Tethys Oil AB (SSE: TETY): New exploration well at Block 56 encounters hydrocarbons
• The Menna-1 well encountered hydrocarbons in the Al Khlata, Karim and Birba formations. The Menna prospect is located ~30 km south-west of the Al Jumd discovery, with which it shares similar characteristics. The prospect is one of several identified prospects on the Eastern Flank trend, stretching alongside the border of Block 6’s productive Karim Small Fields.• The well will now be tested. In a success case, this could increase the size of the development of the Eastern Flank (together with Al Jumd) on Block 56. We assume 3-5 mmbbl at Menna (unrisked NAV of SEK8 per share). The Menna-1 well, together with the Sarha-3 well (about to be tested), will define the total perimeter of development. This a key area for production and reserves growth in 2024.
• Pending the well test results at Menna-1 and Sarha-3, we re-iterate our target price of SEK100 per share. The total unrisked NAV of the upcoming exploration programme in 1Q24 is ~SEK230/sh.
Upcoming newsflow
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.
Valuation
We have reduced our Brent price forecast for 2024 from ~US$89 to ~US$85.5/bbl. Our ReNAV of SEK96/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.
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