Chariot Limited (AIM: CHAR): Like-minded farm-in partner to unlock Anchois
• Chariot is farming-out up to 55% in Anchois (Lixus licence) and 37.5% of the Rissana exploration licence to Energean for (1) up to US$75 mm in cash equivalents, including a US$50 mm loan convertible into Energean shares at a price of £20/sh or 3 mm Energean shares at Chariot’s option, (2) up to US$850 mm gross carry (US$170 mm net to Chariot based on US$850 mm x 20%) and (3) a 7% royalty on Energean’s share of revenue above a hurdle for gas price (we have assumed US$10/mcf).• The transaction consists of two tranches. Energean will initially acquire 45% and 37.5% interests in the Lixus and Rissana licences respectively for US$10 mm on closing plus US$15 mm on FID. Energean will also fund US$85 mm of gross costs including drilling the Anchois East well and up to US$7 mm seismic at Rissana. The well (to be drilled in mid-24) could increase the 1C resources from 365 bcf to an amount significantly closer to the current 2C resources of 637 bcf and the initial production plateau from 105 mmcf/d to up to ~200 mmcf/d. The well is also targeting 383 bcf prospective resources across two deeper prospects and could derisk a further 372 bcf at Anchois South Flank that would be drilled with the first Anchois producing well.
• Energean will then have the option to acquire a further 10% (to 55%) in the Lixus Licence (Anchois) in return for (1) a further US$50 mm convertible/share payment, (2) a US$850 mm gross carry and (3) a 7% royalty. The cash and carry component alone values 10% of the project at US$220 mm or US$440 mm for Chariot’s residual 20% interest (£0.31/sh). The royalty adds further value.
• The net carry is repayable from 50% of Chariot’s future net sales revenues (which means they will have material cashflows and could pay a dividend from day one) and attracts a 7% over SOFR coupon.
• As we incorporate the impact of the farm-out, we re-iterate our target price to £0.50/sh. With line of sight on first production with a strong development partner, the story benefits from high impact drilling newsflow onshore and offshore Morocco in 2024.
The right partner
We believe that Energean is the right partner for this project. The company’s track record of developing and operating large gas projects dedicated to the domestic market in Israel is very relevant to Anchois and Morocco. Energean has also the required balance sheet. The company is agile and Anchois has enough materiality to be important for Energean.
Valuation
Our Core NAV for Chariot based on 20% of Anchois 2C is £0.28/sh. Taking FID on the project by YE24 would add £0.05/sh. A success at Anchois East is worth £0.26/sh and the 3 onshore well programme could add a further £0.12/sh. Our Sum of the Parts valuation stands at £0.51/sh.
Chariot Oil & Gas is an independent oil and gas exploration company focused offshore in West Africa with a portfolio of assets located in the under-explored regions of Namibia, Mauritania and Morocco.
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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