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TICKERS: LBE

New Oil Assets Transform Energy Co. Into Producer
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New acquisitions across two assets have helped this energy company reach its stated of goal of becoming a producer, an analyst for Actus Advisors writes.

New acquisitions across two assets from INPEX Idemitsu have helped Longboat Energy Plc (LBE:AIM) to reach a stated of goal of becoming a producer, analyst Stephane Foucaud of Actus Advisors wrote in a July 3 research note.

"The business will now be underpinned by cashflow. As a producer, the standing of the company as a counterparty in Norway is significantly enhanced," Foucaud wrote.

The analyst said the positive impact of the transaction is offset by the strengthening of the pound vs. the U.S. dollar, so its target price of £0.90 remained unchanged.

Details of the Transaction

Longboat Norge (50.1% owned by Longboat) is acquiring about 300 barrels of oil equivalent per day (boe/d) production and 1.55 million boe of proven and probable reserves (about 77% liquid) across two assets (4.8% unitized interest in the Statfjord Øst Unit and a 4.32% unitized interest in the Synga Unit) for US$12.75 million, Foucaud wrote.

Longboat Norge will also pay a deferred, post-tax consideration of US$1.75 million over the next 18 months as a decommissioning security, to be returned when the assets are decommissioned in the late 2030s, the analyst wrote.

The acquisition also triggers a US$4 million contingent cash equity injection into Longboat Norge (US$2 million to Longboat) by JV partner JAPEX, Foucaud noted.

The effective date of the transaction is 1/1/2023. It's expected to complete later this year with a cash payment.

Acquisitions Unlock New Value

While the company has said the transaction could double overall net production to 600 boe/d in 2024, Foucaud wrote that estimate "could be too conservative given that the independent reserves auditor forecasts >800 boe/d net production in 2024 in the 2P reserve case with an upside of ~1.2 mboe/d in the 3P case."

The transaction unlocks trapped tax losses, and based on the company's historical capex program, Foucouad estimated an additional US$5 million of value.

"Overall, the transaction adds ~US$24 mm of NPV to Longboat Norge (US$15.3 mm NPV for the asset as estimated by the CPR + US$5 mm of tax synergies + US$4 mm from additional JAPEX equity) at an acquisition cost of US$12.75 mm," the analyst wrote. "Net to Longboat’s 50.1% stake, this adds ~US$5.5 mm of net value."

Longboat announced in May that it had reached an agreement with Japan Petroleum Exploration Co. Ltd. (JAPEX) to invest in Longboat Norge and form a joint venture. Under the agreement, JAPEX will make a cash investment of up to US$50 million for 49.9% of Longboat Norge. JAPEX is also providing the JV with a US$100 million acquisition financing facility.


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Important Disclosures:

  1. Steve Sobek wrote this article for Streetwise Reports LLC and provides services to Streetwise Reports as an employee.
  2. The article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional. By opening this page, each reader accepts and agrees to Streetwise Reports' terms of use and full legal disclaimer. This article is not a solicitation for investment. Streetwise Reports does not render general or specific investment advice and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company mentioned on Streetwise Reports.

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Disclosures For Auctus Advisors, Longboat Energy Plc., July 3, 2023

Copyright and Risk Warnings Longboat Energy Plc (“Longboat” 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.

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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.

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