Tethys Oil AB (SSE: TETY): Strong financials. All eyes on strategic review process, exploration drilling & reserves update
• 2Q24 production of 7,688 bbl/d had been previously reported.• 2Q24 production was negatively impacted by flooding and production is expected to return to normal during 3Q24.
• In light of the flooding, FY24 production guidance has been trimmed from 7.8-8.6 mbbl/d to 7.8-8.2 mbbl/d. 2H24 production is expected to be higher than in 1H24.
• The FY24 capex guidance has been reduced from US$90-94 mm to US$77 mm. This reflects (1) the second exploration well at Block 58 and (2) the exploration well at Block 56 both being moved to 2025. We are not carrying any value for these two wells.
• Approval of the development plan for Block 56 is expected within weeks. The associated reserves and resources are expected to be disclosed at that time. The development plan will include an EPF for Menna/Sarha and Al Jumd and a near field exploration strategy to rapidly increase production.
• Drilling operations at the high impact Kunooz-1 well are now expected to commence during the second week of August. The well is targeting 123.5 mmbbl unrisked prospective resources (unrisked NAV of ~SEK200 per share).
• The strategic review process is ongoing. The high level of interest has generated diverse potential alternatives and it requires time to assess the different options. This could include a (partial) divestment of Blocks 3&4 and an equalization of interests on the other Blocks.
• We re-iterate our target price of SEK100/sh. The outcome of the ongoing strategic review process could be a catalyst to rerate the shares.
2Q24 financials
Underlying 2Q24 operating cash flow was US$15.5 mm (US$12.9 mm in 1Q24) with lower opex (US$18/bbl vs US$20.3/bbl in 1Q24) reflecting the positive impact of the recently completed gas to power project. There was also a positive US$4.5 mm working capital movement reversing the build-up in the underlift position.
Valuation
Our ReNAV of SEK102/sh is based on the company’s 21.7 mmbbl 2P reserves, 15.5 mmbbl 2C resources and the upcoming activity programme. We value Blocks 3&4 at ~SEK60 per share. The overall unrisked value of the prospective resources at Block 58 alone (453.9 mmboe) is >SEK700 per share.
Tethys Petroleum is an oil and gas exploration and production company focused on projects in Central Asia. Through its subsidiaries, Co. is engaged in the exploration for, and the acquisition, development and production of, oil and natural gas resources in Kazakhstan, Tajikistan and Uzbekistan.
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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