Auctus report on SEUSFSintana Energy Inc. (TSX-V: SEI): Pure play on the world’s exploration hotspot
• ~11 high impact appraisal/exploration wells will be drilled on various licences in Namibia over the coming months. This is very material and is expected to attract the attention of investors. Sintana provides exposure to three out of the six licences with high impact drilling.
• We believe that the recent weakness of Sintana’s share price offers an opportunity with an asymmetric risk/reward profile.
• We estimate that Sintana’s current share price trades at a discount to the market value of its interests in the Mopane discovery (PEL 83) that could be crystalized by an upcoming partial divestment process initiated by Galp. While further exploration and appraisal drilling is expected to take place before a sale is agreed, Sintana’s costs are carried by Galp.
• The 4 well programme at PEL 83 is expected to include 2 exploration wells that could have a material impact on the size of the hydrocarbon volumes on PEL 83. Increasing the size of Mopane by 20% would add C$0.24/sh.
• Chevron will also start drilling at PEL 90 by YE24. Sintana holds an indirect 4.9% WI in PEL 90. Not much detailed information is available but PEL 90 is adjacent to the licence with the Venus discovery. Our unrisked NAV for Sintana’s interest in PEL 90 is C$0.79/sh as Sintana is carried for this well.
• We anticipate that Woodside will exercise its option to farm into PEL 87 to also start exploration activities in 2025. Sintana would be carried until development. Our unrisked NAV is C$1.77/sh.
• Rhino Resources and Azule Energy (bp/Eni) will also start drilling at PEL 85 around YE24 (2 wells). The block is located to the south east of PEL 83 and a success could have positive implications for the prospectivity of PEL 83. BWE Energy is also expected to drill 2 exploration wells near the Kudu field to test different plays.
• As we incorporate the latest readthrough value of transactions in Impact Oil & Gas, we have increased our target price to C$1.85/sh in line with our new ReNAV.
Value build-up
Based on the limited disclosures on Mopane (PEL 83) and Venus (PEL 56), the discovered resources on Galp’s and TotalEnergy’s licences appear to be of a similar order of magnitude. Using the last price paid by Africa Oil for 7% in Impact suggests a value of ~US$983 mm for Impact’s ~9.5% carried interests in PEL 56. Adjusting for respective carried interests leads to an unrisked value of US$507 mm for Sintana’s interests in PEL 83. Deducting a worst case of 32% capital gain tax (assuming Sintana sell its interests) and using 90% chance of success leads to a value for the company of ~C$1.08/sh based on PEL 83 alone. As we apply a similar approach to the other licences, our total unrisked NAV for Sintana is ~C$4.54/sh.
21/11/2024
1
jmho
• ~11 high impact appraisal/exploration wells will be drilled on various licences in Namibia over the coming months. This is very material and is expected to attract the attention of investors. Sintana provides exposure to three out of the six licences with high impact drilling.
• We believe that the recent weakness of Sintana’s share price offers an opportunity with an asymmetric risk/reward profile.
• We estimate that Sintana’s current share price trades at a discount to the market value of its interests in the Mopane discovery (PEL 83) that could be crystalized by an upcoming partial divestment process initiated by Galp. While further exploration and appraisal drilling is expected to take place before a sale is agreed, Sintana’s costs are carried by Galp.
• The 4 well programme at PEL 83 is expected to include 2 exploration wells that could have a material impact on the size of the hydrocarbon volumes on PEL 83. Increasing the size of Mopane by 20% would add C$0.24/sh.
• Chevron will also start drilling at PEL 90 by YE24. Sintana holds an indirect 4.9% WI in PEL 90. Not much detailed information is available but PEL 90 is adjacent to the licence with the Venus discovery. Our unrisked NAV for Sintana’s interest in PEL 90 is C$0.79/sh as Sintana is carried for this well.
• We anticipate that Woodside will exercise its option to farm into PEL 87 to also start exploration activities in 2025. Sintana would be carried until development. Our unrisked NAV is C$1.77/sh.
• Rhino Resources and Azule Energy (bp/Eni) will also start drilling at PEL 85 around YE24 (2 wells). The block is located to the south east of PEL 83 and a success could have positive implications for the prospectivity of PEL 83. BWE Energy is also expected to drill 2 exploration wells near the Kudu field to test different plays.
• As we incorporate the latest readthrough value of transactions in Impact Oil & Gas, we have increased our target price to C$1.85/sh in line with our new ReNAV.
Value build-up
Based on the limited disclosures on Mopane (PEL 83) and Venus (PEL 56), the discovered resources on Galp’s and TotalEnergy’s licences appear to be of a similar order of magnitude. Using the last price paid by Africa Oil for 7% in Impact suggests a value of ~US$983 mm for Impact’s ~9.5% carried interests in PEL 56. Adjusting for respective carried interests leads to an unrisked value of US$507 mm for Sintana’s interests in PEL 83. Deducting a worst case of 32% capital gain tax (assuming Sintana sell its interests) and using 90% chance of success leads to a value for the company of ~C$1.08/sh based on PEL 83 alone. As we apply a similar approach to the other licences, our total unrisked NAV for Sintana is ~C$4.54/sh.
21/11/2024
1
jmho
