Panoro Energy (OTC:PESAF, OSL:PEN) is in many ways a normal oil and gas company – yet it has a few distinctive angles.
The fact that it is registered and listed in the North Sea heartland of Norway yet operates wholly in Africa, is one.
Investors who appreciate diversity will welcome the fact that it spreads risk by sourcing production from three different countries.
Most strikingly for investors though is that Panoro has just started drilling six new wells in Gabon designed to lead to a 50% step-up in production when they are all on stream, against a macroeconomic backdrop where oil and gas prices are far from weak.
More on that shortly.
And before zooming out for an overview of the current snapshot of a company, it's worth noting that a new shareholder returns policy was recently adopted that will see Panoro declare its maiden cash dividend at its full-year results in February.
Today, the company is producing an average of 7,700 barrels of oil per day (bopd) and made a net profit of US$35.4mln from revenue of US$96.1mln in its most recent quarter.
The largest current production asset is offshore Equatorial Guinea, Block G, where Panoro is in partnership with Kosmos Energy Ltd (LSE:KOS, NYSE:KOS), privately owned Trident Energy and GEPetrol.
Within the block are six oil fields grouped together as part of the Ceiba field and Okume complex, located at a 600-800m depth of water. Panoro acquired its 14.25% interest in Block G in February 2021 and last September revealed payback had already been achieved.
Panoro’s net share of production at Block G is around 4,600 bopd and last reported 2P reserves at the end of 2021 were 13.2 MMbbls with additional 2C resources of 20.9 MMbbls.
There is also production from Tunisia, which although smaller is valued as a stable business in a low operational cost environment, jointly operating with state company ETAP a nationally important cluster of fields, where Panoro has a 29.4% interest.
Panoro’s net share of Tunisian output averages around 1,200 bopd, and numerous infill and workover opportunities have been identified to potentially sustain and incrementally grow production for many years.
Panoro’s last reported 2P reserves at the end of 2021 were 5.2 MMbbls with additional 2C resources of 1.6 MMbbls.
In between those two in terms of current size and the principal driver of near-term production growth for Panoro is offshore Gabon, where a 17.5% interest is held in the Dussafu Marin permit and its multiple oil fields.
The Tortue field started production in 2018 and the Hibiscus and Ruche fields are currently under development. Panoro’s last reported 2P reserves at the end of 2021 were 17.4 MMbbls with additional 2C resources of 6.8 MMbbls.
Panoro’s current net share of production at Dussafu Marin is around 1,900 bopd but more importantly for investors, Gabon is where the big production step-up lies.
From the end of December 2022 to the end of 2023 production, says chief executive John Hamilton, “we will probably have an increase of about 50% of our oil production that comes out of our project”.
Drilling has started, it was confirmed in January, at six new production wells, which Hamilton says will “really transform the company”.
The Olso-headquartered company’s oil sales are largely unhedged, the CEO says, so it is happy to be “entirely exposed” to a macro environment where Brent crude prices started 2023 above US$83 and have headed up to US$86 recently.
“You could be a bull you could be a bear could be somewhere in between, but for those that are seeking exposure to the oil price in a company that is growing, its oil production, you know, we tick a lot of boxes in that respect,” said Hamilton.
At Dussafu, additional gas lift capacity is being commissioned at the one field – Tortue – that is currently in production, designed to allow optimal production from all six existing wells.
Elsewhere on the block, drilling from a jack-up rig started on the Hibiscus and Ruche fields too, a development which Hamilton describes as “an important component of Panoro’s organic production growth outlook”.
Twinned with the new gas lift compressor, this puts the group on track to achieve its targeted rate of 12,500 barrels oil per day, he says.
A production platform and flowlines connecting it to the existing floating production and storage vessel have all been installed.
Completion of the first development phase is expected to add around 30,000 bopd of gross new production, taking gross output from the block to around the 40,000 bopd level.
For investors, Hamilton says that Panoro is a “very well governed… stable, production-growth company that intends on returning cash to its shareholders for dividends and share buybacks”.
“And at the same time continuing to build the portfolio in ways that could be small little bolt on acquisitions, they could be drilling some exploration wells.”
Having production spread across three counties is also key, he says, as well as the experience of the board and its.
“We are very diversified in terms of our country of operation in terms of the nature of the production, the reservoirs, the operators.
“And that really benefits us because in our business, there are always going to be ups and downs on the field as well.”
Further diversification down the line may come from an early stage natural gas and Helium play, where Panoro has a technical cooperation permit in South Africa. But this is currently being incubated as an interesting potential opportunity, with added ESG credentials.
Other development activities and potential exploration are also planned.
Off Equatorial Guinea a license extension last year was secured to the end of 2040, opening several incremental investment opportunities for the joint venture.
The joint venture is planning an infill drilling campaign of two to three wells that is expected to begin in the second half of this year.
Panoro recently agreed a farm-in at the adjacent Block S, where its JV partner Kosmos is operator and Trident and GEPetrol are also partners.
Subject to government approval, drilling is expected next year, with any discovery able to be tied back to existing infrastructure.