Sintana Energy Inc. (TSX-V: SEI): Drilling on multiple licences in coming months
• Drilling operations have started at the Mopane 1-A appraisal well on PEL 83. This appraisal well is the first of an up to four well programme potentially consisting of two appraisal wells and two exploration wells. While the programme is expected to increase the value of this asset, this comes at no cost to Sintana as they are fully carried by Galp.• The main purpose of Mopane 1-A is to confirm the continuity of the reservoir characteristics and liquid content at AVO-1. The potential phase 1 development is based on all the associated natural gas being re-injected into the reservoir. The liquid content is therefore critical to estimating the required capex and opex.
• Galp, the operator, estimates that 10 bn boe of in-place hydrocarbons have already been encountered at PEL 83. The Mopane complex is expected to extend beyond the area already defined by the existing wells. There are also multiple additional large prospects.
• Galp has started a process to farm-out a stake in PEL 83. This would provide a readthrough valuation for the Sintana’s interest in the asset.
• We value Sintana’s interests in the Mopane complex at C$0.76 per share.
• Chevron is also expected to start drilling at PEL 90 around the end of 2024. Sintana holds an indirect 4.9% WI in PEL 90. Our unrisked NAV for Sintana’s interest in PEL 90 is C$0.85 per share. Sintana is carried for this well.
• We re-iterate our target price of C$1.60 per share.
Further drilling in the area
Rhino Resources and Azure Energy (bp/Eni) will also start drilling at PEL 85 around YE24. The block is located to the south east of PEL 83 and a success could have positive implications for the prospectivity of PEL 83 and PEL 79. Total Energies is drilling the Tamboti-1X exploration well in the north east part of PEL 56. The company is targeting ~1 bn boe prospective resources. A success could also have position implications for PEL 90.
Value build-up
Our unrisked value of Sintana’s 4.9% interests in each of PEL 90 and the Mopane complex at PEL 83 is C$0.85/sh and is C$1.24/sh for Sintana’s 7.3% interest in PEL 87. We have also ascribed a risked value of C$0.06 per share (C$0.17 per share unrisked) to the exploration programme at PEL 83. This is assuming one exploration prospect is drilled with prospective resources 20% the size of Mopane and a 1/3 chance of success. We value Sintana’s interest in PEL79 at US$3 mm for the time being. Overall our ReNAV for Sintana is C$1.59 per share.
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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