Valeura Energy (TSX: VLE): High production in 4Q24. Launching a share buyback programme
• The 3Q24 production and cash position at the end of September had been reported previously.• Production in September and October stood at ~26.4 mbbl/d. This is very high. The company expects production to be ~26 mbbl/d over 4Q24. We only assumed 24-25 mbbl/d.
• The high production combined with (1) the settlement in early October of a 0.18 mmbbl lifting sold at the end of 3Q24 and (2) above average liftings in 4Q24 suggests high cashflow and free cashflow in 4Q24. As previously reported, Valeura held crude oil inventory of 1.2 mmbbl at the end of September (30% higher than three months earlier) of which 0.51 mmbbl were lifted on 1 October.
• The FY24 production guidance has been narrowed from 21.5-24.5 mbbl/d to 22-24 mbbl/d. The FY24 opex and capex guidance is unchanged.
• Valeura has launched a share buyback programme for up to 10% of its free float (7.4 mm shares). This is expected to provide support to the share price. This also sends a send a positive signal with regards to the strength of the fundamentals of the business and of the balance sheet following the corporate restructuring given that Valeura continues to look for acquisitions.
• We anticipate a high reserve replacement ratio in 2024 given the positive drilling results and the performance of the fields, particularly at Nong Yao. Sanctioning the redevelopment of Wassana in 1Q25 is expected to add further reserves.
• We re-iterate our target price of C$10.00 per share in line with our ReNAV. We estimate that Valeura will hold ~US$400 mm in net cash at YE25. This assumes ~US$75/bbl for Brent in 2025.
Valuation
We have reduced our Brent price assumptions in 4Q24 from US$80/bbl to US$75/bbl. Our Core NAV for the company (based on the YE23 2P reserves only) is broadly unchanged at ~C$7.20 per share. Our ReNAV of ~C$9.64 per share 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).
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