Valeura Energy (TSE VLE): Delivering on plan. Already 2.6 mbbl/d production at Wassana
• Since production re-start at Wassana on 28 April, 11 of the 13 wells have been brought back into production. Production is gradually ramping up and is already averaging ~2,600 bbl/d. We are increasing our average production forecast for Wassana in 2Q23 from 700 bbl/d to 1,700 bbl/d. Drilling of additional wells at Wassana is expected to start in August with a YE23 exit rate of >5 mbbl/d.• Production from the Mubadala assets averaged 20,475 bbl/d in 1Q23 and total production (including Wassana) has recently increased to over 23 mbbl/d.
• The Nong Yao C development project remains on track to deliver first oil from a new facility in 1Q24.
• Just under half of the US$180-200 mm FY23 capex programme is associated with production growth with the balance dedicated to production and maintenance activities. The production and maintenance capex is consistent with the US$70-85 mm per year historical capex spent by Mubadala to maintain production and replace 2P reserves year on year.
• The shares continue to offer deep value, production and cashflow growth with reserves upside. Confirmation that the ~US$300 mm of tax losses associated with Wassana could be applied to the other fields would be a very material impact event.
• We re-iterate our target price of C$6.00 per share.
Financials
Valeura held US$268.5 mm in cash at the end of March, as well as inventory of US$95.6 mm including US$64.4 mm associated with oil in storage and receivables of US$45.8 mm. Accounts payables and accrued liabilities of US$172.5 mm include SRB payables. Current income tax payables stand at US$113.2 mm. Working capital of US$104 mm is in line with expectations and reflects the large tax and SRB payments in 2Q23 and 3Q23. Valeura has booked a bargain purchase gain amount of US$207.6 mm for the acquisition of Mubadala’s assets in Thailand. This represents C$2.93/sh.
Valuation
We have trimmed our Brent price assumptions for 3Q23 and adjusted the US$/C$ exchange rate in line with current levels. Our new Core NAV is ~C$5.70 per share with a ReNAV of C$5.90 per share. We now forecast the company will hold US$245 mm in net cash (cash minus debt) at YE23 as we incorporate the impact of lower oil prices and the actuals. Assuming only US$75/bbl over the balance of 2023 and 2024, YE23 net cash is ~US$165 mm (= the current market cap) and YE24 net cash is ~US$340 mm (2x the current market cap).
Valeura Energy is engaged in the exploration, development and production of petroleum and natural gas in Turkey and Western Canada. As of Dec 31 2010, proven gross reserves for light and medium oil was 116 thousand barrels (net reserves of 104 thousand barrels); proven gross reserves for heavy oil was 10 thousand barrels (net reserves of 9 thousand barrels); proven gross reserves for natural gas was 1,047 million cubic feet (net reserves of 938 million cubic feet); and proven gross reserves for natural gas liquids was 26 thousand barrels (net reserves of 19 thousand barrels).
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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