Sintana Energy Inc. (TSX-V: SEI): Kapana-1X uncommercial but Chevron expects to continue exploration activities

• The Kapana 1-X well on PEL-90 did not encounter commercial hydrocarbons.
• The rig is likely to be demobilized, but the well’s results have increased confidence in the block. Chevron has indicated that it anticipates further exploration in Namibia.
• Sintana was carried for this well, but the company will fund its share of future capex on PEL-90. Assuming drilling costs of US$100-150 mm for a new well, this suggests a net capex exposure of approximately US$5-7 mm per well, net to Sintana’s 4.9% share. The company held C$20 mm in cash (with no debt) at the end of September 2024.
• We reiterate our target price of C$1.85 per share, as we have not changed our valuation for PEL-90, where we assume additional wells will be drilled. However, we have deducted the net drilling costs of the next well on the licence that Sintana will have to fund.
• The results of the Mopane-3X exploration well are expected in early February. This is an exploration well that is targetting two large stacked prospects, AVO-10 and AVO-13, in the south east of PEL-83.
• Woodside is expected to make a decision about farming-into PEL -87 in early April. Sintana holds a 7.3% net interest in the licence and is carried to FID.
• The total prize remains unchanged and we view the share price weakness as an opportunity.

Another success at PEL-56 for Total. Reflections on Shell’s write down
Media reports indicate that the Tamboti-1X exploration well was successful and encountered hydrocarbons. This has significant potential implications for PEL-90, as Tamboti-1X is located near the southern edge of PEL-90. Shell has announced a write-down of its exploration spending at PEL-39. This raised concerns with some market participants about Mopane, which is located to the north. However, Shell has clarified that the main reason for the write-down was poor reservoir quality. One of the wells drilled by Shell required fracking. This is not the case at Mopane, where the reservoir quality is very good, with a flow test delivering approximately 8 mboe/d, constrained by surface equipment.

Valuation
We value Sintana’s interest in Mopane based on the most recent price paid by Africa Oil for shares in Impact Oil & Gas. We value Sintana on Mopane alone at C$1.06 per share net of a worst case 32% capital gains tax. Our total unrisked NAV is ~C$4.47 per share. Our ReNAV is C$1.84 per share.