Valeura Energy (TSX: VLE): Production restart at Wassana earlier than expected. Taking 100% of the asset
• The Wassana field has now re-started production. This is much earlier than we were anticipating as we were forecasting almost no production from Wassana during 2Q23.• With the activation of additional wells, production rates have begun ramping up.
• Valeura’s 11% partner in Licence G10/48, Palang Sophon, has opted to discontinue its participation in the licence. Palang Sophon will transfer its 11% working interest to Valeura, resulting in Valeura holding 100% WI in Wassana. Valeura’s 2P reserves in Wassana will increase to ~6.8 mmbbl..
• We are now forecasting 17,785 bbl/d production in 2023 (17,535 bbl/d previously) and 24,280 bbl/d in 2024 (23,880 bbl/d previously).
• The shares continue to offer deep value, production and cashflow growth with reserves upside.
• We re-iterate our target price of C$6.00 per share.
Rossukon
Following consideration of the Rossukon project’s tight schedule requirements and an estimated capital requirement of ~US$100 mm (gross), Valeura has decided to divest its working interest in the G6/48 license to its partner Northern Gulf Petroleum for a contingent cash consideration of US$5 mm, payable at first oil from the Rossukon oil field, and a further 4.65% overriding royalty associated with the Company’s 43% working interest (2% of gross production) from the field thereafter. We are not surprised by this decision given the fact the company had not taken FID for the project yet. We did not include any capex or cashflow forecast for Rossukon in our estimates. We only carried C$0.16 per share in our ReNAV for this asset. Pending further details on first oil, we are removing this asset entirely from our valuation.
Valuation
The additional 11% in Wassana more than offsets the impact of the divestment of Rossukon. We have increased our Core NAV from C$5.72 to C$5.94 per share. Our ReNAV has also increased from C$6.05 to C$6.12 per share. Our net cash forecast at YE23 is ~US$290 mm at a Brent price of US$91/bbl (versus market cap of ~US$175 mm). Assuming US$75/bbl over the balance of 2023 and YE24, YE23 net cashis US$175 mm (= the current market cap) and YE24 net cashis US$350 mm (2x 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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