Sintana Energy Inc. (TSX-V: SEI): Positive well results at Mopane
• Galp has announced that the Mopane-1A appraisal well (the third well to be drilled at Mopane) has encountered light oil and gas-condensate in high quality reservoir-bearing sands, once again indicating good porosities, high permeabilities, and high pressures, as well as low oil viscosity characteristics with minimum CO2 and no H2S concentrations.• While limited information is available, we view the very good reservoir characteristics as a positive. In addition, we note the reference to the presence of light oil in addition to gas condensate. Given that the high percentage of gas was a key area of uncertainty, we view this as an important positive.
• Mopane 1A has been drilled ~7.5 km to the south of previous wells, confirming the areal extent and consistent reservoir quality of the AVO-1 discovery.
• This result could help to firm the farm-out price for the licence.
• The next well in the programme will be an exploration well.
• We understand that the wells will be tested at the end of the four well campaign.
• We continue to believe that Sintana’s current share price reflects only the value of its interest in the Mopane discovery (PEL 83) that could be crystalized by an upcoming partial divestment process initiated by Galp. We value Sintana on Mopane alone at C$1.08 per share (C$1.22 per share unrisked). We estimate the additional unrisked value of the upcoming drilling programme at PEL 83 (Galp), PEL 90 (Chevron) and PEL 87 at C$2.80 per share.
• We re-iterate our target price of C$1.85 per share.
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 have reflected a worst case of 32% capital gain tax (assuming Sintana sell its interests). As we apply a similar approach to the other licences, our total unrisked NAV for Sintana is ~C$4.54 per share. Our ReNAV is C$1.87 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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