Panoro Energy ASA (OSE: PEN): Production affected by short term ESPs issues. Adding reserves and exploration upside
• 3Q23 production of ~10 mbbl/d was slightly ahead of our expectations given a strong performance in Tunisia (2.3 mbbl/d vs our expectations of 2.1 mbbl/d).• While gross production at Dussafu had reached up to 39 mbbl/d following the restart of the ESPs at both DHIBM-3 and DHIBM-4, subsequent problems at these two ESPs resulted in inconsistent production. It has therefore been decided to pull out the completions at these two wells to address the ESPs issues. Production should be restored shortly. We note that this is a deferral of some production volume and that reservoir deliverability has been demonstrated by the strong rates achieved when all wells have been producing normally.
• 4Q23 gross production at Dussafu is expected to average 25-30 mbbl/d. Two further wells are expected to be on stream in 1Q24 (one well at the Hibiscus South discovery and one new well at Hibiscus) followed by the completion of the recently drilled Ruche well. With a total of seven producing wells (rather than six), the gross production plateau of 40 mbbl/d is expected to be extended.
• The operator now estimates that the overall Ruche/Hibiscus development holds 10 mmbbl oil in place above initial expectations (4-5 mmbbl recoverable resources, 0.6-0.8 mmbbl net to Panoro). This is in addition to the recent discovery at Hibiscus South (6-7 mmbbl gross recoverable resources). We believe this has positive implications for Panoro’s 2023 organic reserve replacement ratio (92% in 2022).
• The last well slot in the programme will be used to drill the Bourdon prospect with 29 mmbbl prospective resources (~5 mmbbl net).
• As we incorporate lower production assumptions in 4Q23 and 1Q24, offset by increased reserves and additional prospects (we have now included Akeng Deep and Bourdon in our ReNAV), we re-iterate our target price of NOK50/sh.
3Q23 financials
3Q23 revenue was US$103.4 mm with 1.18 mm bbl sold during the quarter. This was below our forecast of ~1.5 mmbbl because the 0.38 mmbbl lifting in Gabon occurred in October (after the end of the period). As a result, 4Q23 sales are estimated at ~1 mmbbl (we forecasted ~0.55 mmbbl). Panoro held US$47 mm in cash at the end of September, which includes advances of US$13.5 mm taken against crude inventory. Overall, our YE23 net debt estimate (which reflects lower oil price assumptions for 4Q23) has not changed materially (US$11 mm vs US$2 mm previously).
Valuation
Our Core NAV and ReNAV now stands at ~NOK36/sh and NOK52/sh.
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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