Operating update in Colombia – 1Q23 production was ~31.7 mbbl/d. Production so far in April has averaged 33.7 mbbl/d.
i3 Energy (CNE CN): YE22 reserves – YE22 2P reserves in Canada were estimated at 181.5 mmboe (YE21: 152.8 mmboe). The total undrilled booked locations has increased by 25% to 376 gross (255.1 net) locations across the core areas, for a total inventory (undrilled booked and undrilled unbooked) of 881 gross (502 net) undeveloped locations.
ASIA AND AUSTRALASIA
India: eliminating windfall tax on domestic oil production - India has reduced to zero the windfall tax rate that was imposed on domestic crude oil. Domestic producers were paying US$42.5/bbl per tonne.
EUROPE
Angus Energy (ANGS LN): Well update in the UK – The sidetrack SF07V well flowed at 2.1 mmcf/d shortly after start up and flow rates have increased over the last 60 hours to 4 mmcf/d. Production from the other wells at Saltfleetby was 5.4 mmcf/d over 1Q23 with peak production of ~6 mmcf/d.
ATOME Energy (ATOM LN): Update in Iceland – ATOME has a signed term sheet and a letter of intent with two power providers for up to 60 MW. An MOU has been signed with one of Iceland’s largest fishing companies, for the decarbonisation of its fleet. Green Fuel’s facility is expected to be operational by YE26. This is expected to be one of the largest green ammonia facilities in Europe.
Barryroe Offshore Energy (BEY LN): Raising new equity for Ireland – Barryroe is raising up to EUR20 mm of new equity at a price EUR0.015 per share. Each Placing Share will also entitle the holder to subscribe for a warrant to purchase an additional 1.5 ordinary shares for €0.015 per share for a period of 10 years from the date of issuance.
EnQuest (ENQ LN): FY22 results – FY22 production in the UK and Malaysia was 47,259 boe/d. YE22 net debt was US$717 mm. 2023 year to date production averaged around 47,800 boe/d. Net debt amounted to US$624 mm as at the end of February. FY23 production is expected to be between 42,000 and 46,000 boe/d with FY23 capex and decommissioning spend of US$220 mm. YE22 Net 2P reserves were ~190 mmboe (YE21: ~194 mmboe). Net 2C resources were ~393 mmboe (YE21: ~402 mmboe)
Hurricane Energy (HUR LN): Operating update in the UK – Oil production from Lancaster was 7,672 bbl/d in May with 52% water cut.
Jersey Oil & Gas (JOG LN): Farming out UK asset – Jersey is divesting 50% of the Greater Buchan Area to NEO Energy. In return, Jersey will receive (1) a carry for Jersey’s 50% share of the estimated US$25 mm cost to take the Buchan field through to FDP approval, (2) US$2 mm in cash on completion of the transaction, US$9.4 mm in cash upon finalisation of the Greater Buchan Area development solution, (3) US$12.5 mm in cash on FDP approval, US$5 mm in cash on each FDP approval in respect of the J2 and Verbier discoveries and (4) a 12.5% carry of the Buchan field development costs.
Serica Energy (SQZ LN): YE22 reserves in the UK – YE22 2P reserves were 130.4 mmboe including Tailwind’s assets. Reserves were booked in the Triton area and at Bruce while there were downward revisions at Columbus (poor well performance) and the Orlando field (possible cessation of service from Ninian host facility at the end of 2026).
Shell (SHEL LN): 1Q23 update – 1Q23 production is expected to be 2,730-2,870 mboe/d.
Tillion Energy (TCF CN): Reserves increase and Turkey. Raising capital – 2P reserves increased from 48.6 bcf to 63.3 bcf. The company is also raising C$15 mm through the issue of 15,000 units comprising C$1,000 convertible debenture and 1,667 new share. The debenture will accrue interest at a rate of 12% per annum. The debenture can be converted into equity at a price of C$0.60 per share.
FORMER SOVIET UNION
Large fine for owners of Kashagan (Kazakhstan): The Kazakh government has filed several claims for a total of ~US$5.1 bn for environmental permit violations.
MIDDLE EAST AND NORTH AFRICA
Serinus Energy (SENX LN): operational problems at work-over in Tunisia – Unexpected conditions were encountered in the wellbore at the W-1 well at the Sabria field. This impeded progress with the removal of the final 1.5 inch coiled tubing below a depth of 2,889 metres. The workover will be suspended pending investigation of alternative means of completing the programme.
United Oil & Gas (UOG LN): Operating update in Egypt – 1Q23 net production was 841 bbl/d. The exit rate for the quarter was 1,445 boe/d.
SUB-SAHARAN AFRICA
Invictus Energy (IVZ AU): Raising new equity for Zimbabwe – Invictus is raising A$10 mm of new equity at A$0.12 per share. The proceeds will fund the preparation for the ukuyu-2 well and the 2D seismic for the Eastern leads.
EVENTS TO WATCH NEXT WEEK
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11/04/2023 – OMV (OMV AG): 1Q23 update
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.
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.
Canacol Energy is engaged in core petroleum and natural gas exploration and development activities in Colombia, Brazil and Guyana.
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.
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.
Hurricane Energy is engaged in the exploration of oil and gas reserves principally on the U.K. continental Shelf. Co.'s acerage is focused on the Rona Ridge, West of Shetland.
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.
Jersey Oil & Gas is engaged in the oil and gas exploration, appraisal, development and production in the North Sea of the U.K.
Panoro Energy is an international independent oil and gas company engaged in the exploration and production of oil and gas resources in Brazil and West Africa. In Brazil, Co. participates in a number of oil and gas licenses located in the Santos basin outside the south-east coast of Brazil and in the Camamu-Almada basin in the state of Bahia. In West Africa, Co. participates in a number of licences in Nigeria and Gabon. As of Dec 31 2013, Co.'s commercial production is from the Manati field in Brazil.
Serica Energy is an independent oil and gas company with production, development and exploration licence interests in the U.K. Continental Shelf and exploration interests in Ireland, Morocco and Namibia. As of Dec 31 2016, Co. had proved plus probable reserves of 3.8 million barrels of oil equivalent, which consisted of 2.1 million barrels of oil and 10.40 billion cubic feet of gas.
Serinus Energy is engaged in the exploration for and development of oil and gas properties in Ukarine, Brunei and Syria.
United Oil & Gas is engaged to take control or investing in businesses within the oil and gas sector.
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).
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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