was upgraded to Buy from Speculative Buy by Research Capital Corp. due to a trio of recent "positive developments," analyst Bill Newman reported in an April 28 research note.
"Valeura remains our Top Pick," Newman wrote. "We view the recent pullback in the stock price as an excellent buying opportunity."
The Calgary-based oil and gas explorer-developer is currently trading at about CA$2.38 per share, which compares to Research Capital's CA$8.25 per share target price on it. The difference between these two prices implies a potentially large 247% return for Valeura investors.
Wassana Production Restarted
Newman presented the latest news that led to the new Buy recommendation.
1) Production from the Wassana oilfield in the Gulf of Thailand resumed and did so earlier than expected, Newman noted. Initial net production is estimated to be about 3,370 barrels per day (3.37 Mbbl/d), up from 3 Mbbl/d.
Production will increase as more wells at Wassana get activated. This is likely to happen when Valeura starts its planned five-well infill drilling program once the jack-up rig gets mobilized to the site, likely in Q3/23. This work could boost net production from Wassana to about 5 Mbbl/d from 4.5 Mbbl/d by the end of this year.
2) Valeura increased its working interest in license G10/48, which covers Wassana, to 100% from 89%. It did so by agreeing to discharge its 11%-owning partner from all outstanding and future liabilities.
3) Valeura transferred its 43% interest in license G6/48, for the Rossukon oilfield, also in the Gulf of Thailand, to its partner in exchange for a 2% royalty on gross production from there. Valeura made this move because it has large capex expenditures looming.
2023 Forecasts Revised
In light of the three described changes, Research Capital updated some of its modeled 2023 and 2024 projections for Valeura.
To reflect the early production start at Wassana and Valeura's increased interest in the relevant license, Research Capital increased its production estimate for Wassana in 2023 to 18.36 Mbbl/d from 17.81 Mbbl/d. For 2024, it raised the same to 26.714 Mbbl/d from 25.748 Mbbl/d.
To account for higher expected production and lower current taxes, Research Capital now expects Valeura to achieve US$249M in free funds flow in 2023, up from US$214M previously. For 2024, the new funds flow forecast is US$274M, which increased from US$236M.
As for capex, Research Capital lowered its estimated spend in 2024 to US$105M from US$180M, and this is because most of the Nong Yao C infill drilling program should be done this year. Also, the well development program for next year encompasses fewer wells (ten) than this year's campaign (21).
What To Watch For
The next possible catalyst for Valeura is the release of its Q1/23 financial and operational results, due out soon, on May 11.
Other big near-term events include the results of the infill drill program at Wassana in Q3/24, and the same from Nong Yao, in Q4/23.
|Want to be the first to know about interesting Oil & Gas - Exploration & Production investment ideas? Sign up to receive the FREE Streetwise Reports' newsletter.||Subscribe|
1) Doresa Banning wrote this article for Streetwise Reports LLC and provides services to Streetwise Reports as an independent contractor. She or members of her household own securities of the following companies mentioned in the article: None. She or members of her household are paid by the following companies mentioned in this article: None.
2) The following companies mentioned in this article are billboard sponsors of Streetwise Reports: None. Click here for important disclosures about sponsor fees. As of the date of this article, an affiliate of Streetwise Reports has a consulting relationship with: None. Please click here for more information.
3) Comments and opinions expressed are those of the specific experts and not of Streetwise Reports or its officers. The information provided above is for informational purposes only and is not a recommendation to buy or sell any security.
5) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned. Directors, officers, employees or members of their immediate families are prohibited from making purchases and/or sales of those securities in the open market or otherwise from the time of the decision to publish an article until three business days after the publication of the article. The foregoing prohibition does not apply to articles that in substance only restate previously published company releases.
Disclosures for Research Capital Corp., Valeura Energy Inc., April 28, 2023
Analyst Certification: I, Bill Newman, CFA, certify the views expressed in this report were formed by my review of relevant company data and industry investigation, and accurately reflect my opinion about the investment merits of the securities mentioned in the report. I also certify that my compensation is not related to specific recommendations or views expressed in this report. Research Capital Corporation publishes research and investment recommendations for the use of its clients. Information regarding our categories of recommendations, quarterly summaries of the percentage of our recommendations which fall into each category and our policies regarding the release of our research reports is available at www.researchcapital.com or may be requested by contacting the analyst. Each analyst of Research Capital Corporation whose name appears in this report hereby certifies that (i) the recommendations and opinions expressed in this research report accurately reflect the analyst’s personal views and (ii) no part of the research analyst’s compensation was or will be directly or indirectly related to the specific conclusions or recommendations expressed in this research report.
Relevant Disclosures Applicable to Companies Under Coverage Relevant: disclosures required under IIROC Rule 3400 applicable to companies under coverage discussed in this research report are available on our website at www.researchcapital.ca
General Disclosures: The opinions, estimates and projections contained in all Research Reports published by Research Capital Corporation ("RCC") are those of RCC as of the date of publication and are subject to change without notice. RCC makes every effort to ensure that the contents have been compiled or derived from sources believed to be reliable and that contain information and opinions that are accurate and complete; RCC makes no representation or warranty, express or implied, in respect thereof, takes no responsibility for any errors and omissions which may be contained therein and accepts no liability whatsoever for any loss arising from any use of or reliance on its Research Reports or its contents. Information may be available to RCC that is not contained therein. Research Reports disseminated by RCC are not a solicitation to buy or sell. All securities not available in all jurisdictions.
Potential Conflicts of Interest: All Research Capital Corporation ("RCC") Analysts are compensated based in part on the overall revenues of RCC, a portion of which are generated by investment banking activities. RCC may have had, or seek to have, an investment banking relationship with companies mentioned in this report. RCC and/or its officers, directors and employees may from time to time acquire, hold or sell securities mentioned in our Research Reports as principal or agent. RCC makes every effort possible to avoid conflicts of interest, however readers should assume that a conflict might exist, and therefore not rely solely on this report when evaluating whether or not to buy or sell the securities of subject companies. RC USA INC. Information about Research Capital Corporation’s Rating System, the distribution of our research to clients and the percentage of recommendations which are in each of our rating categories is available on our website at www.researchcapital.com. The information contained in this report has been drawn from sources believed to be reliable but its accuracy or completeness is not guaranteed, nor in providing it does Research Capital Corporation assume any responsibility or liability. Research Capital Corporation, its directors, officers and other employees may, from time to time, have positions in the securities mentioned herein. Contents of this report cannot be reproduced in whole or in part without the express permission of Research Capital Corporation. US Institutional Clients – Research Capital USA Inc., a wholly owned subsidiary of Research Capital Corporation, accepts responsibility for the contents of this report subject to the terms and limitations set out above. US firms or institutions receiving this report should effect transactions in securities discussed in the report through Research Capital USA Inc., a Broker – Dealer registered with the Financial Industry Regulatory Authority (FINRA).
Company Specific Disclosures: Within the past 12 months, Research Capital has provided investment banking services to the issuer.