AUCTUS ON FRIDAY - 15/03/2024
AUCTUS PUBLICATIONS________________________________________
Chariot (CHAR LN)C; target price of £0.50 per share: Feasibility study as a first step to unlocking a mega green hydrogen project – The feasibility study for the green hydrogen “Project Nour” has now been presented to the government of Mauritania. Chariot holds a 50% interest in the project and TotalEnergies is a partner. Mauritania benefits from an ideal geography for wind and solar energy. The 10 GW project will be developed in several phases, starting with a renewable capacity of 3 GW powering up to 1.6 GW of electrolysis capacity to produce 150,000 t of green hydrogen per annum. The hydrogen generated by the project can be sold domestically for green steel production and exported to Europe as green ammonia There is an existing deep sea port at Nouadhibou. We value Chariot’s interest in Project Nour at £0.05 per share.
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GeoPark (GPRK US)C; target price of US$26 per share: Dutch auction for 10% of the market cap at significant premium to the share price – The key takeaway from the 4Q23 results press release is the announcement of a modified Dutch auction tender offer to purchase up to US$50 mm of GeoPark shares at a price of US$9-10 per share. This represents ~10% of the current market cap of the company. The tender price range represents a premium of 8-20% to the prior day close. The company is sending a strong signal that its shares offer value. The tender price is well below the independent net debt adjusted NPV (after tax) of the company’s 1P reserves (~US$14 per share). The auction could also reduce any potential overhang on the share price by allowing selling shareholders to tender blocks of shares at a premium (rather than by having to progressively sell their positions in the market, which could generate downward pressure on the share price). A Dutch auction offers the benefit of a traditional share buyback with potentially reduced impact on the daily share liquidity. As we incorporate the impact of the US$50 mm Dutch auction tender offer, we have increased our target price from US$25 per share to US$26 per share in line with our new ReNAV. While the tender offer is in addition to the share repurchase program announced last November we are assuming that this traditional share buyback programme will be minimal in 2024.
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Sintana Energy (SEI.V CN)C; target price of C1.55 per share: Second Mopane well confirms initial discovery and encounters new oil pools – Galp Energia has announced that the Mopane-2X well has encountered light oil in high quality reservoirs across three horizons. The first horizon (AVO-1) was an appraisal target of the same horizon encountered in the Mopane-1X well. The pressure regime at both wells is consistent, confirming the lateral extension of the discovery made ~8 km to the East. The second horizon (AVO-3) and the deeper target are new discoveries. The Mopane-1X well had made two discoveries (AVO-1 and AVO-2). The successful appraisal of AVO-1 and the additional discoveries increase the overall volumes encountered so far and increase the likelihood of a commercial development on the licence. Pending further details on the size of the discoveries, we have increased our chance of development from 50% to 60%. 91.6 mm warrants have been exercised at a strike price of C$0.25 per share, boosting the company’s balance sheet by C$22.5 mm. The exercise of these warrants also removes an overhang on the shares. We are increasing our target price from C$1.25 per share to C$1.35 per share.
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VAALCO Energy (EGY US)C; target price of US$10 per share: Increasing reserves. Further potential upside in Gabon. EG potential to be unlocked imminently – VAALCO’s YE23 cash position of US$121 mm and FY23 WI production of 23,946 boe/d were in line with previous indications. The company held 77.3 mmboe WI 2P reserves at YE23 including 15.8 mmbbl in Gabon, 24.5 mmbbl in Egypt, 18.6 mmboe in Canada and 18.5 mmboe in EG. This represents a 1% increase vs YE23 as VAALCO has more than replaced its FY23 production given the strong performance of the producing assets in 2023. The FY24 capex budget is US$70-90 mm (we forecasted US$138 mm) as only US$30-40 mm will be spent in Gabon (on long lead items) with a larger than previously expected drilling programme starting in 2025. 10-15% of the FY24 capex is for Egypt and 35-40% for Canada. VAALCO expects to produce 20.8-23.4 mboe/d in 2024, excluding Cote d’Ivoire. Canada is the only asset expected to deliver growth in 2024 (2.7-3.2 mboe/d WI production over FY24 vs 2.4-2.5 mboe/d in 1Q24) under the firm capex budget programme. However, VAALCO could sanction a further US$18 mm capex programme in Egypt in 2H24 (+15 wells) dependent on the results of the 1H24 programme. This could boost production beyond the FY24 guidance. Four sources of upside could be unlocked in 2024: (1) the negotiation phase for the EG asset is now over and the company is waiting for confirmatory documents to start the FEED ahead of sanctioning the development of 18.5 mmboe WI 2P reserves. (2) VAALCO is also expecting to take FID on the development of 8-12 mmboe 2C resources at the Ebouri field in Gabon. This would trigger the conversion of these 2C resources into the 2P reserves category. (3) We expect further visibility on the Svenska acquisition in 2Q24. It is expected to add ~4.5 mboe/d WI production and 2P reserves. (4) An exploration well will be drilled in Canada in 2024 that could also add reserves.
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Zephyr Energy (ZPHR LN)C; target price of £0.12 per share: Drilling operation to start in the Paradox in mid April – At the well pad, all surface hole location preparations have been completed to enable the mobilisation of the rig to redrill the State 36-2 well. The company plans to mobilise a spudder rig over the next two weeks to drill and set conductor pipe and once these operations are complete, the location will be ready to accept a drilling rig in early April. Zephyr has also a 1,500 HP drilling rig. The rig is wrapping up a sustained drilling campaign in the nearby Uinta Basin. The State 36-2 well is a very high impact well that is expected to add reserves and production and to derisk the overall play.
IN OTHER NEWS
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AMERICAS
Blue Star Helium (BLE AU): Operating update in the USA – The development of the Voyager project has been paused following the disappointing initial outcomes from the first two development wells as the company continues to work through economic evaluation. The anticipated need for compression and vacuum at the wells earlier in field life than previously anticipated has implications for forecast production volumes per well as well as operating cost estimates. Four existing Blue Star discoveries at Galactica/Pegasus via exploration wells JXSN#1 to JXSN#4 delivered gas flowing at 0.125 – 0.412 mmcf/d and high air-corrected concentrations of 2.0 - 6.1% He.
Canadian Overseas Petroleum (COPL LN/XOP CN): Trading suspension on financial issues –Trading in the shares of Canadian Overseas has been suspended due to financial difficulties. The company believes that “there is little prospect for a return to shareholders or bond holders”.
Gran Tierra Energy (GTE CN/LN/US): Operating update in Colombia and Ecuador – Average production YTD is ~33.1 mbbl/d.
LNG Energy (LNG CN): Reserves update in Colombia – LNG estimated that it holds 98 bcfe of 2P reserves at YE23.
Maha Energy (MAHA-A SS): Acquiring assets in Venezuela/Production update in Brazil – Maha has signed the definitive agreements, and paid EUR 4.6 mm, to acquire an indirect equity interest in the Venezuelan oil company PetroUrdaneta from Novonor Latinvest Energy. February and March production in Brazil was respectively 2,415 boe/d and 1,652 boe/d.
EUROPE
Eni (ENI IM): Capital Markets update. Increased dividends – Upstream production is expected to grow by an underlying 3-4% CAGR through 2027 with EUR5 bn per year capex (-20% vs previous guidance). The company’s target payout in dividends and buybacks has been raised to 30%-35% of CFFO from 25%-30%. The proposed 2024 dividend is raised by over 6% to EUR1.00 per share, with a share buyback programme set at EUR1.1 bn.
MIDDLE EAST AND NORTH AFRICA
Genel Energy (GNL LN): Reserves update in Kurdistan – YE23 2P reserves in Kurdistan were estimated at 88.9 mmboe (YE22: 92.2 mmboe) including 78.6 mmboe for Tawke and 10.3 mmboe for Taq Taq. The Sarta PSC was terminated in early December and 2.7 mmboe of 2P reserves were written off.
SUB-SAHARAN AFRICA
Afentra (AET LN): Production update in Angola – Gross production performance on Blocks 3/05 and 3/05A averaged ~23,700 bbl/d (Net: ~6,995 bbld/d) for the period to the end of February 2024.
Reconnaissance Energy Africa (RECO CN): Resources update onshore Namibia – Gross unrisked prospective resources are estimated at 3.1 bn bbl. The risked gross prospective resources are estimated at 203 mmboe (average chance of success of ~7%).
San Leon Energy (SLE LN): No funding from TRAM, creditor update – The financing announced with Tri Ri Asset Management “will not be forthcoming”. San Leon reported that it was in discussions with other potential providers of capital. With the ongoing delay in obtaining new funds, San Leon has numerous outstanding trade creditors (around US$25 mm in aggregate) and these creditors have been exerting increasing pressure including, in some cases, sending legal letters before action. This includes a settlement agreement with the Minister for the Environment, Climate and Communications in Ireland with regards to decommissioning liabilities for the Seven Heads gas field (US$7.7 mm). US$3.3 mm is due this month. Oil production at OML18 in Nigeria has recently been ~10 mbbl/d.
EVENTS TO WATCH NEXT WEEK
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18/03/2024: Diversified Energy (DEC LN) – FY23 results
21/03/2024: Canacol Energy (CNE CN) – FY23 results
21/03/2024: Ithaca Energy (ITH LN) – FY23 results
21/03/2024: Gulf Keystone Petroleum (GKP LN) – FY23 results
21/03/2024: Energean (ENOG LN) – FY23 results
Antares Energy is an exploration and production company pursuing oil and gas opportunities located onshore Texas in the U.S. Co.'s principal activity includes hydrocarbon production and exploration. Co. has exploration leases for the following projects located in in Texas: Oyster Creek, Southern Star, Big Star, Northern Star, and Hawkville. As of Dec 31 2012, Co.'s estimated total proved reserves were approximately 15.2 million barrels of oil equivalent (MMboe), proved and probable were approximately 53.2 MMboe and proved, probable and possible were approximately 66.8 MMboe.
Canadian Overseas Petroleum is engaged in the exploration and development of oil and gas in the United Kingdom North Sea.
Chariot Oil & Gas is an independent oil and gas exploration company focused offshore in West Africa with a portfolio of assets located in the under-explored regions of Namibia, Mauritania and Morocco.
Eni is engaged in the oil and gas exploration and production, gas marketing operations, management of gas infrastructures, power generation, petrochemicals, oil field services and engineering industries. Co.'s operations are divided into three segments; Exploration and Production (oil and natural gas exploration and field development and production, as well as LNG operations), Gas and Power (supply, trading and marketing of gas and electricity, managing gas infrastructures for transport, distribution, storage, re-gasification, and LNG supply and marketing), and Refining and Marketing (supply of crude oil, refining and marketing of refined products). Co. maintains operations in 73 countries.
Genel Energy is a holding company. Co. is principally engaged in the business of oil and gas exploration and production. Co. has three segments: Oil, which is comprised of the producing assets, Taq Taq and Tawke, which are located in the Kurdistan Region of Iraq (KRI) and makes predominantly all sales to the Kurdistan Regional Government; Gas, which is comprised of the upstream and midstream activity on Miran and Bina Bawi also in the KRI; and Exploration, which is comprised of its exploration activity, principally located in the KRI, Somaliland and Morocco. As of Dec 31 2016, Co. had proved plus probable working interest reserves of 161.0 million barrels of oil equivalent.
Gran Tierra Energy, together with its subsidiaries, is a company focused on oil and gas exploration and production in Colombia. Co. is primarily engaged in the exploration and production of oil and natural gas. Co. has one reportable segment based on geographic organization, Colombia. As of Dec 31 2017, Co. had total estimated proved reserves of 59.3 million barrels of oil and natural gas equivalent, consisting of 58.9 million barrels of oil and 2.1 million cubic feet of natural gas.
Maha Energy AB is a Sweden-based independent, international upstream oil and gas company whose business activities include exploration, development and production of crude oil. It directly operates through Maha Energy Inc in Canada, as well as Maha Energy 1 [Brazil] AB and Maha Energy 2 [Brazil] AB in Sweden. It owns an oil field in Wyoming, the United States. The Company specializes in primary, secondary and enhanced oil and gas recovery technologies, and operates a technical office in Calgary and Alberta in Canada, as well as an operations office in Newcastle and Wyoming in the United States. The Company operates as wholly-owned subsidiaries Gran Tierra Finance (Luxembourg) SARL and Gran Tierra Brazco (Luxembourg) SARL.
San Leon Energy is a specialist oil and gas company with a portfolio of assets across Europe and North Africa based in Ireland. Co. is engaged in the exploration and production of oil and gas. Co. is focused on the exploration and production of oil and gas projects in Poland, Albania, Morocco, Spain, Ireland, Romania and Italy. Co. develops and builds its balanced European portfolio using conventional and unconventional shale assets. Co.'s main focus is on Polish unconventional oil and gas reserves. Co.'s subsidiaries, San Leon Services Limited, San Leon Energy (UK) Limted and San Leon Services Sp. z o.o. provide employment and administrative services to the Group.
Sintana Energy is a development stage company engaged in oil and gas exploration and development activities in the United States.
VAALCO Energy is an independent energy company engaged in the acquisition, exploration, development and production of crude oil. The company is primarily engaged in its Etame Production Sharing Contract related to the Etame Marin block located offshore the Republic of Gabon in West Africa. The company also owns interests in an undeveloped block offshore Equatorial Guinea, West Africa.
Rose Petroleum is an oil and gas (O&G) and mining company with exploration assets and an operational crushing and flotation mill. Co.'s principal activities are the exploration and development of O&G resources together with the evaluation and acquisition of other mineral exploration targets, principally gold, silver, uranium and copper, and the development and operation of mines in Mexico. In Co.'s O&G division, the area of focus is on two unconventional oil and gas basins in the U.S.: the Uinta Basin and the Paradox Basin. In its mining division, Co. continues its milling operations through its subsidiary, Minerales VANE S.A. de C.V., which owns the SDA Mill in Mexico.
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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