Panoro Energy ASA (PEN:OSE; 1PZ:FRA) is expected to close on a deal to acquire an additional 40% minority interest, it does not currently own, of its Tunisia Production Sharing contract that governs the partnership between Panoro and its joint venture partners in Tunisia.
This purchase will increase Panoro's interest in the venture to 49% while raising its stake in the Sfax Offshore Exploration Permit (SOEP) to 87.5%. This transaction will add 2.96M barrels of net 2P oil reserves and 800-900 barrels of oil to the company's daily net production, raising Ponoro's daily production level to over 10,000 barrels per day in 2023.
Stephane Foucaud of Auctus Advisors stated in a research report released on April 18, 2023, that Auctus is raising its target price for the company due to the news. "We are increasing our target price from NOK48 per share to NOK50 per share as we incorporate the impact of the acquisition. The shares continue to offer a combination of value, growth, and dividend distribution," Foucaud wrote, noting the valuation in the Norwegian Kroner.
Review of Results
Foucaud presented the key points of Panoro's latest reports.
Panoro will be paying an upfront cost of US$13.2M for the acquisition, including US$8.3M in company shares. These shares will be subject to lock-up periods, with half being locked up for six months after the issue date and the remaining half locked up for 12 months after the issue date. The company will also be paying an additional US$5M by the end of 2023.
Panoro will be taking on some debt in this deal, around US$4M in loan debt, but is expected to easily clear this amount by the end of Q4 2023 due to the assets it will gain.
Foucaud writes that "We now forecast that Panoro will generate ~US$250 mm free cash flow in aggregate over 2023-2024" if the Brent oil prices remain at US$85/bbl throughout the year. Even if the prices drop, he notes, the company can still expect to clear over US$210M.
Potential Risks
Acutus has not reported any potential risks with this merger and considers the stock to be a generally good investment.
Structure and Predictions
Foucaud's research report shares recent target price information as well as current market data on the company:
- Price Target: NOK$50
- Market Cap: US$333 million
Panoro has 115 million fully diluted shares outstanding. The company's cash reserves are CA$2.5 million.
Thor Explorations has 641.9 million basic shares outstanding and 669.5 million fully diluted shares outstanding. The company's cash reserves are CA$2.5 million. By the end of Q1 2023, the company had reduced its debt outstanding to CA$27.9 million.
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Disclosures for Auctus Advisors, Panoro Energy ASA, April 18, 2023
Panoro Energy ASA (“Panoro” or the “Company”) is a corporate client of Auctus Advisors LLP (“Auctus”). Auctus receives, and has received in the past 12 months, compensation for providing corporate broking and/or investment banking services to the Company, including the publication and dissemination of marketing material from time to time. MiFID II Disclosures This document, being paid for by a corporate issuer, is believed by Auctus to be an ‘acceptable minor non-monetary benefit’ as set out in Article 12 (3) of the Commission Delegated Act C(2016) 2031 which is part of UK law by virtue of the European Union (Withdrawal) Act 2018. It is produced solely in support of our corporate broking and corporate finance business. Auctus does not offer a secondary execution service in the UK. This note is a marketing communication and NOT independent research. As such, it has not been prepared in accordance with legal requirements designed to promote the independence of investment research and this note is NOT subject to the prohibition on dealing ahead of the dissemination of investment research. Author The research analyst who prepared this research report was Stephane Foucaud, a partner of Auctus. Not an offer to buy or sell Under no circumstances is this note to be construed to be an offer to buy or sell or deal in any security and/or derivative instruments. It is not an initiation or an inducement to engage in investment activity under section 21 of the Financial Services and Markets Act 2000. Note prepared in good faith and in reliance on publicly available information Comments made in this note have been arrived at in good faith and are based, at least in part, on current public information that Auctus considers reliable, but which it does not represent to be accurate or complete, and it should not be relied on as such. The information, opinions, forecasts and estimates contained in this document are current as of the date of this document and are subject to change without prior notification. No representation or warranty either actual or implied is made as to the accuracy, precision, completeness or correctness of the statements, opinions and judgements contained in this document. Auctus’ and related interests The persons who produced this note may be partners, employees and/or associates of Auctus.
Auctus and/or its employees and/or partners and associates may or may not hold shares, warrants, options, other derivative instruments or other financial interests in the Company and reserve the right to acquire, hold or dispose of such positions in the future and without prior notification to the Company or any other person. Information purposes only This document is intended to be for background information purposes only and should be treated as such. This note is furnished on the basis and understanding that Auctus is under no responsibility or liability whatsoever in respect thereof, whether to the Company or any other person. Investment Risk Warning The value of any potential investment made in relation to companies mentioned in this document may rise or fall and sums realised may be less than those originally invested. Any reference to past performance should not be construed as being a guide to future performance. Investment in small companies, and especially upstream oil & gas companies, carries a high degree of risk and investment in the companies or commodities mentioned in this document may be affected by related currency variations. Changes in the pricing of related currencies and or commodities mentioned in this document may have an adverse effect on the value, price or income of the investment. Distribution This document is directed at persons having professional experience in matters relating to investments to whom Article 19 of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 ("FPO") applies, or high net worth organisations to whom Article 49 of the FPO applies.
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