Tethys Oil AB (SSE: TETY): All eyes on Block 56. Outcome of strategic review expected in 1Q24
• Overall 4Q23 financials were ahead of our expectations and, despite a small underlift position, YE23 cash was US$25.8 mm, above our forecasts of US$22.2 mm.• Tethys expects to spend US$90-94 mm capex in 2024. This is above our forecasts of US$70 mm that incorporated only US$10 mm of exploration and appraisal capex on Block 56 and Block 58. Instead they will spend US$26.5 mm (US$8 mm on Block 56 and US$18.5 mm on Block 58). Two exploration wells will be drilled at Block 58 (we had assumed only one) and 19 appraisal wells and 3 exploration wells will be drilled on Blocks 3&4.
• The FY24 capex programme does not include the development of Block 56 that is expected to be disclosed in 1Q24. The exact size of the development will depend on the well test results at Menna-1 and Sarha-3. A full prospect and lead inventory is also expected in 1Q24. Tethys Oil has received a credit commitment for a US$60 mm term loan facility that could support the development of Block 56. Block 56 is a key area for production and reserves growth in 2024.
• The key focus of the exploration programme is the Kunooz well on Block 58, expected to be drilled in 1Q24 targeting 123 mmbbl prospective resources with an unrisked NAV of ~SEK200/sh.
• Given the high level of activities in 2024, Tethys’ profile is increasingly about growth. Pending the well test results at Menna-1 and Sarha-3, we re-iterate our target price of SEK100/sh. We view the drop in share price as an opportunity. In addition ongoing discussions with potential farm-in partners for Block 58, Tethys has initiated a strategic review process to unlock value. The outcome of the process is expected in 1Q24.
Reserves and resources at Blocks 3&4
Despite production declines and water issues at Blocks 3&4 in 2023, Tethys has managed to add ~1 mmbbl 2P reserves during the year, partially offsetting production of 3.2 mmbbl. While most exploration wells in 2023 were dry, the YE23 reserves position is higher than we anticipated. Contingent resources at Shahd were converted into reserves following a successful infill drilling programme, stable production and increased recovery factor at the field. There were negative revisions at the Ulfa field.
Valuation
FY24 production is expected to be 8.2 mbbl/d +/- 400 bbl/d. We have trimmed our production forecast from 8.5 mbbl/d to ~8.3 mbbl/d. Our ReNAV of SEK104/sh is based on the company’s 21.7 mmbbl 2P reserves, 15.5 mmbbl 2C resources and the upcoming activity programme. We assume a long term Brent price of US$70/bbl.
Tethys Oil AB is a Sweden-based energy company. The Company is focused on oil and gas exploration and production onshore areas with known discoveries. Its core area of focus is the Sultanate of Oman, where the Company holds licence interests in three onshore blocks. Tethys Oil has licences in three countries altogether: Oman, Lithuania and France. Two of the licenses are in production, namely Blocks 3 & 4 in Oman and Gargzdai in Lithuania. During 2013 the Company also had licenses in Sweden, however, they have expired and were not renewed. As of December 31, 2013, the Company had 10 wholly owned subsidiaries active in Sweden, Gibraltar, Switzerland and the British Virgin Islands, such as Tethys Oil Denmark AB, Tethys Oil Spain AB and Tethys Oil Turkey AB, among others.
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.
Auctus provides Corporate Broking, Equity Research and Investment Banking services.
Unfortunately, this report is not available for the investor type or country you selected.
Browse all ResearchPool reportsReport is subscription only.
Thank you, your report is ready.
Thank you, your report is ready.