Auctus on Friday - 15/09/2023
AUCTUS PUBLICATIONS________________________________________
Arrow Exploration (AXL LN/CN)C: target price of £0.55 per share: Tripling 2P reserves at Tapir – The 2P reserves at Carrizales Norte (net to Arrow) have been estimated at 3.92 mmbbl with an 3P upside case of 6.62 mmbbl (1.82 mmbbl of 1P reserves). The 2P reserves at Carrizales Norte are ~2x larger than at Rio Crave Este with overall net 2P reserves at Tapir increased to ~6 mmbbl. The 2P reserves at Carrizales Norte are also 2x the pre drill estimate (1.8 mmbbl) and in line with our estimate (4 mmbbl). The Ubaque reservoir alone is estimated to hold ~3 mmbbl of 2P reserves (out of 3.92 mmbbl total 2P reserves at Carrizales Norte). The main differences between the 2P and 3P reserve estimates reflect (1) different assumptions for the amount of oil initially in place and (2) a second 5 year extension to the licence duration (to 2038). The recovery factor assumptions in the 2P and 3P cases are very similar.
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Calima Energy (CE1 AU)C: target price of A$0.45 per share: Re-iterating production guidance – Pisces#10, the first well of a 2H23 three well campaign, has reached TD. This is a follow up to the highly successful Pisces #6 and #7. The company will now drill Pisces#11, the second well of the programme. The wells continue to be expected to reach peak production in December (post fracture stimulation). Pisces #10 and #11 are on-lease tie-ins. Pisces #12 requires a 2.2 km pipeline and, once sufficient testing and fluid confirmation has occurred, will be shut-in to await pipeline and facility construction. On-stream dates continue to be anticipated in 4Q23 with peak production in December 2023. Production in August was ~3,600 boe/d. While this is below the company’s forecasts due to warmer than seasonal summer weather and maintenance of the water disposal system at the 2-26 battery, we maintain our production forecasts of 3,815 boe/d in 2H23. This could be too conservative given that Calima forecasts an average production rate of ~4,000 boe/d over 2H23. A sustained higher oil price has a material impact on our cashflow forecasts. At current oil prices (~US$90/bbl for WTI), we now forecast overall FCF of ~A$65-70 mm from 2023 to 2025. This is ~30% above the current market cap.
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Longboat Energy (LBE LN)C: target price of £0.90 per share: Expansion in South East Asia. Simplifying Malaysia – Longboat is acquiring Topaz Number One, its partner in Malaysia, for an initial consideration of US$0.1 mm in shares in Longboat. The transaction will boost Longboat’s WI in the Production Sharing Contract over Block 2A offshore Sarawak from 36.75% to 52.5%. The 15.75% WI in the block is the only asset of Topaz Number One. Block 2A holds the multi tcf Kertang deep water prospect. The transaction simplifies the ownership structure (with Petronas as the only remaining partner), which could, in turn, simplify a farm out process. Longboat will also pay the shareholders of Topaz Number One (1) a contingent amount of US$0.125 mm in cash or shares, upon an exploration well being committed on Block 2A or a farm-out and (2) a further contingent amount of up to US$3 mm in cash or shares upon a discovery being made on Block 2A, depending on the resource size and the growth of the share price of Longboat over a two year period. James Menzies and Pierre Eliet from Topaz Number One will join Longboat. They have extensive experience in South East Asia, a region on which Longboat is increasingly expected to focus. We anticipate a full update from the management on its growth plans at its interim results on 27 September after a busy period of transactions over the past few months.
Panoro Energy (PEN NO)C: target price of NOK50 per share: Good drilling results in Gabon could unlock additional reserves – The DHIBM-6H well at Hibiscus/Ruche (Dussafu) has been put on production at a rate of 6.5 mbbl/d. This is higher than we initially expected, and is similar to the IP rates achieved at the first three wells in the programme. The well has again encountered good quality oil-saturated reservoir sands and BW Energy (the operator) has indicated that there are potentially positive implications for Hibiscus reserve estimates. With more exploration activity expected in 2024, we re-iterate our target price of NOK50 per share.
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PetroTal (PTAL LN/TAL CN)C: target price of £1.50 per share: Lower level of production in 3Q23 in line with our expectations – Production continues to be impacted by the reduced barge movements to/from Brazil during the low river dry season. Production in July of 11,552 bbl/d had been previously reported. Production in August was 12,651 bbl/d, in line with previous indications (~13 mbbl/d). We forecast ~12 mbbl/d production in 3Q23. The company has re-iterated its FY23 production guidance of 14-15 mbbl/d. Important upcoming newsflow includes the potential reopening of the ONP pipeline allowing PetroTal to increase production and eliminate the production constraint during the dry season when the Amazon river water level is low. The current quarterly dividend of US$0.025 per share (US$0.10 per share per year) would represent a dividend yield of >17%. A buyback programme of US$3 mm per quarter would represent a further return of >2% per year. In July and August alone, the company has bought back ~US$2.3 mm in shares.
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Pharos Energy (PHAR LN)C: target price of £0.55 per share: Net cash positive by YE23 and new growth opportunities – 1H23 production of 6,915 boe/d and net debt of US$16 mm at the end of June had already been reported. Being paid in US$ in Egypt remains challenging and the FY23 drilling and capital programme has been curtailed to 5 development wells (9 previously). As a result, Pharos anticipates FY23 WI production in Egypt of 1.35-1.45 mbbl/d, at the lower end of the previous guidance range (1.35-1.80 mbbl/d). In Vietnam, the work-over programme at TGT is now expected to take place in 1Q24 rather than 4Q23. The CNV-2PST1 horizontal well continues to outperform expectations with current gross production of 2 mbbl/d. The FY23 WI production guidance range in Vietnam has been narrowed from 4.7-5.7 mboe/d to 5.0-5.3 mboe/d (mid point broadly unchanged). The FY23 cash capex guidance has been reduced from ~US$23 mm to US$13.2 mm with no cash capex in Egypt. The carry in Egypt is now expected to cover all of Pharos’s expenses in Egypt until YE23. The capex reduction reflects (i) a lower level of activity, (ii) cost reductions and (iii) the deferral of long lead items. With only US$0.7 mm in shares bought back during 1H23, the remaining US$2.3 mm allocated for share buyback in 2023 should provide support to the share price. The key newsflow until YE24 is the commencement of drilling on Block 125 in Vietnam. Securing a farm-in partner (process ongoing) would be a very high impact event. The approval of an updated development plan for CNV incorporating some horizontal wells could also have a positive impact on reserves. The recent discovery at NBS (Egypt) is expected to add 4 mmbbl (~1.6 mmbbl net to Pharos WI) that will be developed from late 2023/early 2024.
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IN OTHER NEWS
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AMERICAS
Maha Energy (MAHA-A SS): Production in Brazil and the USA in August – 1Q23 production was 1,606 boe/d including 1,373 boe/d in Brazil.
TotalEnergies (TTE FP): Development project in Suriname – Total is looking to develop Sapakara South and Krabdagu with production of 200 mbbl/d from 2028.
EUROPE
Beacon Energy (BCE LN): Well update in Germany/Raising new equity – Following the drilling of the SCHB-2(2.) well in Germany, the company expects a material upgrade to recoverable reserves in Stockstadt Mitte and a de-risking of 2.4 mmbbl of contingent resources already ascribed to Schwarzbach South. Based on the reservoir properties and the light oil recovered, an initial production rate in excess of 900 bbl/d could be achieved. Reservoir clean-up operations commenced on Friday 8 September and since that time the well has produced a mixture of oil, gas and drilling fluids. Given delays in the programme the drilling rig must now be released but the clean-up of the well will continue on site. Commercial production is expected to commence from the well aided by the installation of a rod pump which will have the capacity to deliver up to 250 bbl/d. The company has also raised £4.3 mm of new equity at a price of 0.15p per share.
Europa Oil & Gas (EOG LN)/ Egdon Resources (EDR LN): Resources update in the UK – The Cloughton gas in place volumes are estimated at 118-274 bcf (192 bcf mean).
IOG (IOG LN): Update in the UK – Production at the Blythe H2 well has declined from 27.7 mmcf/d to 21.2 mmcf/d in August. The well is not producing any water and initial production data indicates connected gas volumes in line with expectations. Realized gas sales in August were 17.8 mmcf/d. The North Sea Transition Authority is not minded to extend the Nailsworth P2342 and P130 licences beyond their current expiry dates of September and December 2023. This is likely to impact the commercial potential of licence P039 (Elland).
Ithaca Energy (ITH LN): Buying UK asset – Ithaca is acquiring the 30% stake in Cambo it does not already own from Shell. The acquisition has minimal near-term cost exposure. The consideration is payable on the earlier of (i) first oil and (ii) the receipt of proceeds of any subsequent sale of a working interest in Cambo by Ithaca Energy and is subject to Ithaca Energy proceeding with FID and/or the NSTA providing development consent.
Star Energy (STAR LN): 1H23 results – 1H23 production in the UK was 2,071 boe/d. Net debt at the end of June was £4 mm.
MIDDLE-EAST AND NORTH AFRICA
Capricorn Energy (CNE LN): 1H23 results – 1H23 production in Egypt was 31.5 mboe/d. Accounts receivable from EGPC have increased from US$97 mm to US$144 mm over the course of 1H23, with US$113 mm overdue. Net cash at the end of June was US$176 mm. The company anticipates producing 32-36 mboe/d in 2023 with an exit rate of ~34 mboe/d. As a consequence of drilling fewer wells than planned and production performance impacted by ESP failures in the first half of 2023, Capricorn now expects annual net working interest production to be at the low end of original guidance. Exploration drilling in the Abu Sennan licence resulted in two dry wells. A well drilled in the South East Horus licence was also dry. Capricorn did not manage to attract interest for Block 61 in Suriname and the block is being relinquished.
SUB-SAHARAN AFRICA
Afentra (AET LN): 1H23 results – 1H23 pro forma production in Angola was 5,660 bbl/d. The company held pro forma WI 2P reserves of 32.9 mmbbl (+20.1 mmbbl of 2C resources) at the beginning of July. Afentra sold its first cargo of 300,000 bbl of crude oil in August, generating pre-tax sales of US$26.4 mm net to Afentra.
Tullow Oil (TLW LN): 1H23 results – 1H23 production was 53.5 mboe/d. Net debt at YE23 is expected to be ~US$1.7 bn (US$1.9 bn at the end of June). The FY23 production guidance range has been narrowed from 58-64 mboe/d to 58-60 mboe/d. FY23 gross oil production from Jubilee is expected to average ~90 mbbl/d, reduced from ~95 mbbl/d. The Akoum B appraisal well in Gabon encountered insufficient resources to justify development.
EVENTS TO WATCH NEXT WEEK
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19/09/2023: Jadestone Energy (JSE LN) – 1H23 results
19/02/2023: Serica Energy (SQZ LN) – 1H23 results
Front Range Resources is engaged in oil and natural gas exploration and production focusing on horizontal multi-stage frac development in Montney, Bluesky, Wilrich and Falher formations in the Deep Basin area of west central Alberta.
Cairn Energy is an oil and gas exploration and development company. Co. has three groups of business unit: Senegal, which focuses on appraising the discoveries offshore Senegal and to identify further exploration prospects for drilling; U.K and Norway, which includes exploration activities in the North Sea, Norwegian Sea and Barents Sea and management of Co.'s development assets in the U.K. North Sea; and International, which consists of all other regions where Co. holds exploration licenses, including Greenland, Ireland, Morocco, Western Sahara, Mauritania and the Mediterranean. As at Dec 31 2016, Co. had total proved plus probable reserves of 51.5 million barrels of oil equivalent.
Calima Energy and its subsidiaries are engaged in investing in oil and gas exploration and production projects internationally and more specifically in West Africa.
Europa Oil & Gas is an exploration and production company focused on Europe. The principal activity of Co. and its subsidiaries (the Group) is investment in oil and gas exploration, development and production. The Group's assets and activities are located in Ireland and the U.K.
Independent Oil and Gas, through its subsidiaries, is engaged in the business of oil and gas exploration and/or operations in the North Sea. Co. has its oil and gas interests are in the U.K. sector of the North Sea.
Longboat Energy PLC, formerly Longboat Energy Ltd, is a United Kingdom-based investment company. The Company's investment objectives is to create a full-cycle North Sea exploration and production (E&P) company in order to deliver value to investors.
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.
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.
PetroTal is an energy company engaged in the exploration for, and development of, crude oil and natural gas in selected areas of the world outside Canada. Co. has interests in four countries, the United Kingdom (offshore and onshore), Romania (offshore and onshore) France (onshore) and the Netherlands (offshore). Each country has established hydrocarbon basins, extensive infrastructure and attractive contractual and fiscal terms. As of Dec 31 2010, total gross proved plus probable reserves for light or medium oil consisting of 0.010 million barrels, natural gas consisting of 186.101 billion standard cubic feet and natural gas liquids consisting of 0.757 million barrels.
Soco International is an oil and gas exploration and production company. Co. has exploration, development and production interests in Vietnam, and exploration and appraisal interests in the Republic of Congo and Angola. As of Dec 31 2016, Co.'s commercial reserves were 33.3 million barrels of oil equivalent.
Total is an international integrated oil and gas company also active in solar and biomass energy sources. Co. engages all aspects of the petroleum industry, including Upstream operations (oil and gas exploration, development and production, and LNG (Liquefied Natural Gas)) and Downstream operations (refining, petrochemicals, specialty chemicals, marketing and marketing and trading and shipping of crude oil and petroleum products). In addition, Co. is engaged in the coal mining and power generation sectors. Co.'s worldwide operations are conducted through three business segments: Upstream, Refining & Chemicals, and Marketing & Services.
Tullow Oil is an independent oil and gas exploration and production company. Co.'s focus is on finding oil in Africa and South America. Co.'s primary activities include targeted exploration and appraisal, selective development projects and growing its production. As of Dec 31 2017, Co.'s portfolio included 90 licences in 16 countries. Co.'s operations are organized into three business delivery teams: West Africa; East Africa; and New Ventures. As of Dec 31 2017, on a working interest basis, Co. had commercial reserves of 245.7 million barrels of oil, 268.90 billion cubic feet of gas, and 290.5 million barrels of oil equivalent (petroleum).
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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