Valeura Energy Inc. (TSX:VLE), the upstream oil and gas company with assets in the Gulf of Thailand and the Thrace Basin of Turkey, has provided a trading update for Q2 2023.
During Q2 2023 the Company’s net working interest production from its four producing assets averaged 22,097 bbls/d of crude oil. Production increased 8% relative to Q1 2023.
Valeura drilled eight wells, on its Jasmine, Nong Yao, and Manora oil fields in Q2 – all were successful. Drilling operations at the Manora oil field are currently in the final stages of a three-well programme. Upon completion the Company intends to bring the three new Manora wells on stream as producers and thereafter to mobilise the drilling rig to the Wassana oil field. Further to the Company’s July 6, 2023 announcement of a temporary suspension in Wassana production operations, for clarity, Valeura intends to proceed with the Wassana infill drilling programme as planned. Drilling operations were executed safely throughout the quarter, with no recorded deviations from Valeura’s safe operating practices.
During Q2 2023, in addition to routine operating costs and capital expenditures, the Company paid taxes(1) of US$178.1 million in respect of the previous owner’s 2022 operations, as planned, paid down US$18.5 million of its debt facility, and completed the acquisition of the Wassana oil field’s mobile offshore production unit, Ingenium, by way of a final consideration payment of US$5.0 million. As of June 30, 2023 Valeura had US$121.6 million in cash(2) and debt of US$30.7 million.
(1) Petroleum income tax and special remuneratory benefit
(2) Cash and cash equivalent plus restricted cash
Valeura intends to announce its Q2 2023 financial and operating results during the second week of August 2023. Specific timing and webcast details will be confirmed in due course.
Sean Guest, Valeura Energy President and CEO commented:
“I am very pleased with our performance during the first full quarter under Valeura’s operatorship. Integration of the businesses we have acquired is progressing well, and our expanded team is continuing to demonstrate a world-class performance, delivering oil production averaging over 22 thousand bbls/d and remaining committed to our principles of safe operations.
The impact of our operations during the quarter underscores the magnitude of how much we have changed the character of Valeura as an investment. We are generating cash, self-funding growth via re-investment into our portfolio, and strengthening our balance sheet at the same time.”
Auctus Advisors highlighted the following points in its latest note on the company:
- 2Q23 production was 22,097 bbl/d, near our forecast of 22.8 mbbl/d.
- Drilling operations at the Manora oil field are currently in the final stages of a three-well programme. The rig will then move to the Wassana field later this month.
- Valeura has paid US$178.1 mm in tax during 2Q23 in line with the our expectations. This amount reflects tax due on 2022 profit in Thailand. A further US$25-30 mm is due to be paid in August.
- Following the tax payment, Valeura held US$121.6 mm in cash and US$30.7 mm of debt at the end of June. We also anticipate that the company is carrying an important non-cash working capital surplus.
- With the large 2022 tax payment now made, we anticipate Valeura’s cash will start to build up. At US$78/bbl over 2H23 and 2024, we forecast that the company could hold >US$160 mm in net cash at YE23 (slightly above the current market cap) increasing to ~US$360 mm at YE24 (~2.5x the current market cap).
- Pending the publication of the 2Q23 financial results, our target price (close to our ReNAV) is unchanged. We continue to believe that the confirmation that the ~US$300 mm of tax losses associated with Wassana could be applied to the other fields could be a rerating event. It would materially offset the tax bill due in relation to profits made in 2023.
