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88E ALV BP/ ENI ENI HUR OMV OMV PEN PEN TAL PHAR REP REP RDSA TETY TETY FP
Auctus on Friday - 09/04/2021

AUCTUS PUBLICATIONS Panoro Energy (PEN NO)C: Better deal than expected in EG – Increasing our target price from NOK30 to NOK34 per share – The acquisition of Tullow’s EG asset has now closed and Panoro has paid a final consideration of US$89 mm in line with the initial price announced earlier (US$90 mm). Panoro has also sold a 903 mbbl cargo in EG associated with historical production in 2H20 and 1Q21 for US$59 mm net to Panoro (after royalty). This amount corresponds to Panoro’s net entitlement production (ie after distribution of government share of profit oil) with historical opex and capex already captured within the final consideration paid last week. This first cash flow effectively implies that 65% of the consideration paid at the end of March has been paid back a few days later. We are increasing our Core NAV from ~NOK21 to ~NOK24 per share and our ReNAV from ~NOK31 to ~NOK34 per share. The first Greater Hibiscus appraisal well is expected to be spudded in 2-3 weeks. This well is targeting 19 mmbbl prospective resources net to Panoro WI, potentially doubling the company’s reserves in Gabon. Our unrisked value for this well is ~NOK12 per share. PetroTal (PTAL LN)C; Target price of £0.60 per share: 1Q21 update – delivering on expectations – 1Q21 production was 7.3 mbbl/d, in line with guidance of 7-8 mbbl/d, with production negatively impacted by downtime at the 4H well. A pump has been replaced at the 4H well that has since been producing ~2,300 bbl/d vs 1,872 bbl/d prior to the pump failure. Production at the end of March had been restored to 8,275 bbl/d. The company continues to expect production to reach 18-19 mbbl/d by YE21. Following the repayment of US$7 mm payables since YE20 and US$16 mm to Petroperu to settle the derivative liability, the company has ~US$76 mm in cash (in line with our expectations). Of this amount, US$23 mm have been set aside for acquisitions (US$20 mm) and for the hedges that have been put in place (US$3 mm), leaving US$53 mm of “unrestricted liquidity”. PetroTal expects to receive ~US$36 mm from Petroperu as true-up payments for 2019/2020 sales. The company is delivering on its plans and the spudding of the first well of the 2021 programme should send a strong message that production is materially increasing again. The shares continue to trade at less than half our estimate of the value of the company based on its 2P reserves only (£0.41 per share @ Brent of US$60/bbl flat). Our Core NAV represents 3.5x the current share price. Pharos Energy (PHAR LN)C; Target price increased from £0.50 to £0.60 per share: All eyes on farm-in partner in Egypt – The new fiscal terms in Egypt are expected to be ratified in 3Q21 and a farm in partner is expected to be announced in 2Q21 (with completion of the transaction in 2H21). These are key milestones triggering the return to drilling in Egypt and allowing production in Egypt to triple to 12 mbbl/d. We are very confident Pharos will secure a partner given the renewed interest of the industry for Egypt (Cairn being the latest entrant with the acquisition of onshore assets from Shell). Once ratified the new terms are expected to be back dated to Nov 2020, resulting in a material positive impact on Pharos’ balance sheet . The company has put in place a working capital facility with the National Bank of Egypt, the size of which would immediately increase on ratification. At current oil prices, we believe that Pharos would likely have enough financial resources to start a two rig drilling programme until the farm out transaction completes. As we roll forward our DCF to YE21 and incorporate lower G&A (following salary reduction and ongoing head office headcount reduction), we are increasing our target price from £0.50 to £0.60 per share. Our Core NAV of £0.36 per share (£0.28 per share) reflects our view of what the company could fund with its own balance sheet once the new terms in Egypt are ratified. Securing a farm in partner would unlock £0.18 per share of value in Egypt, increasing recovery factor a further £0.11 per share. Including the contingent resources in Vietnam, our unrisked NAV for the company’s reserves plus contingent resources is >£0.80 per share. Tethys OIl (TETY SS)C; Target price of SEK85 per share: Production update in Oman – Production from Blocks 3&4 in March 2021 was 11,508 bbl/d. This is in line with our expectations and previous months. IN OTHER NEWS ________________________________________ AMERICAS 88 Energy (88E LN/AU): Drilling update in Alaska – Multiple prospective zones at the Merlin-1 well were identified on logs with indicated good mobility across most of these zones. The well experienced technical problems with equipment and poor hole conditions were encountered. During testing of the lowest zone, good communication was not able to be re-established with the reservoir. Potential formation damage could have contributed to this issue. Moving to the next shallowest prospective zone, wellbore condition issues prevented a test as the tool became stuck. The tool was freed but the risk of returning to that zone was deemed too high. It is now too late in the season to initiate flow testing operations and the forward program will consist of plugging the well. The well may be re-entered in the future, if warranted, in order to drill a side track and conduct a flow test. Alvopetro Energy (ALV CN): Production update in Brazil – March sales volumes were 2,383 boe/d, including natural gas sales of 13.7 mmcf/d. BP (BP LN): Exiting Brazilian assets – BP is exiting exploration activities in the Foz do Amazonas basin. ASIA PACIFIC Total (FP FP): Cancelling gas projects in Myanmar – Total has cancelled its ultra-deepwater Block A-6 project. EUROPE Hurricane Energy (HUR LN): Reserves update in the UK – Lancaster 2P reserves are estimated at 7.1 mmbbl. A further 37.9 mmbbl 2C contingent resources has been estimated including 34.7 mmbbl classified as “Development Unclarified”. Lincoln is expected to hold 18.5 mmbbl 2C net to Hurricane (“Development Unclarified”) while Hurricane is estimated to also hold 25.5 mmbbl 2C contingent resources at the Warwick Crest discovery (“Development Unclarified”). IGas Energy (IGAS LN): FY20 results – FY20 production in the UK was 1,907 boe/d. FY21 production is expected to be 2,150-2,350 boe/d. At YE20, IGas held 17 mmboe 2P reserves (16 mmboe at YE19). YE20 net debt was ~£10 mm. OMV (OMV AG): 1Q21 update – 1Q21 production was 495 mboe/d. Prospex Energy (PXEN LN): Environment approval received for Italian development – The full environmental approval for the development of the Selva Malvezzi Gas-Field in northern Italy has been received from the Italian Government. Prospex holds a 17% interest in the Podere Gallina licence which holds the Selva gas field. The field has gross 2P gas reserves of 13.3 bcf and is expected to start production in mid-2022 with a maximum rate of 5.3 mmcf/d. Repsol (REP SM): 1Q21 update – 1Q21 production was 639 mboe/d. Royal Dutch Shell (RDSA/B LN): 1Q21 update – 1Q21 production is expected to be 3,320-3,435 mboe/d. FORMER SOVIET UNION Block Energy (BLOE LN): 1Q21 update in Georgia – By YE21, Block aims to drill two wells, each targeting initial production of 600 boe/d, and spud a third well. As of 31 March 2021, the Company had US$6.8 mm in cash. Caspian Sunrise (CASP LN): Operational update in Kazakhstan – 1Q21 production was 1,322 bbl/d. Domestic oil prices are US$7.27/bbl. Enwell Energy (ENW LN): Update in Ukraine – 1Q21 production was 4,576 boe/d. At the end of March, Enwell held US$60.9 mm in cash. MIDDLE EAST AND NORTH AFRICA United Oil & Gas (UOG LN): Discovery in Egypt – – The ASD-1X exploration well encountered a total of at least 22 m net oil pay interpreted across a number of reservoirs, including the Abu Roash C, Abu Roash E, Lower Bahariya and Kharita Formations. SUB-SAHARAN AFRICA Eni (ENI IM): Light oil discovery in Angola – Eni has made a light oil discovery in Block 15/06, in Angola’s deep offshore at the Cuica exploration prospect located inside the Cabaça Development Area. The discovery has a size estimated between 200 and 250 mmboe in place. Qatar Petroleum: Acquiring exploration assets in Namibia - Qatar Petroleum is acquiring a 45% participating interest in the PEL 39 exploration license pertaining to Block 2913A and Block 2914B, from Shell. EVENTS TO WATCH NEXT WEEK ________________________________________ 15/04/2021: Serica Energy (SQZ LN): 4Q20 results

  • 09 Apr 21
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Pharos Energy PLC
Pharos Energy Plc (LSE: PHAR): All eyes on farm-in partner in Egypt

• FY21 production guidance has been set at 9.2-10.6 mboe/d (below our initial forecast of 11.5 mboe/d) as Pharos’ guidance assumes minimum investment in Egypt with no rig (US$8 mm vs our forecast of US$23 mm with one rig for six month) pending conclusion of the farm out. Pharos’ production guidance for Egypt is therefore only 4.0-4.4 mbbl/d vs our expectations of 5 mbbl/d. • The new fiscal terms in Egypt are expected to be ratified in 3Q21 and a farm in partner is expected to be announced in 2Q21 (with completion of the transaction in 2H21). These are key milestones triggering the return to drilling in Egypt and allowing production in Egypt to triple to 12 mbbl/d. We are very confident Pharos will secure a partner given the renewed interest of the industry for Egypt (Cairn being the latest entrant with the acquisition of onshore assets from Shell). • Once ratified the new terms are expected to be back dated to Nov. 2020, resulting in a material positive impact on Pharos balance sheet on ratification. The company has put in place a working capital facility with the National Bank of Egypt the size of which would immediately increase on ratification. At current oil price, we believe that Pharos would likely have enough financial resources to start a two rig drilling programme until the farm out transaction completes. • As we roll forward our DCF to YE21 and incorporate lower G&A (following salary reduction and ongoing head office headcount reduction), we are increasing our target price from £0.50 to £0.60 per share. More details on the FY20 results • The FY20 financials were as expected as production, cash and net debt had already been reported. • YE20 2P reserves and 2C resources were broadly in line with expectations with a large reserves increase in Egypt more than offsetting a minor reserves reduction in Vietnam on a redetermination of the share of the reserves located on Pharos’ licences (from 30.1% down to 29.6%). • Hedges for 39% of the 2H21 production have been put in place at US$50.8/bbl. • Overall the negative impact of lower production in Egypt and 2H21 hedges are offset by the very low capex. Deep value. Upside. Newsflow. Our Core NAV of £0.36 per share (£0.28 per share) reflects our view of what the company could fund with its own balance sheet once the new terms in Egypt are ratified. Securing a farm in partner would unlock £0.18 per share of value in Egypt, increasing recovery factor a further £0.11 per share. Including the contingent resources in Vietnam, our unrisked NAV for the company’s reserves plus contingent resources is >£0.80 per share. Any exploration success would be additive. Our ReNAV is £0.56 per share.

  • 08 Apr 21
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PANORO ENERGY (PEN:STO)Panoro Energy ASA (PEN:OSL)
Panoro Energy ASA (OSE: PEN): Better deal than expected in EG – Increasing our target price from NOK30 to NOK34 per share

Better deal than expected in EG – Increasing our target price from NOK30 to NOK34 per share • The acquisition of Tullow’s EG asset has now closed and Panoro has paid a final consideration of US$89 mm in line with the initial price announced earlier (US$90 mm). • Panoro has also sold a 903 mbbl cargo in EG associated with historical production in 2H20 and 1Q21 for US$59 mm net to Panoro (after royalty). This amount corresponds to Panoro’s net entitlement production (ie after distribution of government share of profit oil) with historical opex and capex already captured within the final consideration paid last week. • This first cash flow effectively implies that 65% of the consideration paid at the end of March has been paid back a few days later. • We are increasing our Core NAV from ~NOK21 to ~NOK24 per share and our ReNAV from ~NOK31 to ~NOK34 per share. High impact appraisal well in Gabon in 2-3 weeks The first Greater Hibiscus appraisal well is expected to be spudded in 2-3 weeks. This well is targeting 19 mmbbl prospective resources net to Panoro WI, potentially doubling the company’s reserves in Gabon. Our unrisked value for this well is ~NOK12 per share. Valuation The share price has not reacted materially to the announcement of the large cargo payment in EG. They trade below our new Core NAV of ~NOK24 per share. Our new RENAV is 60% above the share price.

  • 07 Apr 21
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PetroTal Corp.
PetroTal Corp (AIM: PTAL): 1Q21 update – delivering on expectations

• 1Q21 production was 7.3 mbbl/d, in line with guidance of 7-8 mbbl/d, with production negatively impacted by downtime at the 4H well. A pump has been replaced at the 4H well that has since been producing ~2,300 bbl/d vs 1,872 bbl/dd prior to the pump failure. Production at the end of March had been restored to 8,275 bbl/d. • The 7D deviated well has already been spudded and is expected to take approximately 35 days to drill. • The company continues to expect production to reach 18-19 mbbl/d by YE21. • Following the repayment of US$7 mm payables since YE20 and US$16 mm to Petroperu to settle the derivative liability, the company has ~US$76 mm in cash (in line with our expectations). Of this amount, US$23 mm have been set aside for acquisitions (US$20 mm) and for the hedges that have been put in place (US$3 mm), leaving US$53 mm of “unrestricted liquidity”. • Payables at the end of March are US$37 mm. • PetroTal expects to receive ~US$36 mm from Petroperu as true-up payments for 2019/2020 sales. Delivery on plan is not yet reflected in the share price The company is delivering on its plans and the spudding of the first well of the 2021 programme should send a strong message that production materially increasing again. The shares continue to trade at less than half our estimate of the value of the company based on its 2P reserves only (£0.41 per share @ Brent of US$60/bbl flat). Our Core NAV represents 3.5x the current share price. The shares now trade at EV/DACF multiples of 2.0x in 2021 and 0.8x in 2022.

  • 07 Apr 21
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TXP 88E ADX AOI CNE CNE XOM XOM JKX MAHAA TAL PHAR VOG
Auctus on Friday - 01/04/2021

AUCTUS PUBLICATIONS Pharos Energy (PHAR LN)C; Target price of £0.50 per share: Increasing our target price by 25% on new fiscal terms in Egypt – Pharos has received provisional approval from EGPC on revised fiscal terms for its Egyptian assets. This results in an improvement of up to US$5.7/bbl in the breakeven price. Under the new terms, the cost stop (maximum share of revenue to be allocated to cost recovery) will be increased from 30% to 40%. In return, Pharos has agreed to (i) waive its rights to recover a portion of the past costs pool (US$115 mm) leaving cost pool (post transaction) at >US$135 mm and (ii) reduce its share of Excess Cost Recovery Petroleum from 15% to 7.5%. This is an important milestone that enhances the value of Pharos’ assets in Egypt. Overall we increase our Core NAV from £0.18-0.21 (NPV12.5%-15%) to £0.28-£0.32 per share and our ReNAV from £0.37-0.43 to £0.40-0.54 per share. The enhanced terms will also probably facilitate the ongoing farm out process of the Egyptian asset. The shares trade at an EV/DACF multiple of only 1.5x in 2021. We are increasing our target price from £0.40 to £0.50 per share. PetroTal (PTAL LN)C; Target price of £0.60 per share: Positive developments on all fronts – Petroperu has started selling 1.8 mmbbl of oil delivered by PetroTal in 2019 and 2020. These volumes are part of the contingent YE20 derivative liabilities. They carry an average initial price of only US$44/bbl but could be sold at >US$60/bbl, assuming the Brent forward curve from April 2021. On these assumptions, the incremental overall value of these volumes is US$36 mm. PetroTal’s monthly sales invoices to Petroperu (at the time of delivery to the ONP pipeline) will now be priced based on the Brent strip price forecast for eight months out. Petroperu will place oil price Swaps for these sales to alleviate significant price adjustments. PetroTal has completed the second Bretana oil export through Brazil, selling 225,000 barrels of oil at US$61/bbl resulting in net backs of US$31/bbl, which is similar to our estimates of the average net backs achieved without Brazil exports. The combination of demonstrating the Brazil export option on larger volumes and the hedging programme being put in place (both by Petroperu and PetroTal) address key financial and operational risks. The shares continue to trade at less than half our estimate of the value of the company based on its 2P reserves only (£0.38 per share @ Brent of US$60/bbl flat). Our Core NAV of £0.60 per share represents 3.5x the current share price. IN OTHER NEWS ________________________________________ AMERICAS 88 Energy (88E LN/AU): Drilling update in Alaska – The Merlin-1 well is interpreted (logging while drilling) to have encountered multiple potentially hydrocarbon bearing zones in the Nanushuk Formation. The Nanushuk Formation, was encountered ~600' low to prognosis and is interpreted to be ~500' thicker than that encountered in the wells drilled into the Willow Oil Field to the north of the Project Peregrine acreage. Maha Energy (MAHA-A SS): Issue of new equity – Maha is raising US$70 mm of new funding including US$10 mm of new equity (7.5 mm new shares) and the balance as a loan. The proceeds will be used to redeem the outstanding SEK300 mm bond and to further accelerate and fund the Company’s oil and gas production expansion program in Brazil. Touchstone Exploration (TXP LN/TXP CN): Poor well test results in Trinidad– During the third test of the Chinook-1 well, the well recovered load fluid with only minor amounts of 35 degree API gravity oil and formation water. The company will put the well on pump to evaluate the deliverability of the zone and assess possible formation damage that may have occurred during drilling. At Cascadura Deep-1, the testing of a low resistivity interval yielded predominantly water with minor amounts of hydrocarbon emulsion and was subsequently abandoned. Westmount Energy (WTE LN): Programme and resources update in Guyana – The Tanager-1 discovery is estimated to contain 65.3 mmbbl 2C contingent resources (42.7 mmbbl Net to Kaieteur Block) in high quality Maastrichtian reservoir but is non-commercial as a standalone development. Initial Drilling activities have commenced at Jabillo-1 (~1bn bbl prospect). The third well on the Canje block, Sapote-1, will evaluate a large independent prospect in the south east of the block and is currently scheduled for drilling in 3Q21. Westmount held £2.2 mm in cash at YE20. ASIA PACIFIC Advance Energy (ADV LN): Raising new equity for Australia acquisition – Advance is raising gross proceeds of US$30 mm of new equity priced at 2.6 p per share. The placing will allow Advance to fund the acquisition of 50% in the Buffalo discovery in Timor Leste. Cairn Energy (CNE LN): India appealing to court decision – India has appealed the award decision in favour of Cairn Energy with regards to the tax dispute between India and Cairn. PTTEP and Petronas: Discovery offshore Malaysia – The Sirung-1 well, in Block SK405B, off the coast of Sarawak, has encountered an oil and gas column >100 m. EUROPE ADX Energy (ADX AU)C: Resources increase in Austria – ADX’s 10 drill ready exploration prospects in Upper Austria are now estimated to hold 58 mmboe P50 prospective resources (42 mmboe previously). Deltic Energy (DELT LN): Shell confirming investment decision to drill UK exploration well – Shell has made a positive well investment decision to drill the high impact Pensacola Prospect (Deltic WI: 30%) on Licence P2252 in the UK Southern North Sea. Deltic estimates that the Pensacola Prospect contains gross P50 Prospective Resources of 39 BCF to 1,181 bcf with a chance of success of 55%. Exxon Mobil (XOM US): Romgaz makes an offer to acquire Black Sea asset in Romania – Romgaz has made an offer to acquire ExxonMobil’s 50% in Neptun Deep. FORMER SOVIET UNION JKX Oil & Gas (JKX LN): FY20 results – FY20 production in Russia and the Ukraine was 10,238 boe/d (5,389 boe/d in Russia and the balance in the Ukraine). The company held US$24.3 mm in cash at YE20. MIDDLE EAST AND NORTH AFRICA Gulf Keystone Petroleum (GKP LN): 4Q20 results – FY20 gross production in Kurdistan was 36,625 bbl/d. Gross production from the field in 2021 to date was 43,190 bbl/d, in line with guidance of 40,000 – 44,000 bbl/d with net capex of US$55-65 mm for the year. Gulf Keystone held US$161 mm in cash at the end of March. Production is expected to reach 55 mbbl/d during 1Q22. An annual dividend of at least US$25 mm has been re-instated. 2P reserves + 2C resources are estimated at ~800 mmbbl. SUB-SAHARAN AFRICA Africa Oil (AOI CN/SS): Reserves update in Nigeria –YE20 WI 2P reserves were estimated at of 72.6 mmboe (YE'19: 70.9 mmboe). FAR (FAR AU): No offer from Lukoil – Lukoil’s conditional non-binding proposal to acquire FAR is not proceeding to a legally binding offer. Victoria Oil & Gas (VOG LN): Update in Cameroon - Recent weekday production has been 5.5 to 6.0 mmcf/d gross gas. The La-108 well is producing more water than other wells. Analysis of this water suggests it is likely composed of drilling and completions fluid lost from the drilling. The LoI with New Age regarding Etinde, which was originally announced on 5 February 2020, expired on 31 March 2021. A new arbitration process with RSM (Victoria’s JV partner on Logbaba) is due to start in April. Victoria has signed a non binding term sheet to divest its Russian asset. The company is also progressing with legal proceedings against Kazakhstan with regards to the Kemerkol asset. EVENTS TO WATCH NEXT WEEK ________________________________________ 07/04/2021: Pharos Energy (PHAR LN): 4Q20 results 07/04/2021: PetroTal (PTAL LN): 1Q21 update

  • 01 Apr 21
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PetroTal Corp.
PetroTal Corp (AIM: PTAL): Positive developments on all fronts

• Petroperu has started selling 1.8 mmbbl of oil delivered by PetroTal in 2019 and 2020. These volumes are part of the contingent YE20 derivative liabilities. They carry an average initial price of only US$44/bbl but could be sold at >US$60/bbl, assuming the Brent forward curve from April 2021. On these assumptions, the incremental overall value of these volumes is US$36 mm. • An initial sale of 0.36 mm bbl by Petroperu will take place in April with a realized price at a discount of only US$2.06/bbl. The quality discount is well below what we assume in our model (US$6/bbl). • PetroTal has already locked-in the pricing of this initial volume with a swap agreement at US$62/bbl. • PetroTal’s monthly sales invoices to Petroperu (at the time of delivery to the ONP pipeline) will now be priced based on the Brent strip price forecast for eight months out. Petroperu will place oil price Swaps for these sales to alleviate significant price adjustments. • PetroTal has also hedged 0.56 mmbbl production with a Put on Brent at US$60/bbl. • PetroTal has completed the second Bretana oil export through Brazil, selling 225,000 barrels of oil at US$61/bbl resulting in net backs of US$31/bbl, which is similar to our estimates of the average net backs achieved without Brazil exports. Addressing key financial risks The combination of demonstrating the Brazil export option on larger volumes and the hedging programme being put in place (both by Petroperu and PetroTal) address key financial and operational risks as PetroTal provides better visibility on cashflow and confirms the commercial viability of an alternative export route. With the financial framework in place, the story is now about returning to drilling to grow production. The US$36 mm derivative asset will offset the progressive unwinding of the contractors payables, addressing the last financial overhang. Valuation unchanged – one of the cheapest stocks in our coverage The shares continue to trade at less than half our estimate of the value of the company based on its 2P reserves only (£0.38 per share @ Brent of US$60/bbl flat). Our Core NAV of £0.60 per share represents 3.5x the current share price. On 11.8 mbbl/d in 2021, the share trade at EV/DACF multiples of 2x in 2021 and 0.9x in 2022 (on 15.2 mbbl/d production).

  • 01 Apr 21
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