Energy Co.'s Announcement Shows It Is Undervalued
Research Report

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Disclosures for Clarus Securities, NG Energy International Corp., January 21, 2025

Clarus Securities Equity Research Disclosures Within the last 24 months, Clarus Securities Inc. has managed or co-managed a public offering of securities of this company. The analyst has visited the company’s operations in Colombia on July 10th and 11th 2024. Due to the nature of the site visit the issuer paid for all costs. General Disclosure The information and opinions in this report were prepared by Clarus Securities Inc. (“Clarus Securities”). Clarus Securities is a wholly-owned subsidiary of Clarus Securities Holdings Ltd. and is an affiliate of such. The reader should assume that Clarus Securities or its affiliate may have a conflict of interest and should not rely solely on this report in evaluating whether or not to buy or sell securities of issuers discussed herein. The opinions, estimates and projections contained in this report are those of Clarus Securities as of the date of this report and are subject to change without notice. Clarus Securities endeavours to ensure that the contents have been compiled or derived from sources that we believe are reliable and contain information and opinions that are accurate and complete. However, Clarus Securities makes no representation or warranty, express or implied, in respect thereof, takes no responsibility for any errors and omissions contained herein and accepts no liability whatsoever for any loss arising from any use of, or reliance on, this report or its contents. Information may be available to Clarus Securities or its affiliate that is not reflected in this report. This report is not to be construed as an offer or solicitation to buy or sell any security. No part of this report may be reproduced or re-distributed without the written consent of Clarus Securities. Conflicts of Interest The research analyst and/or associates who prepared this report are compensated based upon (among other factors) the overall profitability of Clarus Securities and its affiliate, which includes the overall profitability of investment banking and related services. In the normal course of its business, Clarus Securities or its affiliate may provide financial advisory and/or investment banking services for the issuers mentioned in this report in return for remuneration and might seek to become engaged for such services from any of such issuers in this report within the next three months. Clarus Securities or its affiliate may buy from or sell to customers the securities of issuers mentioned in this report on a principal basis. Clarus Securities, its affiliate, and/or their respective officers, directors or employees may from time to time acquire, hold or sell securities discussed herein, or in related securities or in options, futures or other derivative instruments based thereon. Analyst’s Certification Each Clarus Securities research analyst whose name appears on the front page of this research report hereby certifies that (i) the recommendations and opinions expressed in the research report accurately reflect the research analyst’s personal views about the Company and securities that are the subject of this report and all other companies and securities mentioned in this report that are covered by such research analyst and (ii) no part of the research analyst’s compensation was, is, or will be directly or indirectly, related to the specific recommendations or views expressed by such research analyst in this report. Equity Research Ratings Buy: Attractively valued and expected to appreciate significantly from the current price over the next 12-18 months. Speculative Buy: Expected to appreciate significantly from the current price over the next 12-18 months. Financial and/or operational risk is high in the analyst’s view. Accumulate: Attractively valued, but given the current market price, is expected to appreciate moderately over the next 12 -18 months. Hold: Fairly valued and expected to trade in line with the current price over the next 12-18 months. Sell: Overvalued and expected to decline from the current price over the next 12-18 months. Under review: Pending additional review and/or information. No rating presently assigned. Tender: Company subject to an acquisition bid: accept offer. A summary of our research ratings distribution can be found on our website. Dissemination of Research Clarus Securities’ Equity Research is available via our website and is currently distributed in electronic form to our complete distribution list at the same time. Please contact your Clarus institutional sales or trading representative or investment advisor for more information. Institutional clients may also receive our research via THOMSON and REUTERS.

In a January 21, 2025 research note, Clarus Securities analyst Stephen Kammermayer maintained a Buy rating on NG Energy International Corp. (GASX:TSX.V; GASXF:OTC; 56P:FRA) with a CA$3.50 target price, following the announcement of a US$150 million sale of a 40% working interest in its Sinu-9 block. In this report, Kammermayer wrote that this sale "illustrated significant undervaluation" of the company.

The company has agreed to sell the stake to Maurel & Prom (M&P), a Paris-based upstream energy company backed by Indonesia's state oil company Pertamina. The deal includes a US$30 million deposit upon signing and US$120 million payable upon ANH approval in Colombia, expected in 5-7 months. M&P also holds an option to purchase an additional 5% for US$18.7 million.

The sale values the total Sinu-9 block at US$375 million, with NG Energy retaining a 32% stake valued at US$120 million (US$0.47/share or CA$0.68/share). Adding cash value of US$0.59 per share (CA$0.85) brings the total value to CA$1.53 per share for the Sinu-9 stake alone, 31% above the current share price.

Following the sale, the company is estimated to have approximately US$170 million in cash and US$37 million in debt. Additional potential funding from outstanding warrants (US$114.5 million) and options (US$11.8 million) could bring total cash to US$296.3 million.

Production is expected to grow from 2,140 boe/d in 2024 to 8,846 boe/d in 2026, with natural gas representing 99% of production. The company also holds up to 40% working interest in the Tiburon block, estimated to hold 3 Tcf of natural gas, and oil potential in Sinu-9 estimated at up to 20,000 bpd.

The CA$3.50 target price is based on a 4.0x EV/DACF multiple applied to expected run-rate DACF to exit 2026 of US$88.7 million, plus cash value per share.

The share price at the time of the report of CA$1.17 represents a potential return of 199% to Clarus's CA$3.50 target price.