Panoro Energy ASA (OSE: PEN): Growing production in Gabon. Gearing towards material exploration in 2024
• 2Q23 production was 8,093 boe/d, below our forecasts of 9,055 boe/d, mostly due to lower production in EG. This low production, combined with the delay to the restart of the gas lift compressor in Gabon (now online but not fully operational yet), has led Panoro to narrow its FY23 production guidance from 9.5-11.5 mboe/d to 9.5-10.5 mboe/d.• 2Q23 WI production in Gabon was 2,660 bbl/d (in line) but with the addition of the third new well at Hibiscus Ruche Phase I development, WI production has recently reached up to ~5.2 mbbl/d (~30 mbbl/d gross). We forecast 28 mbbl/d gross production in 3Q23 (4.9 mbbl/d net to Panoro 17.5% WI). Overall corporate WI production has already reached levels of up to 11 mboe/d.
• With a total of 6 new Hibiscus Ruche wells (including 3 wells already on production), Panoro is on track to reach gross production plateau of ~40 mbbl/d (7 mbbl/d net to Panoro WI) in Gabon and overall WI corporate production of 13 mbbl/d at the end of the campaign.
• With the Hibiscus Ruche Phase I development progressing towards completion, Panoro’s 2024 programme will include more exploration. There are 2 additional drilling slots with the contracted rig in Gabon that could be used to drill 1-2 exploration wells at Dussafu. The overall exploration inventory on the licence is estimated at ~40 mmboe prospective resources net to Panoro. Akeng Deep is also expected to be drilled in EG in 2024 (180 mmbbl gross prospective resources).
• Net debt at the end of June was US$69 mm. Pending the publication of the company 2Q23 financials, we re-iterate our target price of NOK50 per share that has been set close to our ReNAV.
Reflections on Equatorial Guinea
2Q23 production in EG has been impacted by some uptime issues. The first of the three new wells is expected to come on stream mid 1Q24 with two further wells being put on production in 2Q24. We have therefore reduced our EG WI production forecasts for 2H23 by ~1 mbbl/d to ~3.8 mbbl/d. With three new wells are onstream, we forecast ~5.4 mbbl/d WI production from 2H24 (38 mbbl/d gross).
Financials and Valuation
We have trimmed our FY23 production forecast from ~10.5 mboe/d to ~9.5 mboe/d. Our new ReNAV is ~NOK48/sh. Assuming US$85/bbl for Brent over 2H23 and 2024, we forecast that Panoro could generate US$200 mm of aggregate free cash flow over the period (assuming no exploration spending), representing >50% of the current market cap. Even assuming a FY24 capex programme in line with FY23 would leave ~US$160 mm of free cash flow.
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.
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