A Mispriced O&G Growth Story VLE The valuation certainly seem cheap also when comparing with peers. Valeura is currently valued at around $6,800 per flowing barrel versus an average of $14,800 for a peer group made up of Jadestone Energy, Pharos Energy, EnQuest, and International Petroleum, and I would argue that none of them are richly priced at the moment.
Cash flow generation is significant
Oil production in Q1 2023 averaged 20,475 bbls/d and is forecast to average between 20,000 and 22,300 bbls/d according to guidance. Valeura, however, seems to track well in advance of its target, with average production of 23,700 bbls/d in June. This is the result of its recent successful drilling campaign at the Nong Yao and Jasmine fields.
Valeura benefits from Brent pricing and relatively low costs. Operating expenses are expected to be around $220 - 240 million, or around $30 per barrel. With Brent prices around $80 per barrel, netbacks are around $29 per barrel. Looking forward, the company aims to bring production to a target level of around 25,000 bbls/d and beyond.
While short-term capital expenditures may impact free cash flow, the potential for significant cash flow generation is undeniable. Management has provided guidance of $30 million per month in free cash flow from the Mubadala assets alone.
Analyst’s Disclosure: I/we have a beneficial long position in the shares of VLE:CA either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.