Valeura Energy (TSX: VLE): Investor visit: adding depth and breadth

• Valeura hosted an investor trip to its operations in Thailand earlier this month. The visit underscored three key aspects: (1) the extensive experience of the management team, (2) the strong relationships with Thai authorities, and (3) the substantial breadth of its assets, offering more potential than previously anticipated.
• Greg Kulawski, Valeura's COO, brings extensive experience to the company's shallow water operations in Thailand. His previous roles at Shell include Deputy CEO of Sakhalin Energy, global Vice President of Safety, and GM of Nigeria's onshore and shallow water assets.
• With its production representing ~30% of Thailand's total crude oil production of 81 mbbl/d (2024), Valeura is one of the largest oil producers in the country and a very important partner of PTTEP, which is more focused on natural gas production.
• Recent well performance, utilizing enhanced seismic modeling, downhole water management technology, and precision geosteering, suggest that a recovery factor of up to 60% could be achieved. This could lead to further increases in reserves.
• FID for the Wassana redevelopment is still anticipated in early 2Q25, with first oil expected in early-2027. This involves a new oil production platform with a capacity of 10 mbbl/d (vs. Wassana's FY24 production of ~3.6 mbbl/d). A significant portion of the 10.6 mmbbl low-risk contingent resources at Wassana will be converted into 2P reserves upon FID. The new platform would also enable two further satellite developments to the north and south. This would derisk additional contingent resources and provide further exploration upside.
• While the overall prospective resources have not been disclosed, the company has identified prospects and leads on all its licences. There are ongoing or planned seismic acquisition and processing activities at Jasmine and Manora to further grow the portfolio. The Ratree prospect (Jasmine area), with prospective resources of 3.4-41.9 mmbbl (19.4 mmbbl mid case), is expected to be drilled around mid-2025.
• Valeura expects to maintain production of 20-25 mbbl/d until 2039, which represents a significant upside compared to the independent auditor's 2P profile of 15 mbbl/d in 2030 and cessation of production at YE36.
• We re-iterate our target price of C$13 per share.

Valuation
Our Core NAV and ReNAV are C$10.41/sh and C$12.82/sh, respectively. The exploration upside valuation only includes Ratree's prospective resources. Valeura estimates FY25 free cash flow neutrality at ~US$42/bbl, with YE26 net cash of US$510-725 mm at US$65-85/bbl for Brent. We forecast US$540 mm at US$70/bbl, excluding the redevelopment of Wassana.