Valeura Energy (TSX: VLE): Financials in line. Operations on track.
• The 1Q24 production of 21.9 mbbl/d and cash position of ~US$194 mm at the end of March had been reported previously.• Operations are on track. Drilling is underway at the Nong Yao A platform, with two new wells that are expected to be completed in the coming week.
• Drilling at the Nong Yao C development is expected to result in first oil in 3Q24 to boost production from the area to 11 mbbl/d, and later in the year there will be a 5-well infill drilling programme on Jasmine/Ban Yen, also intended to increase production.
• Production at Wassana has reached 5 mbbl/d in early May, which we view as a good performance (we assume 4.3 mbbl/d in average for 2Q24).
• Two well workovers have been completed at Manora in early 2Q24 to offset recent natural production declines.
• Valeura carried ~US$80 mm of current tax payable at the end of 1Q24. This could suggest we are overly conservative in our tax payment forecast of ~US$100 mm for 2024.
• We reiterate our target price of C$9.30 per share. The key news flow for the balance of 2024 would be (1) taking FID at the Wassana redevelopment project that should trigger the booking of additional reserves (we currently attribute an unrisked NAV of ~C$2 per share to the contingent resources at Wassana), (2) the drilling of the Ratree exploration well (at least 20 mmbbl prospective resources, C$2.35 per share unrisked NAV) and (3) the tax consolidation for Wassana, Nong Yao and Manora.
• The story continues to be about strong free cashflow generation, reserves growth and exploration upside.
Valuation
Our Core NAV and ReNAV now stand at respectively C$7.45 per share and C$9.59 per share. Assuming US$85/bbl for Brent in 2024, 2025 and 2026, our YE25 and YE26 net cash forecast would be respectively US$470 mm and US$670 mm. This compares with a current market cap of ~US$430 mm.
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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