Auctus on Friday - 09/06/2023

AUCTUS PUBLICATIONS
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Arrow Exploration (AXL LN/CN)C; target price of £0.50 per share: No flow from the Gacheta but overall reserves addition from CN-1 larger than initially expected – The Gacheta zones proved unproductive at the CN 1 well location. Management is investigating potential reasons for the lack of productivity and plans to re-evaluate these Gacheta zones in future wells. The Gacheta zones were located above the Ubaque that flowed at rates >1,100 bbl/d. Arrow will put in production the C7A and C7 zones during the course of next week. These are the primary zones at Carrizales Norte. Overall, the company’s preliminary interpretation of the CN-1 discovery suggests aggregate reserve capture materially exceeds initial expectations. Larger oil accumulations than expected were encountered at both the Ubaque and the C7 reservoirs. The development of Carrizales Norte could now be expanded beyond the three wells initially envisaged. We currently carry 1.8 mmbbl net resources for Carrizales Norte. A 2.7 mmbbl field (+50%) would add £0.05 per share to our Core NAV.
See website for full report

PetroTal (PTAL LN/TAL CN)C; target price of £1.50 per share: Another (probably short lived) river blockade –The Indigenous Association for Development and Conservation of Bajo Puinahua (AIDECOBAP) has started a violent blockade in the Puinahua Canal against all ships providing services to PetroTal, preventing the monetization of oil production. This has happened several times in the past and has historically been resolved quickly. During social activism-related downtime, over US$50,000 per day is forfeited from future social trust allocations. Already US$8 mm has been accumulated in a social fund by PetroTal in a restricted bank account. This river access disruption coincides with planned production reductions to tie in previously installed infrastructure. Production in June to date has therefore been only 10 mbbl/d. From 8 June, the field will be shut in for ~5 days for field installation work.
See website for full report

Zephyr Energy (ZPHR LN)C; target price of £0.18 per share: Small equity raise to address capex increase and production delay – Zephyr has raised £3.15 mm of new equity priced at 3.5 p per share. The funding addresses a shortfall created by the combination of an increase in capex due to the blow-out at the State 36 2 well in the Paradox and a six month delay in bringing the Slawson wells in the Williston into production due to the related surface facilities buildout being late. Much of the additional cost associated with the blow-up of well State 36-2 will be reimbursed by Zephyr’s insurance but there is a lag between when the costs are paid by Zephyr and when Zephyr is reimbursed. As we incorporate the 5% equity dilution and a delay in production start-up in the Paradox from 4Q23 to 1Q24, we are changing our target price to £0.18 per share.
See website for full report

IN OTHER NEWS
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AMERICAS

Canacol Energy (CNE CN): Operating update in Colombia – The Lulo 2 appraisal well encountered 230 feet true vertical depth of net gas pay with average porosity of 20% within the primary Cienaga de Oro sandstone reservoir. Gas sales in May stood at 189 mmcf/d.

Canadian Overseas Petroleum (COPL LN/XOP CN): Operating update in the USA – April and May production was 1,170 bbl/d and 1,330 bbl/d respectively.

i3 Energy (I3E LN): FY22 results – FY22 production in Canada was 20.3 mboe/d. The company held 181.5 mmboe 2P reserves at YE22. YE22 net debt was £11 mm. FY23 production is expected to be 22.25-23 mboe/d with an expected peak rate of 26 mboe/d.

ASIA AND AUSTRALASIA

Jadestone Energy (JSE LN): New equity raise – Jadestone Energy has raised US$50 mm of new equity priced at 45p per share. The company’s main shareholder, Tyrus Capital, is also providing a standby working capital facility of US$35 mm. Following share buybacks of US$17.9 mm and multiple acquisitions, Jadestone had net debt of only US$8.8 mm at the end of May, while net cash was ~US$162 mm at the end of June 2022. The company’s current borrowing capacity is not sufficient for the company to meet its committed capital programme.

TotalEnergies (TTE FP): Farming down interests in gas assets in PNG – JX Nippon Oil & Gas Exploration is acquiring a 2.58% interest in Block PRL15, including the Elk-Antelope fields from TotalEnergies.

EUROPE

Barryroe Offshore Energy (BEY LN): Cancelling capital raise. Going concern issues – The equity raise launched in April has been cancelled. Without this cash injection, Barryroe’s working capital covers only three months of running costs, creating going concern issues.

Egdon Resources (EDR LN)/Union Jack Oil (UJO LN): UK planning appeal withdrawn – The planning appeals in relation to the refusal of planning consent for exploratory drilling at North Kelsey have been withdrawn by Egdon. The lateral borehole was viewed as a new development and had to be part of a different planning application. A new application will be submitted accordingly.

IOG (IOG LN): Update in the UK North Sea – The Blythe H2 well has flowed at a maximum dry gas rate of 22.8 mmcf/d and 280-336 bbl/d condensate. This is below the expected initial H2 gas rate of 30-40 mmcf/d. The current gross unconstrained H1 well production rate is ~15.5 mmcf/d. Average 2023 gross production year to date to 31 May was 13.9 mmcf/d. The Company is now likely to breach some of the covenants under the terms of its EUR100 mmm senior bond at the next covenant test date of 30 June. Cash at bank as at 31 May was £21.5 mm, including restricted funds of £6.8 mm.

FORMER SOVIET UNION

Lukoil: dry hole in Kazakhstan – The V-1 wild cat well on the Zhenis block was dry.

MIDDLE EAST AND NORTH AFRICA

Zenith Energy (ZEN LN/ZENA NO): Arbitration against Tunisia – Zenith is starting legal proceedings against Tunisia with a total claimed amount of US$48 mm. Zenith claims there have been obstructions in relation to the development of the Sidi El Kilani and Ezzaouia concessions.

SUB-SAHARAN AFRICA

Invictus Energy (IVZ AU): Raising new equity for Zimbabwe gas – Invictus has raised A$12.75 mm of new equity at a price of A$0.12 per share. The proceeds of the raise will be used for the drilling of the Mukuyu-2 appraisal well.

Noble Helium (NHE AU): Raising new equity for Helium on Tanzania – Noble has raised A$13.5 mm of new equity at a price of A$0.18 per share to fund the drilling of an exploration well at the North Rukwa project.

Savannah Energy (SAVE LN): FY22 results – FY22 production in Nigeria was 26.8 mboe/d. YE22 net debt was US$404.9 mm (US$503.2 mm on an adjusted basis including the Naira held in cash to pay interest).