Valeura Energy Inc. (VLE:TSX; PNWRF:OTCMKTS) got an increase in its target price by Auctus Advisors to CA$6 per share from CA$5.20 after accounting for adjusted working capital and guidance for production and capex, reported one of the financial firm's analysts, Stephane Foucaud, in an April 18 research note.
The oil and gas company's current share price is about CA$3.26, noted Foucaud, and from here, the new CA$6 target price implies an 82% total return.
"The shares continue to offer deep value, production and cash flow growth, and reserves upside," Foucaud wrote.
Surprises to the upside
Foucaud highlighted the increase in Valeura's adjusted net working capital after closing of the Mubadala acquisition in March is higher than expected, at an estimated CA$105 million (CA$105M) versus US$58M. Also, the CA$105M does not include the amount of tax Valeura has to pay in August.
The amount of tax due at that time is lower than Auctus forecasted, too, Foucaud pointed out. The firm originally estimated it to be more than US$75M but now expects it to be less than half of that, under US$30M.
Guidance for 2023
In terms of full-year 2023 (FY23) production, Valeura guided to 20,000–22,500 barrels per day (20–22.5 Mbbl/d) of oil. This total includes production during the months before the Mubadala acquisition closed and assumes production in the Wassana oilfield will start next month.
As for capex, the energy company budgeted US$180–200M. This amount includes about "US$34M for Q1/23 activities and mostly occurring before the completion of the Mubadala acquisition (and already netted off from the adjusted working capital)," noted Foucaud.
Combined reserves, resources
Foucaud reported that Valeura had 29,100,000 barrels (29.1 MMbbl) of oil of Proven and Probable (2P) reserves at the end of 2022. This indicates the company replaced about 6.6 MMbbl of 2P reserves during 2022 through production, which, Foucaud wrote, "has also positive implications for the timing of decommissioning."
Of the total 29.1 MMbbl of 2P reserves, about 6.1 MMbbl were Mubadala assets. Also from Mubadala are about 6 MMbbl of 2C resources.
"We note that the reserves and resources were estimated by Mubadala rather than Valeura, and we understand that the oil price assumptions were very low," Auctus wrote.
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