Valeura Energy (TSX: VLE): Additional exploration upside. Lower decommissioning liabilities
• FY23 production, YE23 net cash and YE23 reserves and resources had been reported previously.• The FY24 production guidance of 21.5-24.5 mbbl/d with US$205-235 mm opex and US$135-155 mm capex has been re-iterated.
• Current production continues to be high, with average production for the first half of March of ~23,000 bbl/d, including ~7.9 mbbl/d for Jasmine, 7.2 mbbl/d for Nong Yao, 2.9 bbl/d for Manora and 4.9 mbbl/d for Wassana. Production at Wassana is particularly high.
• Valeura will also drill two exploration prospects that we had not included in our valuation: Ratree, near Jasmine, and Nong Yao D. An exploration well could also potentially be drilled at Wassana North, subject to rig sequencing.
• Nong Yao D is expected to hold at least 7-10 mmbbl, which could justify a new platform. The well is about to be spudded. Ratree is a riskier prospect with >20 mmbbl recoverable resources, to be drilled later in the year.
• First production from the Nong Yao C extension continues to be expected in late 2Q24.
• While the company has drilled additional wells in 2023, the YE23 estimates for NPV of the decommissioning liabilities has been reduced by 30% to ~US$129 mm (US$198 mm as at the end of September 2023) as decommissioning has been delayed. There could also be further opportunities to reduce cost. The new decommissioning liabilities are below the net cash position of the company at YE23 (US$151 mm).
• As we incorporate the new prospects to be drilled in 2024, we have increased our target price from C$8.50 per share to C$9.00 per share.
• The story continues to be about strong free cashflow generation, reserves growth and exploration upside.
Valuation
Our forecasts are broadly unchanged. We have increased our ReNAV from ~C$8.50/sh to ~C$9.20 per share as it incorporates our risked value for Nong Yao D and Ratree. Our unrisked NAVs for Nong Yao D and Ratree are respectively C$0.95 per share and C$2.37 per share. Assuming US$85/bbl for Brent in 2024, 2025 and 2026, our YE26 net cash forecast would be US$670 mm at YE26.
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.
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.