Tethys Oil AB's (TETY:SSE;TETY:STO) Q2/23 financial results showed lower-than-expected production from Blocks 3&4 in Oman, and as a result, Auctus Advisors lowered its target price on the company, reported analyst Stephane Foucaud in an August 8 research note. However, "positive appraisal results" on a different block, 56, "could trigger the development of a new field."
Return Still Attractive
Auctus' new target price on the oil explorer-developer is SEK110, down from SEK120, noted Foucaud. In comparison, Tethys is currently trading at about SEK48 per share.
The difference between these prices implies a significant return for investors of 139%.
Revised Production Estimates
Foucaud reported that the Swedish energy company lowered its full-year 2023 (FY23) production guidance to 9 Mbbl/d from 9–10 Mbbl/d. This came on the heels of lower Q2/23 production from Blocks 3&4 of 8,994 bbl/d net to Tethys, given its working interest in the asset. Flow stabilized at about 9,000 barrels per day (9 Mbbl/d) net to Tethys.
Auctus reduced its estimate of Tethys' share of FY23 production to 9 Mbbl/d, too.
However, production and reserves from Blocks 3 and 4 could be supplemented by any of the Elaf-1, Rahbah-1, or Jari-1 exploration wells should they yield positive results, purported Foucaud.
Looking To Advance Discovery
The highlight of Q2/23, Foucaud pointed out, was the positive results of the extended well tests on Al Jumd in the northwestern corner of Block 56.
Two of the three wells tested produced 34,699 barrels during the quarter, equivalent to about 385 barrels per day (385 bbl/d). However, actual production varied from 150–700 bbl/d.
"Following these results, the company has started looking at commercialization options for the Al Jumd trend," wrote Foucaud. "We currently carry only 1,500,000 barrels for Al Jumd, but the development could be much more material."
Al Jumd could encompass resources from two additional wells, Foucaud indicated. One is an exploration well slated for drilling in H2/23. The second is the Sarha-3 well, testing of which is scheduled to restart "in the coming months."
Ultimately, the Al Jumd area could be greenlighted and start adding production next year.
Other Possible Growth Areas
Tethys is considering at least three other areas for exploration, reported Foucaud.
As for the central area of Block 56, the company will announce further details on the prospective resources there in Q1/24.
This quarter, Q3/23, Tethys will announce prospective resources at Block 58 that were identified via interpretation of the three-dimensional seismic data on South Lahan.
The drilling of the South Fahd prospect, originally slated for Q3/23, has been postponed until Q1/24. This change decreases FY23 capex to US$81–86 million (US$81–86M) from US$85–95M.
| 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 |
Important Disclosures:
- Doresa Banning wrote this article for Streetwise Reports LLC and provides services to Streetwise Reports as an independent contractor.
- The article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. 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.
For additional disclosures, please click here.
Disclosures for Auctus Advisors Inc., Tethys Oil AB, August 8, 2023
Tethys Oil AB (“Tethys” 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. The investment or investment activity to which this communication relates is available only to such persons and other persons to whom this communication may lawfully be made (“relevant persons”) and will be engaged in only with such persons. This Document must not be acted upon or relied upon by persons who are not relevant persons. Without limiting the foregoing, this note may not be distributed to any persons (or groups of persons), to whom such distribution would contravene the UK Financial Services and Markets Act 2000 or would constitute a contravention of the corresponding statute or statutory instrument in any other jurisdiction.
Disclaimer This note has been forwarded to you solely for information purposes only and should not be considered as an offer or solicitation of an offer to sell, buy or subscribe to any securities or any derivative instrument or any other rights pertaining thereto (“financial instruments”). This note is intended for use by professional and business investors only. This note may not be reproduced without the prior written consent of Auctus. The information and opinions expressed in this note have been compiled from sources believed to be reliable but, neither Auctus, nor any of its partners, officers, or employees accept liability from any loss arising from the use hereof or makes any representations as to its accuracy and completeness. Any opinions, forecasts or estimates herein constitute a judgement as at the date of this note. There can be no assurance that future results or events will be consistent with any such opinions, forecasts or estimates. Past performance should not be taken as an indication or guarantee of future performance, and no representation or warranty, express or implied is made regarding future performance. This information is subject to change without notice, its accuracy is not guaranteed, it may be incomplete or condensed and it may not contain all material information concerning the company and its subsidiaries. Auctus is not agreeing to nor is it required to update the opinions, forecasts or estimates contained herein. The value of any securities or financial instruments mentioned in this note can fall as well as rise. Foreign currency denominated securities and financial instruments are subject to fluctuations in exchange rates that may have a positive or adverse effect on the value, price or income of such securities or financial instruments. Certain transactions, including those involving futures, options and other derivative instruments, can give rise to substantial risk and are not suitable for all investors. This note does not have regard to the specific instrument objectives, financial situation and the particular needs of any specific person who may receive this note. Auctus (or its partners, officers or employees) may, to the extent permitted by law, own or have a position in the securities or financial instruments (including derivative instruments or any other rights pertaining thereto) of the Company or any related or other company referred to herein, and may add to or dispose of any such position or may make a market or act as principle in any transaction in such securities or financial instruments. Partners of Auctus may also be directors of the Company or any other of the companies mentioned in this note. Auctus may, from time to time, provide or solicit investment banking or other financial services to, for or from the Company or any other company referred to herein. Auctus (or its partners, officers or employees) may, to the extent permitted by law, act upon or use the information or opinions presented herein, or research or analysis on which they are based prior to the material being published.
Further Disclosures for the United Kingdom This note has been issued by Auctus Advisors LLP, which is authorised and regulated by the Financial Conduct Authority. This note is not for distribution to private customers. This note is not intended for use by, or distribution to, US corporations that do not meet the definition of a major US institutional investor in the United States or for use by any citizen or resident of the United States. This publication is confidential and may not be reproduced in whole or in part or disclosed to another party, without the prior written consent of Auctus. Securities referred to in this note may not be eligible for sale in those jurisdictions where Auctus is not authorised or permitted by local law to do so. In particular, Auctus does not permit the distribution or redistribution of this note to non-professional investors or other persons to whom disclosure would contravene local securities laws. Auctus expressly disclaims and will not be held responsible in any way, for third parties who affect such redistribution. © Auctus Advisors LLP All rights reserved 2023
