Valeura Energy (TSX: VLE): Production guidance re-iterated but lower capex and additional resources
• The 2Q24 production and the cash position at the end of June had previously been reported.• Development drilling at Nong Yao C has been completed with the 6 development wells encountering the reservoirs in line with expectations. One appraisal well was successful and will be converted into a seventh production well. First production is expected later in August. Two of the development wells also encountered appraisal target; which could derisks potential future infill drilling and add some reserves.
• Even including the appraisal programme, the Nong Yao C development is~ 25% under budget.
• As a result, overall FY24 capex guidance has been reduced from US$135-155 mm to US$135-145 mm. The FY24 production guidance range has been narrowed from 21.5-24.5 mbbl/d to 22-24 mbbl/d.
• The drilling rig is now moving to the Jasmine/Ban Yen field where five development and two appraisal wells will be drilled. The high impact Ratree exploration well will be slotted into the drilling schedule in due course, as the company continually seeks to optimise the programme. In 4Q24, Valeura plans to start drilling three infill development plus two appraisal wells at Manora.
• We have increased our target price to C$10 per share in line with our new ReNAV.
• The key near term catalysts are the corporate restructuring associated with Manora, Nong Yao, Yasmine/Ban Yen and Wassana and the drilling of Ratree (~C$2.65 per share unrisked NAV).
Wassana
Valeura expects to take FID on Wassana in 1Q25. This could trigger the booking of incremental reserves. Our unrisked NAV for the company’s low risk YE23 2C resources (mostly associated with Wassana) is ~C$2.20 per share. Production could start in late 2026.
Valuation
Our Core NAV and ReNAV are now respectively ~C$7.30 per share and ~C$9.70 per share. Our ReNAV does not incorporate the new resources encountered by the Nong Yao appraisal wells. We estimate the company will hold ~US$255 mm at YE24. This represents ~65% of the current market cap.
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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