Update: Valeura Energy, Metro Mining, Illumin and Ensign Energy Services

HUGE update

Disclaimer: I’m not an investment advisor. Nothing I have written in this article should be taken as investment advice. Everything I have written here could be inaccurate. Trust nothing you just read. I’m part of the Seeking Alpha Affiliate program which means I have a financial relationship with Seeking Alpha.

4 companies BIG update. I have written about each of these companies and it’s time to do an update. I like how these investments theses are developing. The stocks are doing fine in terms of price action, but I think each one is going higher based on some of the things I will be covering in this article.

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Valeura Energy

Let’s see what’s going on with my favorite. Valeura gets to go first because it’s my favorite.

Source: Google

Valeura should be up way more because we finally got the tax restructuring. Which was one of the big catalysts I talked about in my original write-up.

Valeura had a lot of tax loss carry-forwards, but they were only being used for 20% of their production meaning the benefit was being realized slowly. Money now is more valuable than money in the future so the faster they can utilize those tax losses the more value the market will attribute to them.

Source: ceo.ca

I had the amount for tax losses wrong in my write-up, but I don’t mind because the real number is higher. I got the number 275m USD from somewhere. According to this PR, they have 397m USD of tax losses as of September 30th.

Note that Jasmine field is excluded from this arrangement which is around 30% of the production. But going from 20% to 70% of production being able to take advantage of these tax losses is a huge benefit because Thailand has a 50% tax rate on profits for oil companies.

These percentages of production are rough numbers.

Let’s do some math. I’ll use this year’s cost guidance higher range because we have higher production now and current oil production and current oil price to count the next 12 months with these tax benefits

73,8$(current brent)*26 000*365=700 362 000

“Royalties for Thai I licences are a flat 12.5%, and for Thai III licences are a sliding scale between 5% and 15% based on sales volumes” I did not find more details so let’s say royalties 10%=70 036 200

opex=235m

Capex=155m

SG&A=30m

Exploration=8m

Pre-tax profit=202 329 800 USD

70% of it has no taxes=141 630 860 USD

30% has 50% tax=60 698 940*0,5=30 349 470 USD

171 980 330m USD After-tax profit rough estimate for the next 12 months using the current Brent oil price and they would have 194 670 200 USD of tax losses left after this. So basically another year.

This is how I understand it would work, but no promises and they have not given all the details yet.

This company has a 406m USD market cap and 250m USD EV. (156m cash and no debt according to Q3 operations update) EV to after-tax profit based on that calculation=1,45

Also, the Nong Yao C production increase was another catalyst that was achieved.

Source: https://ceo.ca/@accesswire/valeura-energy-inc-announces-nong-yao-c-production

Source:https://ceo.ca/@accesswire/valeura-energy-inc-announces-q3-2024-operations-and

This is from my original write-up Link to the Original write-up

So they have achieved both of these catalysts Nong Yao and Tax thing. The one factor that is out of their control is the oil price which has gone down from 90$ Brent to 73,8$.

The stock performance is +48,4% from when I first bought, +29,7% from my cost basis, and -4,45% from my original write-up. The last one only reason for it is the oil price, but as I went over in my calculation the cash flow is very strong even at the current oil price.

The other 2 catalysts for Valeura are reserve replacement and capital allocation. Reserve replacement results will come out early next year. I’m expecting strong results like last time. And capital allocation is the 1 catalyst we are still waiting for as Valeura has been hoarding cash.

They are obviously working on an acquisition which is their speciality. They did the best acquisition I have ever seen. This was the Mumbadaalalalala acquisition. The Kris acquisition was very good as well. They got those tax losses from the Kris acquisition and are applying them now to Mumbadala fields. Very nice synergy there. Usually, I don’t want the companies I invest in to do acquisitions, because so many times they are not good or they take a long time to pay off, but with Valuera I want them to do acquisitions because of their track record.

From their new presentation, we can get some ideas for what they are planning on that side.

Source: https://www.valeuraenergy.com/wp-content/uploads/2024/10/2024-10-corporate-update-VF.pdf

They are showing all the fields and different operators in the region. Then later they say this when they are talking about the oil and gas sector in Thailand.

“Reduced # of operators ▪ Major companies exiting due to materiality ▪ Very few operators of Valeura’s scale and capability ▪ Governments seeking proven operators Shallower buyer pool ▪ Diminishing pool of credible buyers ▪ Difficult to raise capital for new entrants ▪ Competitive pricing and unique structures possible”

Major companies exiting. From the companies shown in the picture, Only oil major is Chevron. Mecdo(Indonesian company) and PTTEP(Thai national oil company) are pretty big as well revenue in billions so it could be one of those as well.

I would guess it’s Chevron becau😴😴😴

They also mention the usual methods for returning capital

“▪ Potential shareholder returns - Capacity for share buybacks in the short to mid terms - Future growth will support sustainable dividend”

I guess these are 2nd to acquisitions when it comes to management preference. If they can’t get anything done on the acquisition front they will do buybacks and dividends. This has also been my impression from their other presentations and earnings calls. They think of growth as a priority.

Source: https://www.valeuraenergy.com/wp-content/uploads/2024/10/2024-10-corporate-update-VF.pdf

This is our new timeline. A lot of organic growth plans. I’m optimistic about those based on their track record with these assets. They mention maintaining production at the current assets until 2030’s.

“Capital / Organic Investment ▪ Capex: Maintain production 20 mbbl/d to 25 mbbl/d into the 2030’s(1) ▪ Expex: Selectively target organic resource growth”

The whole Valeura bear thesis has been their lack of reserves, but they have shown and are showing that if you invest in these assets there is still a lot left. Now they are saying they will maintain 20-25k BPD into the 2030’s which is a huge statement.

I wonder if they will be able to get the production from these assets above 30k BPD before 2030’s. The amount of organic growth initiatives they are doing makes me think that is their goal.

Source: https://www.valeuraenergy.com/wp-content/uploads/2024/10/2024-10-corporate-update-VF.pdf

Another valuation reminder at the end. The sector is cheap and Valeura is the cheapest one in the cheap sector.

update to the update

The next day after this article was released Valeura finally announced a stock buyback

Source: https://ceo.ca/@accesswire/valeura-implements-share-buyback-programme

10% of the float is easy for them to do. I think this is about keeping the shareholders happy while they work on their acquisition. Regardless, this is a very positive development.

This was around 1/5 of this article. The next 4/5 is for the paid subs which includes the Metro Mining, Ensign Energy Services, and Illumin updates. Going over what is happening with the companies and the sectors they are in Bauxite, Adtech, and O&G drilling. Speculating what the US election result could mean for Ensign. All of these companies have posted Q3 results which I’m also covering in this post.

Here are links to my original write-ups: Metro, Ensign video, Illumin, Valeura