Panoro Energy ASA (OSE: PEN): Production from Hibiscus wells back to normal. Drilling a new exploration well
• Production at the DHIBM-3H and DHIBM-4AH wells has been restored to normal levels.• The Dussafu field is now producing at rates of up to 35 mbbl/d, significantly above the 26.5 mbbl/d reported at the time of the electrical failures.
• Both wells had experienced surface electrical issues preventing operation of the downhole ESPs. DHIBM-3H was not producing while DHIBM-4H was producing on natural flow.
• Panoro’s total corporate production is now ~12 mbbl/d, near the target of 13 mbbl/d. Two to three new wells are still to be drilled at Dussafu.
• The DRM-3H development well on Ruche (5th well in the initial six well development programme) has encountered oil in the Gamba. This is the longest well in the campaign so far and an alternative final casing is now required. Drilling has been temporarily paused until the casing arrives on site.
• Meanwhile, Panoro has started drilling a new exploration well at Hibiscus South. The well will be drilled in ~30 days and targets ~7 mmbbl gross recoverable resources (~1 mmbbl net to Panoro).
• With more exploration activity expected in 2024, we re-iterate our target price of NOK50 per share.
Well sequencing and production
If successful, the Hibiscus South well can be put in production very quickly. The Hibiscus wells are very prolific with IP rates of ~6 mbbl/d. The rig could then return to Ruche, finish the DRM-3H well and drill the sixth and final well of the campaign. There would still remain a rig slot to potentially drill another exploration well.
Financials and Valuation
Our Core NAV is unchanged at ~NOK36/sh but we have increased our ReNAV from NOK48 per share to NOK49 per share to incorporate the new exploration well. We have assumed 35% chance of success. At US$90/bbl for Brent over 4Q23 and 2024, we forecast that Panoro would generate ~US$230 mm of aggregate free cash flow over the period (assuming no exploration spending) from June 2023 to YE24. This represents >65% 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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