Oil & Gas Co. To Expand Its Portfolio of Assets

December 30, 2022

The transformational acquisition of interests in various oilfield-holding licenses is expected to generate “substantial free cash flow,” noted a Research Capital Corp. report.

Valeura Energy Inc. (VLE:TSX; PNWRF:OTCMKTS) will acquire offshore oil assets in the Gulf of Thailand, “a transformational action that provides a huge boost to cash flow,” reported Research Capital Corp. analyst Bill Newman in a Dec. 6 research note.

To reflect the deal, Research Capital increased its target price on the Canadian oil and gas company to CA$8.25 per share from CA$1.45, its current share price. From here, the target represents a possible 469% return for investors.

“We expect the assets will generate substantial free cash flow to fund development and appraisal projects to extend the life of the reserves, help to fund the company’s other Thailand assets, and provide capital for additional acquisitions,” wrote Newman.

Research Capital Corp. maintains its Speculative Buy rating on Valeura.
Free Reports:
Sign Up for Our Stock Market Newsletter – Get updated on News, Charts & Rankings of Public Companies when you join our Stocks Newsletter

Get our Weekly Commitment of Traders Reports - See where the biggest traders (Hedge Funds and Commercial Hedgers) are positioned in the futures markets on a weekly basis.

Valeura’s management team forecasts 2023 pretax annual cash flow of US$360 million (US$360M) from the new assets, Newman noted; Research Capital estimates funds flow forecast next year to be US$206M.

The three assets Valeura is to acquire, relayed Newman, are:

an operated 100% interest in the B5/27 license holding the Jasmine and Ban Yen oilfields
an operated 90% working interest in the G11/48 license holding the Nong Yao oilfield
a 70% interest in the G1/48 license holding the Manora oilfield

Newman noted these concessions have a current combined net oil production of about 21,200 barrels per day.

“The oilfields are midlife to mature assets but with additional development opportunities that can significantly extend the life,” he added.

For the acquisition, Valeura will pay US$10.4M in cash plus a possible maximum contingent payment of US$50M, due only if oil prices are high. Specifically, this payment is based on average oil prices in 2022, 2023, and 2024 and kicks in when the Dubai benchmark average exceeds US$100 per barrel. The Calgary, Alberta-based company will make the purchase through Valeura Energy Asia Pte. Ltd., a subsidiary and special purpose vehicle.

“In our conservative scenario, which includes the max contingent payment and our estimated discounted decommission costs of US$168.4M, the transaction metrics remain compelling at US$9.47 per barrel and $10,774 per flowing barrel,” Newman highlighted.

Research Capital Corp. maintains its Speculative Buy rating on Valeura.

Disclosures:
1) Doresa Banning wrote this article for Streetwise Reports LLC and provides services to Streetwise Reports as an independent contractor. She or members of her household own securities of the following companies mentioned in the article: None. She or members of her household are paid by the following companies mentioned in this article: None.

2) The following companies mentioned in this article are billboard sponsors of Streetwise Reports: None. Click here for important disclosures about sponsor fees. The information provided above is for informational purposes only and is not a recommendation to buy or sell any security.

3) Statements and opinions expressed are the opinions of the author and not of Streetwise Reports or its officers. The author is wholly responsible for the validity of the statements. The author was not paid by Streetwise Reports for this article. Streetwise Reports was not paid by the author to publish or syndicate this article. Streetwise Reports requires contributing authors to disclose any shareholdings in, or economic relationships with, companies that they write about. Streetwise Reports relies upon the authors to accurately provide this information and Streetwise Reports has no means of verifying its accuracy.

4) This 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.

5) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned. Directors, officers, employees or members of their immediate families are prohibited from making purchases and/or sales of those securities in the open market or otherwise from the time of the decision to publish an article until three business days after the publication of the article. The foregoing prohibition does not apply to articles that in substance only restate previously published company releases.

Disclosures For Research Capital Corp., Valeura Energy Inc.

Analyst Certification: I, Bill Newman, CFA, certify the views expressed in this report were formed by my review of relevant company data and industry investigation, and accurately reflect my opinion about the investment merits of the securities mentioned in the report. I also certify that my compensation is not related to specific recommendations or views expressed in this report. Research Capital Corporation publishes research and investment recommendations for the use of its clients. Information regarding our categories of recommendations, quarterly summaries of the percentage of our recommendations which fall into each category and our policies regarding the release of our research reports is available at www.researchcapital.com or may be requested by contacting the analyst. Each analyst of Research Capital Corporation whose name appears in this report hereby certifies that (i) the recommendations and opinions expressed in this research report accurately reflect the analyst’s personal views and (ii) no part of the research analyst’s compensation was or will be directly or indirectly related to the specific conclusions or recommendations expressed in this research report.

General Disclosures: The opinions, estimates and projections contained in all Research Reports published by Research Capital Corporation (“RCC”) are those of RCC as of the date of publication and are subject to change without notice. RCC makes every effort to ensure that the contents have been compiled or derived from sources believed to be reliable and that contain information and opinions that are accurate and complete; RCC makes no representation or warranty, express or implied, in respect thereof, takes no responsibility for any errors and omissions which may be contained therein and accepts no liability whatsoever for any loss arising from any use of or reliance on its Research Reports or its contents. Information may be available to RCC that is not contained therein. Research Reports disseminated by RCC are not a solicitation to buy or sell. All securities not available in all jurisdictions.

Potential Conflicts of Interest: All Research Capital Corporation (“RCC”) Analysts are compensated based in part on the overall revenues of RCC, a portion of which are generated by investment banking activities. RCC may have had, or seek to have, an investment banking relationship with companies mentioned in this report. RCC and/or its officers, directors and employees may from time to time acquire, hold or sell securities mentioned in our Research Reports as principal or agent. RCC makes every effort possible to avoid conflicts of interest, however readers should assume that a conflict might exist, and therefore not rely solely on this report when evaluating whether or not to buy or sell the securities of subject companies.

RCC USA: Information about Research Capital Corporation’s Rating System, the distribution of our research to clients and the percentage of recommendations which are in each of our rating categories is available on our website at www.researchcapital.ca. The information contained in this report has been drawn from sources believed to be reliable but its accuracy or completeness is not guaranteed, nor in providing it does Research Capital Corporation assume any responsibility or liability. Research Capital Corporation, its directors, officers and other employees may, from time to time, have positions in the securities mentioned herein. Contents of this report cannot be reproduced in whole or in part without the express permission of Research Capital Corporation. US Institutional Clients – Research Capital USA Inc., a wholly owned subsidiary of Research Capital Corporation, accepts responsibility for the contents of this report subject to the terms and limitations set out above. US firms or institutions receiving this report should effect transactions in securities discussed in the report through Research Capital USA Inc., a Broker – Dealer registered with the Financial Industry Regulatory Authority (FINRA).

Latest Financial Markets News:

InvestMacro

Oil & Gas Co. To Expand Its Portfolio of Assets