AUCTUS ON FRIDAY - 27/09/2024
AUCTUS PUBLICATIONS________________________________________
Arrow Exploration (AXL LN/CN)C; Target price £0.70 per share: Another horizontal well with high flow rate – The fourth horizontal well at Carrizales Notre (CNB HZ-5) has been put on production at a gross oil rate of 2.7 mbbl/d (1.35 mbbl/d net to Arrow) with a water cut of 11%. This flow rate compares favourably with CNB HZ-4 that was put on production at a gross oil rate of >2.5 mbbl/d (8% water cut). Overall gross oil production from the three other horizontal wells is ~5.62 mbbl/d (~2.8 mbbl/d net to Arrow) including 2.1 mbbl/d for CNB HZ-4, 1.9 mbbl/d for CNB HZ-3 and 1.6 mbbl/d for CNB HZ-1. This compares with our expectations of gross IP90 of 1.5 mbbl/d per well (4.5 mbbl/d for three wells). The water cut of CNB HZ-1 and HZ-3 is 48-52%. We are assuming water cut of 60-80% after six months. The water cut at CNB HZ-4 is now 11%. Overall current net production is now 5,835 boe/d. This represents an increase of ~0.8 mboe/d compared to a month ago. This is above our 3Q24 production forecasts of ~4.2 mboe/d with two further horizontal wells to be drilled plus one exploration well at Chorreron-1 (Baquiano-1) by YE24. We forecast net production of ~5.7 mboe/d in 4Q24. Our unrisked value for Chorreron (formerly Baquiano) is £0.05/sh. The publication of an updated reserves report for Carrizales Norte that could incorporate the impact of the horizontal drilling and increase Arrow’s 2P reserves is a key near term news item. We currently assume a single rig to maintain production constant at ~5.7 mboe/d in 2025. We however note that Arrow is looking to accelerate its drilling programme in 2025 by adding a second rig. Additional drilling could have a positive impact on our forecasts and valuation.
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Criterium Energy (CEQ CN)C; Target price C$0.35 per share: High production in September. The drilling programme has commenced – Current production has reached 950 bbl/d, representing an increase of 90 bbl/d since August. This reflects the very good performance of the work-over programme with 98 bbl/d incremental production from three new workovers in Tranche 3 from early August. Overall, the programme (three tranches with a total of 11 work-overs so far) has delivered 227 bbl/d of incremental production. In addition, the work-over of MGH-48 has encountered gas, which will be used as feed gas to reduce the consumption of diesel, reducing operating costs. The total cost of the work-over programme was US$0.6 mm, delivering US$1.4 mm of incremental pre-tax cash flow so far. The next tranche of 1-4 work-overs will be undertaken in 4Q24. Drilling operations have commenced with the MGH-43 well spudding in early September. It will be followed by the MGH-40 well. Both wells are expected to be on stream in November. Each well is expected to add ~150 bbl/d each with minimal added variable cost. This is expected to result in per bbl operating costs decreasing by 30%. We continue to forecast that Criterium will exit 2024 with ~1,250 boe/d production. The total cost of the FY24 activity programme remains estimated at ~US$4.5 mm. Completing the divestment of Bulu for US$7.75 mm remains a key event as this would allow the company to reduce its debt and/or accelerate its drilling programme.
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Zephyr Energy (ZPHR LN)C; Target price £0.12 per share: Decision on next steps in the Paradox imminent. Potential partnering. – 1H24 sales volumes in the Williston were 1,239 boe/d. The FY24 production guidance for the Williston is unchanged at 1.1-1.3 mboe/d. This excludes >100 boe/d of natural gas liquids. While the cash position at the end of June 2024 was ~US$1.1 mm, the receivables were US$11.5 mm (with payables of only US$7.6 mm). The overall cash plus receivables minus payables of ~US$5 mm is well above our expectations of US$0.2 mm. This reflects the expected imminent payments of US$3.9 mm (US$3 mm from the insurer plus US$0.9 mm as revenue payments from the non-operated assets). In addition Zephyr will soon submit the final claims under the well control insurance policy of ~US$1.3 mm. Pending further visibility on next steps for well State 36-2R, we re-iterate our target price of £0.13 per share. Zephyr could decide to bring the well into production or lengthen the lateral to up to 10,000’ to further prove the hypothesis that acid treatment improves reservoir permeability from the microfractures and the matrix of the reservoir. If confirmed, this will have very positive implications for the play if acidization is sufficient to develop the reservoirs rather than having to rely on much more expensive hydraulic stimulation (fraccing). Zephyr is in advanced discussions with potential partners to invest either in the well or at the asset level. Announcing a partner could be a rerating event for the shares.
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IN OTHER NEWS
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AMERICAS
ATOME (ATOM N): Raising new equity for Paraguay green ammonia – ATOME is raising £2.25 mm of new equity priced at £0.75 per share. Directors and Management are subscribing for up to £1.5 mm in the fundraising. The proceeds will allow ATOME to progress the Villeta project to FID.
Canacol Energy (CNE CN): Operating update in Colombia –FY24 EBITDA is expected to be at the higher end the US$250-280 mm guidance with volumes of ~167 mmcf/d. The Cardomomo 1 exploration well did not encounter commercial amounts of natural gas. For the remainder of 2024, Canacol plans to drill 3 appraisal wells in producing gas fields and 2 exploration wells.
Trinity E&P (TRIN LN): 1H24 results – 1H24 production in Trinidad was 2,595 bbl/d. Net cash at the end of June was US$5 mm. The FY24 production guidance has been reduced to 2.45-2.55 mbbl/d.
EUROPE
Deltic Energy (EOG LN): 1H24 results – Deltic has reached agreement with the JV partners on Licence P2252 (UK), limiting Deltic’s liabilities associated with the withdrawal from the licence to £1.9 mm with payment of ~50% of this amount deferred for a period of 24 months. Deltic held £3.7 mm in cash at the end of June.
Kistos (KIST LN): 1H24 results – 1H24 production in the Netherlands and Norway was 8.4 mboe/d. FY24 production is estimated at 7.5-8.5 mboe/d. Net debt at the end of June was US$175 mm. First oil from the Balder Future project is now anticipated by the end of 2Q25.
OKEA (OKEA NO): Divesting Norway asset – OKEA is selling its 15% WI in Yme to Lime Petroleum for a consideration of US$15.65 mm. All related decommissioning costs will be transferred to Lime. In addition, Lime will pay OKEA a post-tax consideration of US$9.2 mm in 2027 which will be repaid to Lime in four equal tranches upon completion of four pre-defined stages of abandonment of the field.
FORMER SOVIET UNION
Caspian Sunrise (CASP LN): 1H24 results – 1H24 production in Kazakhstan was 1,606 bbl/d. Production from the new Well 155 has stabilised at ~700 bbl/d, initially increasing production from the MJF structure to ~2,450 bbl/d before falling back to ~1,350 bbl/d as production from new Well 155 has affected production from some of the older wells. Current overall production is ~1,600 bbl/d.
SUB-SAHARAN AFRICA
Corcel (CRCL LN): Acquiring further interests in asset onshore Angola and raising new equity – Corcel has acquired an additional 20% interest in block KON-16 at no cost. Corcel has raised £1.2 mm of new equity priced at £0.001 per share.
Noble Helium (NHE AU): Raising new equity for Tanzania helium –Noble Helium is raising A$3.0 mm of new equity priced at A$0.045 per share. The funds will be used for (i) deeper targets in the western margin shallow analytical program in the North Rukwa basin, (ii) preliminary exploration activity and (iii) fund the estimated costs to proceed to dual listing on AIM.
EVENTS TO WATCH NEXT WEEK
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30/09/2024: Seascape Energy (SEA LN) – 1H24 results
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.
Caspian Sunrise is engaged in exploration and production of crude oil. Co. builds a portfolio of oil and gas exploration and production assets in Central Asia and in particular Kazakhstan.
Regency Mines is engaged as a natural resource exploration and development company. Co. manages a balanced portfolio of mineral and oil and gas projects and investments at different stages of development. Co. is active in multiple international locations including the U.K., Papua New Guinea, the U.S. and Greenland.
Cluff Natural Resources invests in global resources opportunities with a primary focus on U.K. based upstream energy projects. Co.'s principal activity is the exploration, evaluation and development of mineral exploration targets. As of Dec 31 2016, Co. held a 100% interest in two gas licenses in the Southern North Sea.
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.
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.
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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