Valeura Energy (TSX: VLE): Another strong quarter
• 3Q24 production was 22.2 mbbl/d. This is well above our conservative forecast of 20.4 mbbl/d that incorporated more provisions for downtime and steeper declines. All the assets appear to be performing very well.• Production in September was 26.4 mbbl/d. This is above the already high rate of 26.2 mbbl/d announced at the end of August.
• Valeura held US$156 mm in cash at the end of September. This was very close to our forecast of US$162 mm. However, the 3Q24 revenue and cash position at the end of September were negatively impacted by lower oil liftings (the crude oil inventory position has increased by 30% during 3Q24 to 1.2 mmbbl). In addition, the US$14 mm proceeds of one the 3Q24 liftings will be received in October. Two liftings totaling 0.51 mmbbl occurred just after the end of the quarter.
• Adding back the value of these liftings net of payable royalties (0.5 mmbbl x US$70/bbl less 10% royalties) plus the US$14 mm (less 10% royalty) proceeds from the late 3Q24 lifting would have increased the cash position at the end of September to ~US$200 mm.
• This would suggest an underlying free cash flow generation of ~US$70 mm in 3Q24. This is after having paid US$30.1 mm of cash tax in 3Q24.
• With production expected to remain at ~25 mbbl/d until YE24, we re-iterate our target price of C$10.00 per share in line with our ReNAV.
Main take aways from the asset performance
Net production at Nong Yao averaged 11.6 mbbl/d during the last days of 3Q24. At Jasmine, two new wells have added 1,055 bbl/d production (in aggregate). One of the wells encountered 1,982 feet of net oil pay within a reservoir compartment full to base with no apparent bottom aquifer. A further three wells are being drilled at Jasmine. In addition, Valeura will start a five well infill and appraisal programme at Manora before YE24.
Valuation
Our Core NAV for the company (based on the YE23 2P reserves only) is broadly unchanged at ~C$7.20/sh as the strong 3Q24 performance is offset by the reduction in our oil Brent price assumptions for 4Q24 from US$85/bbl to US$80/bbl. We assume Brent prices of ~US$75/bbl in 2025 and US$70/bbl from 2026. Our ReNAV of ~C$9.55/sh reflects the risked value of resources associated with the redevelopment of Wassana and Nong Yao D and exploration drilling at Ratree.
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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