Panoro Energy ASA (OSE: PEN): Reserves addition in Gabon. Strong financials
• The 1H24 production and the cash position had been reported previously. Panoro generated ~US$54 mm cash from operations (we expected ~US$48 mm) with a US$22 mm positive working capital movement. At the end of June, current accounts receivable of ~US$72 mm were well above the current payables of ~US$43 mm.• Production currently stands at 10-10.5 mbbl/d. This excludes any contribution from the new EG wells, the first of which is expected to start production in early September. Overall, we forecast that WI EG production will increase by ~2 mbbl/d by YE24.
• Panoro continues to expect total corporate production to be over 13 mbbl/d by YE24.
• There are some cost inflationary pressures and the FY24 capex guidance could be increased. This would also incorporate the greater number of wells drilled in Gabon in 2024.
• The key near-term newflow is the drilling of the Akeng Deep prospect. The well is targeting a 180 mmbbl prospect with an unrisked NAV of ~NOK15/sh.
• We re-iterate our target price of NOK52/sh that incorporates the reserves increase in Gabon, partially offset by expectations of increased costs. We are also now assuming a buy-back programme of NOK100 mm for 2024 (NOK150 mm previously) and we have kept our assumptions on future dividend distributions in line with the latest payment (~NOK50 mm per quarter). There is upside to these assumptions given that FY25 capex is expected to be only US$40 mm (FY24: ~US$75 mm), which leaves ample room for further shareholder distributions.
Larger than expected reserves increase in Gabon
The 2024 exploration programme in Gabon has added ~23 mmbbl gross 2P reserves (WI: ~4 mmbbl). The volume is 30% above our expectations. This also represents an increase of >25% to the YE23 2P reserves estimates in Gabon. As the entire block is covered by a production licence, Panoro has enough time to maximize the value of the exploration upside. In addition, any exploration capex is incorporated in the cost oil pool of the existing development, resulting in very low effective exploration costs. Overall, remaining WI prospective resources are estimated at ~25 mmbbl, which represents >100% of the current 2P reserves in Gabon.
Valuation and forecast
Our FY24 production forecast is unchanged but we have assumed a 10% capex increase in 2024. Our Core NAV and ReNAV are respectively NOK33/sh and NOK52/sh (broadly unchanged).
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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