will acquire offshore oil assets in the Gulf of Thailand, "a transformational action that provides a huge boost to cash flow," reported Research Capital Corp. analyst Bill Newman in a Dec. 6 research note.
To reflect the deal, Research Capital increased its target price on the Canadian oil and gas company to CA$8.25 per share from CA$1.45, its current share price. From here, the target represents a possible 469% return for investors.
"We expect the assets will generate substantial free cash flow to fund development and appraisal projects to extend the life of the reserves, help to fund the company's other Thailand assets, and provide capital for additional acquisitions," wrote Newman.
Research Capital Corp. maintains its Speculative Buy rating on Valeura.
Valeura's management team forecasts 2023 pretax annual cash flow of US$360 million (US$360M) from the new assets, Newman noted; Research Capital estimates funds flow forecast next year to be US$206M.
The three assets Valeura is to acquire, relayed Newman, are:
- an operated 100% interest in the B5/27 license holding the Jasmine and Ban Yen oilfields
- an operated 90% working interest in the G11/48 license holding the Nong Yao oilfield
- a 70% interest in the G1/48 license holding the Manora oilfield
Newman noted these concessions have a current combined net oil production of about 21,200 barrels per day.
"The oilfields are midlife to mature assets but with additional development opportunities that can significantly extend the life," he added.
For the acquisition, Valeura will pay US$10.4M in cash plus a possible maximum contingent payment of US$50M, due only if oil prices are high. Specifically, this payment is based on average oil prices in 2022, 2023, and 2024 and kicks in when the Dubai benchmark average exceeds US$100 per barrel. The Calgary, Alberta-based company will make the purchase through Valeura Energy Asia Pte. Ltd., a subsidiary and special purpose vehicle.
"In our conservative scenario, which includes the max contingent payment and our estimated discounted decommission costs of US$168.4M, the transaction metrics remain compelling at US$9.47 per barrel and $10,774 per flowing barrel," Newman highlighted.
Research Capital Corp. maintains its Speculative Buy rating on Valeura.
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