Panoro Energy ASA (OSE: PEN): Accretive transaction in Tunisia
• Panoro is buying the 40% minority interest it does not own in its Tunisia JV for a total consideration of US$18.2 mm in cash and shares.• On closing (expected in April), Panoro will have 49% interest in the TPS producing assets and 87.5% interest in SOEP
• The transaction adds ~2.96 mmbbl of net 2P oil reserves and 800 to 900 bbl/d of net production.
• We are increasing our production forecasts to reflect this and now estimate Panoro FY23 production of 10.8 mboe/d.
• The transaction is accretive to our valuation, it adds materiality and simplifies the business structure.
• We are increasing our target price from NOK48 per share to NOK50 per share as we incorporate the impact of the acquisition.
• The shares continue to offer a combination of value, growth and dividend distribution.
What Panoro is paying
The upfront consideration comprises US$4.9 mm in cash and US$8.3 mm in shares (2,945,035 new Panoro shares are being issued to the seller). Half of the share consideration will be locked-up for a period of six months from the issue date and the balance will be locked-up for 12 months. Deferred consideration of US$5 mm is payable in cash by YE23. Panoro is also assuming ~US$4 mm of outstanding Tunisian loan facilities. This is more than offset by Panoro assuming the seller’s effective share of cash and working capital in the Tunisian JV amounting to ~US$6.5 mm.
Valuation
We are increasing our Core NAV and ReNAV from NOK41 per share and NOK48 per share to, respectively, NOK43 per share and NOK50 per share. We now forecast that Panoro will generate ~US$250 mm free cash flow in aggregate over 2023 2024. This assumes ~US$95/bbl for Brent. At Brent of US$85/bbl until YE24, the aggregate free cash flow over 2023-224 would be ~US$210 mm. This represent >60% of the current market cap post completion of the acquisition of the Tunisian assets.
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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