AUCTUS ON FRIDAY - 10/05/2024
AUCTUS PUBLICATIONS________________________________________
GeoPark (GPRK US)C; target price of US$26 per share: More favourable offtake contract in Colombia – GeoPark has signe da new offtake contract with Vitol for a minimum of 20 mbbl/d. The agreement improves GeoPark’s price realizations by US$0.15/bbl vs the current agreement. As part of this transaction, GeoPark will obtain immediate access to committed funding from Vitol for up to US$300 mm, with an option to increase by another US$200 mm for a total of US$500 mm, in prepaid future oil sales over the period of the offtake contract. The interest cost is based on a SOFR risk-free rate plus a margin of 3.75% per annum.
Panoro Energy (PEN NO)C; target price of NOK50 per share: Discovery in Gabon – The Hibiscus South exploration well on the Dussafu permit has encountered 25 m of pay in an overall hydrocarbon column of 35 m in the Gamba formation.This discovery could add ~5-6 mmbbl gross recoverable reserves (~1 mmbbl net to Panoro).
PetroTal (PTAL LN/CN)C; target price of £1.50 per share: Acquisition in Peru – More than meets the eye –PetroTal is acquiring Block 131 onshore Peru including the Los Angeles field from CEPSA for US$5 mm. The field produces ~900 boe/d from 4 existing wells and holds 4.9 mmbbl of 40-45 deg API oil 2P reserves. We estimate that 3 new wells (at ~US$12 mm per well) could increase production to 2-3 mbbl/d. There are also opportunities to develop bypassed oil with horizontal wells drilled high on the structure. The oil is currently sold at the Iquitos refinery and passes by the Bretana field (in barges). Although the oil commands high realizations, given the current low production and high royalty (23.9%), we estimate that the netbacks are currently ~US$20-25/bbl. Doubling production could increase these netbacks to ~US$40/bbl. Potential cost reduction initiatives could improve the netbacks further. We view this acquisition as very accretive on a standalone basis. It also offers important area of synergies that will boost the value of Bretana. The light oil from Los Angeles can be blended with the heavier oil from Bretana enabling a lower discount to Brent for Bretana crude. We currently assume an improvement of US$1/bbl. This blend would also allow the Iquitos refinery to handle more crude from Bretana. We have assumed that 1 bbl/d of Los Angeles crude blended with Bretana crude allows Iquitos to process 1 bbl/d of extra crude from Bretana. 2 mbbl/d production from Los Angeles would therefore result in 3 mbbl/d production from Bretana (~1 mbbl/d currently) to be processed at Iquitos irrespective of the dry season restrictions. This has positive impact on overall average netbacks as the Iquitos route commands US$6/bbl premium compared to the Brazil route. The location of Block 131 is of strategic importance, as it is connected by a 130 km highway to the company’s Block 107. We have increased our target price from £1.45/sh to £1.50/sh to capture some of the impact of the acquisition. Given the effective date of 01 January 2024, we anticipate that there will be no cash consideration due on closing that we assume at YE24. This is partially offset by higher capex.
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Pulsar Helium (PLSR CN)C; target price of C$1.80 per share: Road restrictions lifted – The Minnesota Department of Transport has announced that Spring road restrictions in the north frost zone have ended. Pulsar will immediately recommence field operations at the Jetstream #1 appraisal well at the Topaz helium project. Activities will initially consist of road improvements and civil works, followed by down-hole logging, well completion, and flow testing with a pressure build up program. All necessary contracts are in place, with vendors and equipment secured to complete the upcoming works. Our unrisked NAV for Topaz is C$2.37-5.74 per share.
Tethys Oil (TETY SS)C; target price of SEK100 per share: Imminent development of Block 56 and high impact exploration drilling at Block 58 - 1Q24 production of 8,032 bbl/d had been previously reported. The development plan for Block 56 is expected to be submitted to the government by the end of May. The associated reserves and resources are expected to be disclosed at that time. The development plan will include an EPF for Menna/Sarha and Al Jumd and a near field exploration strategy to rapidly increase production. The high impact Kunooz-1 well is expected to spud in June. The well is targeting 123.5 mmbbl unrisked prospective resources (unrisked NAV of ~SEK200 per share). This is the largest exploration prospect to be drilled Oman in 2024. At Block 49, Tethys has entered the second exploration period of the licence to assess the prospectivity beyond the Thameen-1 well. The well will be fracked in 2H24. Production has now stabilized at Blocks 3&4. While production was impacted by flooding in March and April, five appraisal wells out of six were successful in 1Q24 and should contribute to reserves replacement. 13 further appraisal wells and three exploration wells will be drilled during the balance of 2024 on the Blocks. Tethys is in exclusive negotiations with Sonatrach to enter the El Hadjira and El Haiad II areas in Algeria. Tethys is aiming to focus on existing development opportunities with an EPF and appraisal activities. Tethys is expected to provide further visibility on the ongoing strategic review process during 2Q24. This could include a (partial) divestment of Blocks 3&4 and an equalization of interests on the other Blocks. As the company’s profile is changing from mature production to growth, there will be no dividend distribution in 2024. The outcome of the ongoing strategic review process could be a catalyst to rerate the shares.
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VAALCO Energy (EGY US/LN)C; target price of US$10 per share: Good quarter. Gearing-up for growth – 1Q24 WI production was 21,807 boe/d, in line with our expectations. VAALCO held ~US$113 mm in cash at the end of March, which is also in line. With the completion of the acquisition of Svenska, the company now expects to produce 23.6-26.5 mboe/d in FY24. This incorporates 2.8-3.1 mboe/d for Cote d’Ivoire (the production expectations for the other assets are unchanged). The FY24 capex guidance has been increased from US$70-90 mm to US$115-140 mm. It now incorporates (1) the capex for the preparation for the FPSO modification at Baboab (Cote d’Ivoire) expected to take place in 2025, (2) long lead items ahead of a 5-7 well drilling programme in Gabon in 2025, (3) the cost of the FEED in EG (to reach FID in 1Q25) and (4) the cost of an extra well in Canada (southern part of the licence) that could potentially unlock new drilling locations and add reserves. The capex budget could increase by a further US$18 mm if VAALCO manages to secure a rig for a new drilling campaign in Egypt in 2H24. This would also increase the production expectations for 2024. In EG, VAALCO will now hold 60% WI in Block P and carry its partners, The carry will be repaid by the partners with interest (at SOFR+7%) and repaid from cost oil and profit oil.
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Valeura Energy (VLE CN)C; target price of US$9.30 per share: Financials in line. Operations on track – The 1Q24 production of 21.9 mbbl/d and cash position of ~US$194 mm at the end of March had been reported previously. Operations are on track. Drilling is underway at the Nong Yao A platform, with two new wells that are expected to be completed in the coming week. Drilling at the Nong Yao C development is expected to result in first oil in 3Q24 to boost production from the area to 11 mbbl/d, and later in the year there will be a 5-well infill drilling programme on Jasmine/Ban Yen, also intended to increase production. Production at Wassana has reached 5 mbbl/d in early May, which we view as a good performance (we assume 4.3 mbbl/d in average for 2Q24). Two well workovers have been completed at Manora in early 2Q24 to offset recent natural production declines. Valeura carried ~US$80 mm of current tax payable at the end of 1Q24. This could suggest we are overly conservative in our tax payment forecast of ~US$100 mm for 2024. The key news flow for the balance of 2024 would be (1) taking FID at the Wassana redevelopment project that should trigger the booking of additional reserves (we currently attribute an unrisked NAV of ~C$2 per share to the contingent resources at Wassana), (2) the drilling of the Ratree exploration well (at least 20 mmbbl prospective resources, C$2.35 per share unrisked NAV) and (3) the tax consolidation for Wassana, Nong Yao and Manora. The story continues to be about strong free cashflow generation, reserves growth and exploration upside.
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IN OTHER NEWS
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AMERICAS
3R Petroleum Offshore: Requiring assignment of additional interest in Brazil field – 3R has initiated a process in order to carry out the compulsory assignment of the 37.5% stake held by Nova Técnica Energy in the Papa Terra Field. The measures have been initiated following Nova Técnica’s default of their financial obligations within the scope of Papa Terra’s consortium.
Alvopetro Energy (ALV CN): 1Q24 results – April sales in Brazil averaged 1,808 boe/d, up from 1,701 boe/d in 1Q24. Alvopetro had a working capital surplus of US$15 mm at the end of March.
Canacol Energy (CNE CN): 1Q24 results - Realized contractual natural gas sales volume in Colombia were 150.4 mmcf/d in 1Q24. Natural gas and LNG operating netback increased 22% to US$4.90/mcf due to a 19% increase in average sales prices of firm long-term fixed-priced contracts to US$6.04/mcf. At the end of March, Canacol held US$690 mm of net debt.
Diversified Energy (DEC LN/US): 1Q24 update in the USA – 1Q24 production was 723 mmcfe/d increasing to 742 mmcfe/d at the end of March.
Equinor (EQNR NO): Acquiring Lithium asset in the USA – Equinor is acquiring 45% share in two lithium project companies in Southwest Arkansas and East Texas from Standard Lithium. In return, Equinor will compensate Standard Lithium for US$30 mm in past costs net to the acquired interest and will carry Standard Lithium's capex of US$33 mm to progress the assets towards a possible final investment decision. Equinor will make milestone payments of up to US$70 mm in aggregate to Standard Lithium if a final investment decision is taken.
Frontera Energy (FEC CN): 1Q24 results – 1Q24 production in Colombia and Ecuador was 38,193 boe/d. Frontera has launched a strategic review process for the infrastructure business. Net debt at the end of March was US$306 mm.
Parex Resources (PXT CN): 1Q24 results – 2Q24 to date production in Colombia was 56 mboe/d, up from 53,338 boe/d in 1Q24. Parex has declared a dividend of C$0.385 per share for 2Q24, representing C$1.54 per share on an annualized basis. The company had US$1 mm net cash at the end of March.
EUROPE
bp (BP LN): 1Q24 results – Adjusted net earnings were US$2.7 bn with 2,378 mboe/d production.
DNO (DNO NO): Acquiring assets in Norway – DNO is acquiring 6.9% in Norne, 11.5% in Skuld and Urd, 20% of Marulk and 10.5% of Verdande from Var Energi (VAR NO) for US$51 mm in cash. In addition, the company will transfer its stake in Ringhorne East (22.6%) to Vår Energi. The transaction adds more than 8 mmboe in reserves and resources net to DNO. In terms of production, the transaction (net to DNO, including divestment of Ringhorne East) is estimated to add 3,000 boe/d to DNO’s output at closing, rising to above 5,000 boe/d in 2026 as the Verdande contribution kicks in.
Harbour Energy (HBR LN): Operating update – 1Q24 production was 172 mboe/d including 161 mboe/d in the UK. Net debt at the end of March was US$0.1 bn, down from US$0.2 bn at YE23.
MIDDLE EAST AND NORTH AFRICA
DNO (DNO NO): 1Q24 results – 1Q24 net production averaged 74,800 boe/d, of which the Kurdistan region of Iraq contributed 57,200 boe/d, the North Sea 14,200 boe/d and West Africa 3,300 boe/d. Wellhead prices for Kurdistan sales have now reached the upper US$30s/bbl. Net cash at the end of March was US$171 mm.
Genel Energy (GENL LN): 1Q24 update in Kurdistan – Net production over the period was 19,080 bbl/d. Net cash at the end of March was US$128 mm. Genel continues to expect net cash to remain well above US$100 mm throughout 2024.
ShaMaran Energy (SNM CN): 1Q24 results – 1Q24 gross production from Atrush and Sarsang was 57.4 mbbl/d as production has continued to increase. 1Q24 oil sales to the Kurdistan local market averaged a net oil price of US$36.49/bbl. Net debt at the end of March was US$184 mm.
SUB-SAHARAN AFRICA
Azule Energy (BP/Eni JV): Entering Namibia offshore – Azule Energy is acquiring 42.5% in PEL85 in the Orange basin from Rhino Resources. Two exploration wells are expected to be drilled from 4Q24.
D3 Energy: IPO for helium project in South Africa – D3 is looking to raise A$10 mm through an IPO in Australia to fund its helium project in South Africa.
Kosmos Energy (KOS US/LN): 1Q24 results – Net production over the period was 66.7 mboe/d including 43.8 mboe/d in Ghana, 14.5 mboe/d in the USA and 24.4 mboe/d in EG. First LNG in Mauritania and Senegal is expected in 4Q24. Net debt at the end of March was US$2.2 bn.
EVENTS TO WATCH NEXT WEEK
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14/05/2024 – GeoPark (GPRK US): 1Q24 results
15/05/2024 – Africa Oil (AOI SS): 1Q24 results
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.
BP is an integrated oil and gas group based in the United Kingdom. Co. is engaged in the exploration and production of crude oil and natural gas; refining, marketing, supply and transportation; and the manufacture and marketing of petrochemicals. Co. operates globally, with business activities in Europe, the U.S., Canada, Russia, South America, Australasia, Asia and parts of Africa. Co. operates in two business segments: Exploration and Production - including oil and natural gas exploration and development and production; and Refining and Marketing- activities include the refining, manufacturing, supply and trading, marketing and transportation of crude oil, petroleum and petrochemicals.
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.
Eni is engaged in the oil and gas exploration and production, gas marketing operations, management of gas infrastructures, power generation, petrochemicals, oil field services and engineering industries. Co.'s operations are divided into three segments; Exploration and Production (oil and natural gas exploration and field development and production, as well as LNG operations), Gas and Power (supply, trading and marketing of gas and electricity, managing gas infrastructures for transport, distribution, storage, re-gasification, and LNG supply and marketing), and Refining and Marketing (supply of crude oil, refining and marketing of refined products). Co. maintains operations in 73 countries.
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.
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.
Genel Energy is a holding company. Co. is principally engaged in the business of oil and gas exploration and production. Co. has three segments: Oil, which is comprised of the producing assets, Taq Taq and Tawke, which are located in the Kurdistan Region of Iraq (KRI) and makes predominantly all sales to the Kurdistan Regional Government; Gas, which is comprised of the upstream and midstream activity on Miran and Bina Bawi also in the KRI; and Exploration, which is comprised of its exploration activity, principally located in the KRI, Somaliland and Morocco. As of Dec 31 2016, Co. had proved plus probable working interest reserves of 161.0 million barrels of oil equivalent.
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).
Parex Resources is engaged in oil and natural gas exploration, development and production in South America and the Caribbean region. As of Dec 31 2010, Co. had gross proved light and medium oil reserve of 1,066 thousand barrels (net: 980 thousand barrels).
Shamaran Petroleum is a Canadian-based oil and gas company engaged in the business of oil and gas exploration and development. Co. is in the pre-production stages of an exploration and development campaign in respect of petroleum properties located in the Kurdistan Region of Northern Iraq.
Tethys Petroleum is an oil and gas exploration and production company focused on projects in Central Asia. Through its subsidiaries, Co. is engaged in the exploration for, and the acquisition, development and production of, oil and natural gas resources in Kazakhstan, Tajikistan and Uzbekistan.
VAALCO Energy is an independent energy company engaged in the acquisition, exploration, development and production of crude oil. The company is primarily engaged in its Etame Production Sharing Contract related to the Etame Marin block located offshore the Republic of Gabon in West Africa. The company also owns interests in an undeveloped block offshore Equatorial Guinea, West Africa.
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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