Panoro Energy ASA (OSE: PEN): Increasing dividend. M&A transaction in Gabon highlights the value of Panoro’s assets
• 2Q23 production and cash and debt at the end of June had reported previously.• Gross production at Dussafu is 27 mbbl/d, below the rate achieved at the end of July (30 mbbl/d) due to an ESP failing at one of the new wells, reducing production from that well to 2.8 mbbl/d. This is a short term issue fixable by changing the ESP. The fourth new production well (DHIBM-6H) is being completed and is expected to be on stream shortly. Panoro continues to expect to reach overall net corporate production in excess of 13 mbbl/d when all 6 new Hibiscus Ruche Phase I wells are on stream around YE23.
• In Tunisia 1H23 gross production of 4,250 bbl/d was very high (1Q23: 3,960 bbl/d) due to a very successful campaign of ESP replacements. An ongoing review of the reservoir model could open new drilling locations and potentially allow Panoro to book additional reserves.
• A 2Q23 dividend of NOK40 mm has been declared. This is above our expectations (NOK31 mm) and up from NOK31 mm in 1Q23.
• With more exploration activities expected in 2024, we re-iterate our target price of NOK50 per share that has been set close to our ReNAV.
Maurel & Prom acquires Assala Energy
Last week, Maurel & Prom announced the acquisition of Assala Energy for US$730 mm in cash. M&P is also assuming Assala’s US$600 mm RBL facility. Assuming the RBL facility is entirely drawn and cash is stripped from the business would suggest an acquisition price of US$1.33 bn. Assala Energy owns 75.5% of Assala Gabon which produces 40.7 mbbl/d (WI) and held 97 mmbbl of 2P reserves at YE22. This equates to 80 mmbbl 2P reserves and 32.9 mbbl/d production net to Assala Energy for transaction multiples of ~US$16.6/bbl of 2P reserves and US$40,425/bopd. Applying these metrics to Panoro’s 16.9 mmbbl 2P reserves in Gabon and 7 mbbl/d WI production ~YE23 suggests a readthrough value of ~US$280 mm (~NOK25/sh) for Panoro’s stake in Dussafu, which is above our NAV for the asset (~NOK21/sh). Applying the transaction metrics to the reserves in EG (similar NPV/bbl as in Gabon on our numbers) would lead to an overall value for EG + Gabon of ~NOK45/sh.
Financials and Valuation
Our Core ReNAV and ReNAV are broadly unchanged at ~NOK36/sh and ~NOK48/sh. Assuming US$85/bbl for Brent over 2H23 and 2024, we continue to 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.
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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