Panoro Energy ASA (OSE: PEN): 2024 shareholder distributions could represent a total yield of 12.5%-15.5%
• 3Q23 production of ~10 mbbl/d and net cash at the end of September had been previously reported.• There were no specific updates on the ongoing ESP investigation at Dussafu. Production plateau of 40 mbbl/d was reiterated and could be reached by the end of 1Q24 in our estimation.
• Drilling the first of three new wells in EG will commence by YE23 (unchanged). The corporate tax rate in EG has been reduced from 35% to 25%. Dure to the timing of tax payments the cash effect of this will be felt in 2025 (ie. 2024 taxes paid in 2025).
• 2024 will be a very important year for Panoro. The company will drill two high impact exploration wells at Akeng Deep in EG and at Bourdon in Gabon. Our unrisked NAVs for Akeng Deep and Bourdon are ~NOK14 per share ~NOK5 per share respectively.
• The FY24 capex is estimated at US$70-75 mm (we had assumed US$65 mm) given increased activity. Part of the cost of Akeng Deep, should it be unsuccessful, will be accounted for as cost oil in the producing field. This implies that a portion of the cost of the well will be recovered very quickly in the downside scenario. In the upside scenario of a discovery, the nearby FPSO offers a fast-track tie-back development option.
• The FY24 programme includes more activity in Tunisia, with drilling at Rhemoura and Guebiba expected to start in late 2024.
• With increasing free cashflow in 2024, the overall shareholder distributions are expected to increase by 100-150% in 2024 versus 2023.
• We re-iterate our target price of NOK50 per share.
Shareholder distributions
Panoro has declared a cash distribution of NOK40 mm for 3Q23 for a total payout of NOK140 mm since the 2023 shareholder returns policy was announced. The company is moving towards its targeted total of NOK200 mm for 2023. For 2024, Panoro anticipates distributing a total of NOK400-500 mm including a core cash distribution above that paid in 2023. This assumes Brent price of ~US$85/bbl. Panoro will distribute the balance as special distributions and/or share buybacks. The NOK400-500 mm shareholder distributions would represent a yield of ~12.5%-15.5%. This highlights the highly free cashflow generation potential of the business. Cash distributions will be made as a return of paid in capital which can benefit some shareholders (ie. no withholding tax).
Valuation
Our Core NAV and ReNAV now stand at ~NOK33/sh and NOK49/sh. At US$85/bbl for Brent, we estimate that the cumulative free cash flow over 2024-2026 is greater than the current market cap.
Panoro Energy is an international independent oil and gas company engaged in the exploration and production of oil and gas resources in Brazil and West Africa. In Brazil, Co. participates in a number of oil and gas licenses located in the Santos basin outside the south-east coast of Brazil and in the Camamu-Almada basin in the state of Bahia. In West Africa, Co. participates in a number of licences in Nigeria and Gabon. As of Dec 31 2013, Co.'s commercial production is from the Manati field in Brazil.
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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