Criterium Energy Ltd (TSX-V: CEQ): On track
• The work-over programme has started with the first two work-overs having added a total of ~40 bbl/d. The third work-over was not completed as damaged equipment was encountered downhole.• The second tranche of work-overs will start in May. Overall, 12-15 work-overs will be undertaken during 2024, at a pace of 2-3 workovers per month, potentially adding a total of 240-300 boe/d.
• The drilling of new wells is expected to start in 3Q24 at a cost of US$1.8 mm per new well. 10 infill development and infill drilling locations have been high-graded. Each well could add 75-200 bbl/d with a payback of 4-6 months.
• Importantly, the sale of Bulu continues to make progress. Completing the divestment of this asset would be a rerating event as it would add US$7.75 mm in cash to Criterium’s balance. This is more than the current market cap of the company. This could also allow the company to accelerate the drilling programme. Repaying an additional US$5.5 mm of debt could also trigger a US$3.8 mm debt write down.
• Production continues to be expected to reach 1.0-1.5 mboe/d by YE24. In addition, the development of the gas could add a further 1.0-1.5 mboe/d from 2025 or 2026. We reiterate our Target Price of C$0.30/sh in line with our ReNAV.
Valuation and cashflow
We continue to attribute a 50% probability to the divestment of Bulu. Completing the transaction would add ~C$0.05 per share to our ReNAV (including the US$3.8 mm write-down but excluding the benefits to accelerate the development programme). Our Core NAV is C$0.22/sh with a ReNAV of C$0.33/sh. It incorporates a lower share count (minus 5 mm shares as a result of a correction in the number of shares being issued to one of the lenders). Once oil production has reached ~2.2 mbbl/d (plus 8 mmcf/d of gas) in 2027, we forecast recurrent free cash flow of ~US$20 mm per year at US$70/bbl.
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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