Criterium Energy (TSX-V: CEQ) Auctus Advisors analyst note:
On Track
- The work-over programme has started with the first two work-overs having added a total of ~40 bbl/d. The third work-over was not completed as damaged equipment was encountered downhole.
- The second tranche of work-overs will start in May. Overall, 12-15 work-overs will be undertaken during 2024, at a pace of 2-3 workovers per month, potentially adding a total of 240-300 boe/d.
- The drilling of new wells is expected to start in 3Q24 at a cost of US$1.8 mm per new well. 10 infill development and infill drilling locations have been high-graded. Each well could add 75-200 bbl/d with a payback of 4-6 months.
- Importantly, the sale of Bulu continues to make progress. Completing the divestment of this asset would be a rerating event as it would add US$7.75 mm in cash to Criterium’s balance. This is more than the current market cap of the company. This could also allow the company to accelerate the drilling programme. Repaying an additional US$5.5 mm of debt could also trigger a US$3.8 mm debt write down.
- Production continues to be expected to reach 1.0-1.5 mboe/d by YE24. In addition, the development of the gas could add a further 1.0-1.5 mboe/d from 2025 or 2026. We reiterate our Target Price of C$0.30/sh in line with our ReNAV.
Valuation and cashflow
We continue to attribute a 50% probability to the divestment of Bulu. Completing the transaction would add ~C$0.05 per share to our ReNAV (including the US$3.8 mm write-down but excluding the benefits to accelerate the development programme). Our Core NAV is C$0.22/sh with a ReNAV of C$0.33/sh. It incorporates a lower share count (minus 5 mm shares as a result of a correction in the number of shares being issued to one of the lenders). Once oil production has reached ~2.2 mbbl/d (plus 8 mmcf/d of gas) in 2027, we forecast recurrent free cash flow of ~US$20 mm per year at US$70/bbl.
You can read / download the full note for Criterium Energy below:
