Valeura Energy Inc.'s (VLE:TSX; PNWRF:OTCMKTS) oil production in Q3/23 was 19,961 barrels of oil (19.961 Mbbl), reported Auctus Advisors analyst Stephane Foucaud in a quarterly update dated October 9.
"We reiterate our target price of CA$6.40 per share," Foucaud wrote.
Compelling Gain Potential
In comparison, the price of Valeura today is about CA$3.10 per share, noted Foucaud.
The difference between the current and target prices implies a significant return for investors of 106%.
Q2/23 Performance Highlights
Foucaud presented the key takeaways from Valeura's Q3/23 financials.
As for the Canadian company's Q3/23 production of 19.961 Mbbl of oil, the total fell short of Auctus' projection, Foucaud noted, because production at Wassana was on hold during the quarter. Production at Wassana during the previous quarter was 1.6 Mbbl per day (1.6 Mbbl/d).
"The difference to our forecast mostly reflect[s] the timing of drilling," Foucaud wrote.
As for the balance sheet, Valeura ended Q3/23 with US$103.4 million (US$103.4M) in cash after having paid US$29M in petroleum income tax during the quarter.
Valeura generated US$15.7M in free cash flow in Q3/23, "including the late liftings," Foucaud indicated.
Numbers To Rise in Q4/23
Looking to Q4/23, Auctus estimates Valeura will produce about 21 Mbbl/d and, given no cash tax payment is required, about US$85M in cash flow, wrote Foucaud. Both figures reflect a quarter-over-quarter increase.
This amount of cash flow would take the company's cash at year-end 2023 to US$190M.
Royalty Payments To Start
Also, during Q4/23, specifically during the first week of November, Foucaud pointed out Valeura is expected to receive the first royalty from production at Rossukon, an oilfield in Thailand.
After the initial payment of US$5 million (US$5M) by the operator, Valeura will go on to receive an over-riding royalty of 2% on gross Rossukon production. Auctus expects production at the project will amount to 10−12 Mbbl/d to start, then increase to 15−20 Mbbl/d late next year.
"At US$80 per barrel for Brent, this represents additional pretax free cash flow of US$6−12M per year," Foucaud wrote.
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Disclosures for Auctus Advisors, Valeura Energy Inc., October 9, 2023
Valeura Energy inc (“Valeura” 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.
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