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The JAPEX investment significantly
strengthens Longboat’s funding position, allowing the Company to
actively pursue near-term development and production M&A
opportunities from a position of strength and without shareholder
dilution.
The facility will be available for drawing for the first three years and will
attract a market rate of interest on an increasing scale over its tenor with an initial
rate of 6% in the first year and an all-in-cost over the term of less than 10%. We
believe the acquisition financing facility has been structured in such a way that the
JV can bring in additional third party debt. Using the leverage generated by the
facility, the JV will be able to unlock significantly more financing capacity, and
therefore pursue much larger deals with meaningful growth.
Longboat and a new licence group have been granted an extended
work period for licence PL1049, which has been stratigraphically
split and renamed PL1049S. Longboat Norge holds 40% in PL1094S
where the main objective is to pursue the Tertiary play, which has
been proven to be successful in the surrounding area including
Longboat’s Kveikje discovery. Two prospects, Jasmine (10-
30mmboe) and Sjøkreps (20-300mmboe) have been mapped in
PL1049S. An existing, high quality seismic dataset together with
Longboat’s substantial in-house expertise, will allow Longboat and
its partners to de-risk the prospectivity in a prolific part of the
Norwegian North Sea.
Retention of Licence with Significant Potential – Longboat Norge has announced
that a new licence group and an extended work period has been granted for PL1049,
which has been stratigraphically split and renamed PL1049S. The main objective is
to pursue the Tertiary play, which has been proven to be successful in the area
including the Kveikje discovery. The area is covered with new modern high quality
seismic data and combined with new processing techniques, there is significant
potential to de-risk the exploration prospects.
Increased Working Interest, Successful Partnership – Longboat initially held a 25%
working interest in PL1049, where the deep Cambozola prospect was drilled in 2022.
As part of the PL1049S joint venture Longboat holds a 40% working interest
alongside DNO Norge AS (40%, operator) and Petoro (20%). Notably, DNO has
experienced significant success in recent years in close proximity to PL1049S. In
March 2023, DNO announced the Heisenberg discovery, its fifth consecutive
discovery in the Troll-Gjøa area, which includes the Røver Nord and Sør discoveries
and the Kveikje discovery.
Material Prospectivity – Two prospects, Jasmine and Sjøkreps have been mapped
on PL1049S, both targeting Tertiary plays.
Sjøkreps is a fault-bounded three-way dip closure at Palaeocene level and has
primarily estimated recoverable volumes ranging between 20-300mmboe (P90-P10)
with the main risk being quality of reservoir. The Jasmine prospect is an injectite
target at Eocene level, which is analogous to the Kveikje discovery, and has
recoverable volume range preliminary estimated between 10-30mmboe (P90-P10)
with the main risk being reservoir quality.
Low Cost Work Programme – The work programme consists of seismic studies,
potential seismic reprocessing and integration of results from ongoing near-term
wells targeting the same interval in the area, which combined have the potential to
significantly improve the chances of success ahead of a drill decision. The drilling
decision has to be made by February 2025.
The company has USD35m of maturities in 2023, USD372m in 2024 and USD220m in 2025. Kazakh on its own TP 300p. JPM 1st March had a TP of 1400p. Black rock and others adding. Black rock at 12.05%.
Re 300p
Valuation methodology: We value Polymetal on a blend of NAV and 12-month forward EV/EBITDA. We ascribe a 1x P/NAV multiple for the company’s Kazakh assets and nothing for the Russian assets at present. We reach a price target of GBp300 and maintain a Hold recommendation.
Re 1400p
Investment Thesis
H2’20 YoY (%)
1,730 -7%
1,070 -25%
62% -12%
0.89 -42%
897 -7% 341 14% 556 -19%
1,351 22%
0.8x 40%
H1'21 HoH (%)
1,274 27%
660 22%
52% -2%
0.45 16%
358 134% 375 4% -17 n.m. 1,827 -10% 1.1x 7%
H2'21A
H2'21E
vs JPMe
Cons*
A/ C
1,616
804
50%
0.52
837 389 448
1,647
1.1x
1,617
823
51%
0.54
780 387 392
1,647
1.1x
0%
-2%
-1%
-3%
7%
0%
14%
0%
1%
1,634
826
51%
-1%
-3%
-1%
Management has recently embarked on asset portfolio optimization, gradually disposing of smaller and higher costs assets and re-focusing on larger scale, longer dated and lower cost assets. Having successfully delivered Kyzyl (2018) and Nezhda (2021) mines into operation, development of Veduga and Prognoz greenfields and POX-2 construction should help drive group gold equivalent production further to ~1.9Moz GE by 2026 vs ~1.7Moz (2021). Polymetal's relatively higher operating leverage vs peers (mainly Polyus) offers more exposure to gold and silver prices. Updated dividend policy provides greater payments transparency and upside to shareholder returns in favorable market conditions. Polymetal's valuation premium vs peers has narrowed recently and valuation multiples screen as attractive, in our view. We thus rate Polymetal OW.
Valuation
Our Dec-23 PT is calculated as the equal weighting of: 1) 1.4x NPV under JPM base case metals prices & FX forecasts and 2) 6.5x 2023E EV/EBITDA. Our NPV calculation applies a WACC of 9.5%
TP 120p
mmary
The Egyptian Vulture discovery is an exciting result that, in our view, could have already de-risked commercial quantities of oil, and with further appraisal could still unlock volumes in excess of 100 million barrels. This is the second discovery in the first two wells and provides improved underpinning of our valuation through discovered barrels. Reiterate Buy.
Oil Discovery at Egyptian Vulture. Longboat has announced that the Egyptian Vulture well in the Norwegian Sea encountered light oil in the primary target in the Lower Cretaceous (Cenomanian) Intra-Lange Formation. The top of the reservoir was reached close to prognosis with 13 metres net sand in a 37 metre oil filled gross interval.
-- An extensive programme of data acquisition and sampling has been carried out with (5.5) preliminary analysis indicating a very light oil discovery. The oil-water contact was not
encountered.
Conservative Recovery Factor Assumptions. The operator’s preliminary estimate of the size of the discovery is 19-63 mmboe gross based on an oil-in-place volume of 220-440 mmboe gross (Rf 9-14%). Further appraisal will be required to understand the flow potential of the reservoir and, we believe, could ultimately increase recoverable volumes towards (or even over) 100 mmboe.
Financial Liquidity Maintained. The well was drilled ahead of time and budget. The net cost to longboat had been estimated at ~$5 million (~$1.1 million post-tax). The discovery is 20 km from the Åsgard field and 23 km from the Kristin field, both of which are also operated by Equinor and which offer development options.
Valuation. Prior to drilling, we carried 96 mmboe gross for Egyptian Vulture, which we valued at 17p/sh risked (68p/sh unrisked). Assuming higher liquids content plus some de-risking we estimate ~40 mmboe (mid-case) could be worth ~20-40p/sh (~$5/boe). We expect an appriasal programme to attempt to de-risk some of the uncertainties around the upside case, which could in theory be worth well in excess of the 68p/sh that we had modelled.
https://www.dropbox.com/s/k9gztf4ld2fnhii/B19B1E9A-D1DD-4432-BAC9-C2D9B3D4BAD0.png?dl=0
They haven’t; these guys have 10% across multiple portfolios as of January.
https://www.marlboroughfunds.com/funds/Marlborough%20Fund%20Managers/
Articles of association form a document that specifies the regulations for a company's operations and defines the company's purpose. The document lays out how tasks are to be accomplished within the organization, including the process for appointing directors and the handling of financial records.
I think July contracts ended today.
:-) You know what I meant. They’d still be a gap. Any way, moving in the right direction.