Criterium Energy Ltd (TSX-V: CEQ): Debt agreement frees up US$1.5 mm. Increased netbacks. Further payment for Bulu
• 2Q24 production was 812 bbl/d. Criterium held ~C$6 mm in cash at the end of June. These figures are in line with our expectations.• 2Q24 operating costs per bbl have been reduced by 7% compared to 1Q24. With the MGH-40 & MGH-43 wells scheduled to spud imminently and expected to add 150-200 bbl/d each with minimal added variable cost, per bbl operating costs are expected to decrease by a further 30%.
• We continue to forecast that Criterium will exit 2024 with ~1,250 boe/d production. At this level of production and with total cash tax of only ~US$0.65 mm per quarter (this includes business tax and VAT), we forecast that Criterium could generate >US$2 mm of operating cashflow per quarter.
• The company has renegotiated the debt servicing obligations in 2H24, resulting in cash outflow reduction of US$1.5 mm over the period. This is important as it reduces the pressure on the balance sheet while production is increased.
• Criterium has also received an additional non-refundable US$0.5 mm payment from the buyer of Bulu. Overall, US$1 mm of the total purchase price of US$7.75 mm has been paid so far. While the closing date for the transaction has been extended to 4Q24, we view this additional non-refundable payment as very encouraging.
• 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.
• Criterium plans to submit to the Indonesia government a plan to develop the gas at SE Mengoepeh before YE24. A MOU for the sale of the gas has already been signed. Sanctioning the gas development could open access to further debt funding. This is a key area of near-term potential value creation.
• We re-iterate our target price of C$0.35/sh in line with our ReNAV.
Growing production
During July, production averaged 850 bbl/d, while August has averaged 860 bbl/day despite having approximately 100 bbl/d currently offline as Criterium performs repairs on three different pumps in the PLT field in the Tungkal PSC. Volumes from those repaired pumps are expected to be back on-line by early September.
Valuation
We are now assuming that the divestment of Bulu will complete in 4Q24. Our Core NAV and ReNAV are broadly unchanged at respectively C$0.22/sh and C$0.32/sh.
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.
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