Energy Co. Reports Operations on Track for Production Growth

Source: Stephane Foucaud 05/09/2024

Valeura Energu Inc. reported results for the first quarter of this year, showing its operations are on track, according to an Auctus Advisors research note.

Auctus Advisors analyst Stephane Foucaud, in a research report published on May 9, 2024, provided an update on Valeura Energy Inc. (VLE:TSX; PNWRF:OTCMKTS) following the company’s first quarter 2024 (1Q24) results. The analyst reiterated his target price of CA9.30 per share, implying a total return of 75% from the share price at the time of the report of CA$5.32.

“The 1Q24 production of 21.9 mbbl/d and cash position of ~US$194 mm at the end of March had been reported previously,” Foucaud noted. “Operations are on track. Drilling is underway at the Nong Yao A platform, with two new wells that are expected to be completed in the coming week.”

The analyst highlighted that drilling at the Nong Yao C development is expected to result in first oil in 3Q24, boosting production from the area to 11 mbbl/d. Later in the year, a 5-well infill drilling program on Jasmine/Ban Yen is also intended to increase production.

Foucaud pointed out that production at Wassana has reached 5 mbbl/d in early May, which he views as a good performance, assuming an average of 4.3 mbbl/d for 2Q24.

“Two well workovers have been completed at Manora in early 2Q24 to offset recent natural production declines,” he added.

Valeura carried ~US$80 million of current tax payable at the end of 1Q24, suggesting that Auctus Advisors’ tax payment forecast of ~US$100 million for 2024 may be overly conservative.

“We reiterate our target price of CA$9.30 per share,” Foucaud stated. “The key news flow for the balance of 2024 would be (1) taking FID at the Wassana redevelopment project that should trigger the booking of additional reserves (we currently attribute an unrisked NAV of ~CA$2 per share to the contingent resources at Wassana), (2) the drilling of the Ratree exploration well (at least 20 mmbbl prospective resources, CA$2.35 per share unrisked NAV) and (3) the tax consolidation for Wassana, Nong Yao and Manora.”

The analyst emphasized that the Valeura Energy story continues to be about strong free cash flow generation, reserves growth, and exploration upside.

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