Sintana Energy Inc. (TSX-V: SEI): Constrained test rate of 14 mboe/d at Mopane-1X. 10+ bn boe in place confirmed.
• Multiple tests over multiple zones in multiple horizons were run at the Mopane-1X exploration well. The flows achieved during the well test reached the maximum allowed limits of 14 mboe/d. The flow rate was constrained by the size of the available surface facilities.• The AVO-1 horizon encountered at Mopane-1X and Mopane-2X are in the same pressure regime, suggesting that the entire area (8 km diameter) between the two wells is connected. Overall, in the Mopane complex alone, and before drilling additional exploration and appraisal wells, hydrocarbon in-place estimates are 10 bn boe or higher.
• The reservoirs log measures confirm good porosities, high pressures and high permeabilities in large hydrocarbon columns. Fluid samples present very low oil viscosity and contain minimal CO2 and no H2S concentrations. This is an important difference from the Venus discovery, where the reservoir quality is understood to be lower. This has an important positive impact on recovery factors (we assume 30%). As a result of this and the materially shallower water depth, drilling and development costs should be significantly lower than at Venus.
• We are increasing our target price from C$1.35/sh to C$1.60/sh as we have increased our estimated chance of development for the Mopane complex from 60% to 90%. We are not attributing any value yet to the potential material upside on the block until better visibility on the drilling programme is provided.
10 further wells on PEL83 for which is Sintana is fully carried
Galp has filed an application for 10 further exploration and appraisal wells on PEL83. Some of the new wells are likely to further appraise the lateral extent of the Mopane complex beyond the area defined by the first two wells while other wells could test some of the multiple other prospects on the license, some of which could be larger than the Mopane complex. Sintana is fully carried for this programme.
Value build-up
We continue to value the unrisked value of Sintana’s interests in each block in the Orange basin in line with the farm-out terms secured by Impact for PEL56. Given the relative size and characteristics of discoveries, this could be conservative. Our unrisked value of each of Sintana’s 4.9% interest in PEL90 and PEL83 is ~US$250 mm or C$0.86/sh and of Sintana’s 7.3% interest in PEL87 is US$365 mm or C$1.26/sh. Assuming 90% chance of commerciality for PEL83 suggest a ReNAV of US$225 mm (C$0.78/sh) for Sintana’s interest in the block. 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.
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.
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