Valeura Energy (TSX: VLE): ~US$47 mm free cash flow in 4Q23. ~12% production growth in 2024
• 4Q23 production was 19,165 bbl/d (we expected ~21,300 boe/d) with minimal production at Wassana and declining production at Jasmine only partially offset by growing production at Nong Yao. Production in January stands at 22.6 mbbl/d in line with our estimates for 1Q24.• The FY24 capex budget has been set at US$135-155 mm plus US$8 mm for exploration. This compares with our previous expectations of US$142 mm (and no exploration). The capex programme includes US$50 mm for Jasmine and US$47 mm for the new Nong Yao C development.
• FY24 opex is estimated at US$205-235 mm, in line with our expectations of US$216 mm. The capex programme includes an opex reduction programme at Jasmine and we are reducing our opex estimates for the field from ~US$105 mm per year to US$90 mm.
• Valeura anticipates producing 21.5-24.5 mbbl/d in 2024 (we estimated 25.1 mbbl/d). The mid-point of the guidance represents production growth of ~12% compared to 2023.
• As we incorporate the production and capex guidance and roll forward our DCF by one year to YE24, we re-iterate our target price of C$6.40/sh.
YE23 net cash and YE24 net cash forecast
Valeura held ~US$150.9 mm in net cash at YE23. This implies that the company generated ~US$47 mm of free cash flow in 4Q24. Most of the departure from our expectation of YE23 net cash of ~US$175 mm reflects the production and sales difference compared to our estimates (~273,000 bbl or ~US$22 mm). We have also reduced our net cash estimates for YE24 from US$444 mm to US$334 mm as we have (1) incorporated YE23 net cash (-~US$24 mm), (2) reduced our FY24 Brent price forecast from ~US$90/bbl to US$85.5/bbl (-US$35 mm), (3) reduced our FY24 production estimates from 25.1 mbbl/d to 23.4 mbbl/d (-US$35 mm) and (4) increased our FY24 development and exploration capex estimates by US$15 mm to US$157 mm.
Valuation
We have rolled forward our DCF by one year to YE24, which offsets our lower assumptions. Given the positive drilling results in 2023, we have also increased our production profile (and capex) for 2025 from 20.7 mbbl/d to 23.3 mbbl/d (~=2024). This has also positive implications for production for later periods. This translates into a potential FY23 reserves replacement of 50% which we believe is below what Valeura has achieved in 2023. Our new YE24 net cash represents 1.45x the current market cap. Overall our Core NAV and ReNAV now stand at respectively C$5.55/sh and C$6.27/sh.
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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