Criterium Energy Ltd (TSX-V: CEQ): On track for near term acquisition
• The FY22 financials were in line with our expectations. The company held C$3.7 mm in cash at YE22.• Criterium has also filed the notice of intention to file a short form prospectus. This could be an indication that the company is close to announcing an acquisition and/or an equity transaction.
• With many sellers looking to reduce their exposure to hydrocarbons, a management team with extensive experience in South East Asia and limited competition, Criterium is targeting the acquisition of 1-3 mboe/d by YE23 in Thailand, Indonesia, Malaysia or Vietnam. The stated ambition is to grow production to 8-10 mboe/d by 2026.
• While other potential acquirers are focused on larger assets, the market that Criterium is initially targeting is less crowded and it is likely to be possible to acquire assets at very attractive prices.
What a typical acquisition could look like
Assuming Criterium acquires assets with 1-2 mbbl/d production, based on US$85/bbl for Brent and US$15/bbl opex, it could add US$10-20 mm per year of operation cash flow after 60% government take. Tax losses could boost that figure by US$15-30 mm to US$25-50 mm per year. An ideal asset would have existing production, near term production growth opportunities, reserves upside, low opex and would not require too much capex for further development.
Valuation
We are not proposing a target price until the company executes a transaction. Our ReNAV based on Bulu is ~C$0.09/sh. We note that the share price of Conrad Asia Energy (the closest comparable to Criterium based on its current asset base) has been very resilient. The readthrough value of Criterium based on Conrad Asia’s current share price is now ~C$0.440/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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