Tethys Oil AB (SSE: TETY): All eyes on Block 56. Upcoming high impact drilling at Block 58 in early 2024
• Net cash of ~US$28 mm at the end of September was near our expectations (~US$30 mm) but was impacted by a negative working capital movement (-US$1.5 mm).• WI production in October at Blocks 3&4 was 8,289 bbl/d and FY23 WI production is expected to be at the lower end of the 9 mbbl/d +/- 200 bbl/d guidance. The reduced FY23 capex guidance of US$81-86 mm had already been announced in August.
• The key area of focus is Block-56 and the development and commercialization options for the Al-Jumd trend on the Eastern Flank. The duration of the licence has been extended to December 2024. In 4Q23, Tethys will drill the Menna prospect and test the Sarha-3 well. Together with the existing Al-Jumd well, this will define the perimeter of development. A development of the area could be sanctioned in 2024 and would provide additional sources of production that Tethys will operate. Further details on the prospective resources for the Central Area at Block 56 are expected to be disclosed in 1Q24
• On Block 58, the very high impact Kunooz (South Fahd) prospect with 123 mmbbl unrisked resources continues to be expected to be drilled in early 2024. Additional prospective resources at South Lahan are expected to be announced soon. Tethys is in discussions with potential farm-out partners which would provide an implied valuation for the block and reduce Tethys’ capex exposure.
• We have changed our target price to SEK100 per share, which reflects our expectations of lower production at Blocks 3&4. The total unrisked NAV of the upcoming exploration programme until 1Q24 is ~SEK245/sh.
More on Blocks 3&4
The resources encountered at Jari-1 are not expected to be commercial on a standalone basis and Elaf-1 and Rahbah-1 encountered gas and condensates. The drilling campaign in 4Q23 will be important as it includes near field appraisal and exploration opportunities and the new appraisal programme of the Lower Al Bashair reservoir. Success could reverse the recent downward production trend. The focus of the development of Blocks 3&4 has been the Barik reservoir but the Al Bashair has already produced in the Farha field. The associated resources are only partially included in the independent contingent resources estimates.
Valuation
Our ReNAV of SEK100/sh is based on the company’s 23.9 mmbbl 2P reserves, 14.6 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.