Valeura Energy (TSX: VLE): Lower oil prices could generate acquisition opportunities
• 1Q25 production averaged 23.9 mboe/d, which is in line with previous indications. This included a planned seven-day annual maintenance shutdown at the Nong Yao field near the end of the quarter. Production resumed on 1 April.• Valeura has re-iterated its FY25 production guidance of 23-25.5 mbbl/d.
• FID for the Wassana redevelopment is still anticipated in 2Q25, with first oil expected in early-2027, though the company has indicated that it will "review and optimise its expenditures" given the current volatile market, presumably to ensure it keeps the balance sheet strong to capitalize on acquisition opportunities.
• The Ratree prospect, with prospective resources of 3.4–41.9 mmbbl (mid-case: 19.4 mmbbl), is scheduled for drilling around mid-2025. If successful, it could support a new development with dedicated infrastructure. The unrisked NAV for this prospect represents approximately 40% of the current market cap.
• The lower oil price environment could be beneficial to Valeura’s acquisition strategy. Even assuming US$60/bbl for Brent from 2Q25 to YE27, we forecast net cash of respectively US$270 mm, US$365 mm and US$480 mm at YE25, YE26 and YE27. Our YE27 net cash forecast represents ~75% of the current market cap.
• As we reduce our Brent price assumptions for 2Q25 and 3Q25 from US$75/bbl to US$60/bbl, we have changed our target price to C$12.00 per share.
Financial position
At the end of March 2025, Valeura held US$238 mm in net cash, with no debt (compared to US$258 mm at YE24). During 1Q25, the company made a US$39.2 mm tax payment related to corporate restructuring finalized last November. The proceeds of a a late-quarter sale (~US$30 mm) are expected to be received in April. Based on 2024 and 2025 drilling activity, no SRB tax is anticipated to be payable in 2025, resulting in minimal residual cash taxes for the remainder of the year.
Valuation
Our new Core NAV and ReNAV are C$9.56 per share and C$12.20 per share, respectively. We have reduced our operating cashflow forecasts for 2025 by ~US$60 mm to reflect our lower Brent price assumptions for 2025 (2026 onwards unchanged at U$70/bbl).
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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