Valeura Energy - Re-rate starting?
Valeura Energy is turning into a cash making machine, this has been a great value investment for me so far.
I first became aware of Valeura Energy in September, as it had shown up my daily scans several times as it made new monthly highs and was showing increasing volume. After looking more into the company and the value proposition I decided to take my initial position, I bought my shares at an average cost of $2.83, the stock is currently trading at $3.40 after a large pullback from $4.25 due to the recent weakness in oil prices.
Nonetheless I am still up over 20% in just a couple of months, I see a good opportunity ahead in the coming months for the stock to continue to re-rate as the financials continue to improve and more investors learn about the story, I see this as a position I will be able to hold for the long term as they continue to execute and walk the talk.
Valeura’s primary operations are based offshore in Thailand, it is the second largest producer in the country currently, as it’s producing 20.8 mbbls/d. The company currently has a market cap of $345 million Canadian, it had over $142 million Canadian in net cash balance at the end of Q3.
Some of the key highlights from Q3 Earnings -
-Average realised price of US$87.8/bbl
-Oil sales of 1.7 million bbls, generating revenue of US$149.4 million;
-Opex per barrel of US$34.0/bbl
-Capex of US$36.7 million
-Adjusted EBITDAX of US$67.2 million
-Debt reduced to US$12.9 million at September 30, 2023, and subsequently to nil
The company is now debt free, which as a shareholder I love to see. It's going to be making alot of free cash flow from here on out, even if oil prices take a little bit of hit in the short term, the company should still be able to perform strongly.
The CEO Sean Guest had some interesting comments on growth within the existing asset base “ At the same time, a suite of organic growth opportunities is emerging too. New volumes identified this quarter at our Wassana field are leading to a complete re-imagining of the scale of the field, where we estimate there are at least 20 new development drilling targets. Meanwhile, we prepare for a major growth phase at our Nong Yao field, which is set to have new infrastructure installed in the early part of next year, leading to a planned 50% increase in production from the field”
The company also continues to look for opportunities abroad that fit there criteria, “We are continuing to pursue our growth-oriented strategy on all fronts, while adhering to our strict thresholds for value generation. The mergers and acquisitions market continues to present appealing opportunities and we feel it is prudent to ensure our balance sheet is robust, such that we can transact quickly once opportunities arise”
The company continues to execute on guidance and is on an aggressive growth trajectory all while being relatively unknown, I am confident in management’s ability after looking into what the company has been able to achieve over the last couple years.
As someone who is bullish on oil prices medium to long term, Another thing that I really like about Valeura is that they don’t have any hedging arrangements in place currently. I have seen some investor’s call the company a call option on oil. They actually sold oil for a slight premium to the Brent Price in Q3. You can see the how the financials get really bullish if we get higher oil prices.
Valeura’s average realised price for crude oil sales was US$87.8/bbl in Q3 2023, reflecting an average premium to the Brent crude oil benchmark of approximately US$1.3/bbl. While actual realised prices vary on a field-by-field basis, reflecting each field’s unique crude oil characteristics and market demand, average prices across Valeura’s portfolio are expected to continue to approximate the Brent crude oil benchmark. The Company currently has no hedging arrangements in place in respect of its crude oil sales.
The company recently announced a new institutional investor which is a Thai Investment Holding Company, they have taken over a 10% stake in the company and have been buying in the open market like crazy the last couple weeks. Accumulating almost 2 million shares since Nov.09. This is the kind of shareholder one likes to see, as they are showing they are big believers in the company and will have strong hands moving forward.
With the company now being debt free and with increased production at the Wassana oilfield in Q4, we can expect the companies cash position to grow significantly this quarter, likely in the near future we can expect significant shareholder returns or a significant acquisition which the company has said they are looking for. This looks like a nice way to play the energy bull market.
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This play is working out well. 🙏🏻