CanAsia Energy Corp. (CEC:TSX.V) increased its stake in Andora Energy to 88.2% from 71.8% by converting two existing loans into Andora shares, reported Research Capital Corp. analyst Bill Newman in a Nov. 22 research note. Given Andora owns the Sawn Lake oil and gas project in Alberta, these transactions boosted CanAsia's percentage ownership of the project's contingent resources by 40,700,000 barrels (MMbbl) or 22.8%.
"Next step is to unlock some of that value by restarting steam-assisted gravity drainage (SAGD) production from the Sawn Lake field, which could be a near-term catalyst for the stock," Newman wrote.
Larger Share of Sawn Lake
Oil and gas explorer-developer CanAsia now owns 218.9 MMbbl of the total 248.2 MMbbl Sawn Lake net contingent resources, reported Newman.
"The after-tax net present value discounted at 15% of the risked best base contingent resource for Andora's interest is $165 million ($165M), which net to CanAsia's equity interest is $146M ($2.92 per share)," Newman indicated.
Transaction Details
CanAsia got a larger stake in Andora and, thereby, a greater share of the Sawn Lake resources when it converted two loan agreements it assumed from Pan Orient Energy in the August 2022 Sawn Lake asset transfer, Newman explained. Recently, CanAsia converted the credit facilities into Andora shares, the $2.5M one at $0.15 per share and the $2.2M one at $0.01 per share.
Now CanAsia owns 88.2% of Andora.
Sawn Lake Development
Restarting SAGD production at Sawn Lake, Newman wrote, would require the facility to be refurnished, the existing well pair to be restarted, and a second SAGD well pair to be drilled.
"This should take production to about 1,235 barrels of oil per day (1.235 Mbbl/d) in 2024," the analyst noted.
Sawn Lake could reach production of 3 Mbbl/d in 2025, Research Capital estimated, with the addition of three SAGD well pairs, added Newman. This would cost about $31M. Later, on this timeline, the project could attain peak production of 20 Mbbl/d in 2036.
Research Capital has a Speculative Buy rating and a CA$0.50 per share target price on CanAsia, which is currently trading at about CA$0.24 per share.
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Disclosures For Research Capital Corp., CanAsia Energy Corp, November 22, 2022
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