Panoro Energy ASA's (PEN:OSE; 1PZ:FRA) net production in the Southern Gabon basin in Q2/23 met expectations and is expected to keep growing, reported Auctus Advisors analyst Stephane Foucaud in an Aug. 3 research note.
Compelling return on investment
Auctus reiterated its target price of NOK50 per share on the Norway-based energy company, currently trading at about NOK29.80 per share, Foucaud noted.
The return to target from the current price is an attractive 64%.
Gabon gets boost
The highlight of Panoro's Q2/23 production was Gabon, wrote Foucaud. The company's working interest share of Q2/23 Gabon production was 2,660 barrels per day (2.66 Mbbl/d) and was in line with expectations. The third Hibiscus Ruche well that Panoro put online during the quarter bumped working interest production up to 5.2 Mbbl/d. Gross production during Q2/23 was 30 Mbbl/d.
"Overall corporate working interest production has already reached levels of up to 11,000 barrels of oil equivalent per day (11 Mboe/d)," Foucaud reported. This encompassed production from Gabon, Equatorial Guinea and Tunisia.
FY23 guidance updated
Average Q2/23 working interest production, however, was a miss, coming in at 8.093 Mboe/d versus Auctus' forecast of 9.055 Mboe/d.
Given this underperformance and the delayed restart of the oil and gas lift compressor at the Gabon oilfield, Panoro narrowed its full-year 2023 production guidance range to 9.5–10.5 Mboe/d from 9.5–11.5 Mboe/d.
Forecasts for Equatorial Guinea
Panoro experienced some "uptime issues" at its Equatorial Guinea asset during Q2/23, Foucaud reported. Consequently, Auctus reduced its working interest production estimate for the next two quarters, H2/23, by 1 Mbbl/d. It is now 3.8 Mbbl/d.
One well is expected to come online there in mid-Q1/24 followed by two more in Q2/24, all at Akeng Deep.
"When three new wells are onstream, we forecast about 5.4 Mbbl/d working interest production from H2/24 (38 Mbbl/d gross)," Foucaud wrote.
Heavy on exploration
Looking to next year, Foucaud pointed out, Panoro's work plan for it will likely be exploration heavy given that phase one development at Hibiscus Ruche in Gabon is nearly done.
Along with the trio in Equatorial Guinea, Panoro is expected to drill one to two exploration wells in Gabon.
More growth anticipated
At the end of the campaign, Foucaud purported, with six Hibiscus Ruche wells online (only three are on production now), the company will be "on track to reach [a] gross production plateau of about 40 Mbbl/d (7 Mbbl/d net to Panoro working interest) in Gabon and overall working interest corporate production of 13 Mbbl/d."
Cash flow expectations
Auctus forecasts Panoro could generate US$200 million (US$200M) in aggregate free cash flow in H2/23 and in 2024, assuming it does not spend any capital on exploration and assuming a Brent oil price at US$85 per barrel, noted Foucaud. This amount, US$200M, represents more than 50% of the explorer-developer's current market cap.
Assuming capex in 2024 is about the amount spent in 2023, resulting free cash flow for Panoro will be about US$160M.
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