Sintana Energy Inc. (TSX-V: SEI): Chevron farm-in rerates a new area in Namibia
• Chevron is acquiring an 80% WI in PEL82 in the Walvis Basin, offshore north Namibia. As a result of the transaction NAMCOR and Custos’ 10% (each) residual interest will be carried. Sintana holds 49% of Custos.• The Orange Basin’s acreage is now in the hands of multiple large companies. As Chevron looks to expand its footprint in the country and explore other opportunities, the company could have been attracted by PEL82 because of the extensive G&G data available on the licence. PEL82 is the most “advanced opportunity” in the Walvis Basin. 70% of the block is covered by 3D seismic (some acquired as recently as in 2018) and two wells have been drilled in the past encountering good quality sands (Murombe-1) and recovering light oil to surface (Wingat-1).
• The block was previously held by ExxonMobil and Galp until 2021-2022 before the discoveries in the Orange basin.
• Assuming the carry is similar to PEL90, Custos and NAMCOR could be carried for one exploration well plus one appraisal well. Water depth at PEL82 is similar to PEL83. Assuming a work programme of US$75-130 mm for 1-2 wells would lead to an implied value for the block of US$19-33 mm (80% of the block bought for 20% of the cost of the programme). This leads to an implied value of US$0.9-1.6 mm for Sintana’s 4.9% interest. Adding the value of the carry (4.9% x the cost of the programme) leads to a total value of US$5-8 mm (C$0.02-0.03 per share) net to Sintana.
• We re-iterate our target price of C$1.60 per share.
Value build-up
The entry of Chevron as operator at PEL82 highlights the potential materiality of the block. Using an unrisked value for PEL82 in line with the other blocks with an experienced operator, our unrisked value of each of Sintana’s 4.9% interest in PEL90, PEL83 and PEL 82 is C$0.86/sh. The unrisked value of Sintana’s 7.3% interest in PEL87 is C$1.26/sh. Our valuation of PEL83 reflects only the 10 bn bbl of oil in place discovered so far. We value Sintana’s interest in PEL79 at US$3 mm for the time being. Overall our ReNAV for Sintana is C$1.59/sh.
Sintana Energy is a development stage company engaged in oil and gas exploration and development activities in the United States.
Auctus Advisors is a specialist Equity Capital Markets and Advisory business with a focus in the Energy Sector.
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