Panoro Energy ASA (OSE: PEN): Likely reserves increase at Hibiscus following better than expected drilling results
• The DHIBM-7P pilot vertical well encountered 24 metres of net pay in an overall hydrocarbon column of 37 metres.• The well was drilled from the pilot hole of the recently drilled Hibiscus South well that had already encountered 5-6 mmbbl recoverable resources. The bottom part of this well had been plugged ahead of drilling a horizontal producer in the area (this horizontal well will be drilled next).
• One of the producing wells at Hibiscus continues to deliver a very high flow rate without requiring a pump. This very strong performance suggests that this area of the field could hold more volume than initially expected. The DHIBM-7P pilot well has confirmed that theory, encountering oil beyond the expected boundary of the field. The hydrocarbon column also extends across the boundary between the Gamba and the underlying Dentale formation. This is the first time that the Gamba and Dentale have been found in the same well at Hibiscus main.
• Panoro is now reworking its model of the field which is now larger than expected. Panoro will drill a production well in the newly proved northern flank area once the upcoming Hibiscus South horizontal well is completed.
• The development of Hibiscus/Hibiscus South/Ruche is now expected to include 8 wells rather than 6 as initially expected (there are four spare well slots on the platform), which would extend the duration of the 40 mbbl/d gross production plateau.
• Pending further details, we have added 8 mmbbl gross recoverable resources (Panoro WI: 17.5%) to our valuation. This is slightly above the 5-6 mmbbl encountered at Hibiscus South. We have not changed our target price of NOK50 per share ahead of the publication of the 1Q24 results on Thursday.
Valuation
We have increased our Core NAV and ReNAV from respectively ~NOK32 per share and ~NOK51 per share to ~NOK33 per share and ~NOK52 per share. At US$85/bbl for Brent, we estimate that the cumulative free cash flow over 2024-2026 is greater than the current market cap. High oil prices could also support higher overall shareholder distributions.
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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