Freeport sells more O&G, page-2

PURA VIDA ENERGY NL (PVD)
Change of strategy in **on
Pura Vida Energy (PVD) has articulated a strategy that aims to bring the Loba Oil Field, offshore **on, into production within 12-months of a successful flow test. We think this is a commendable strategy, given the close proximity to infrastructure and industry wide deflation, but will require the Company finding a funding partner. We have a Speculative Buy recommendation on PVD with a 12-month target price of 8cps.
**on – targeting near term production
PVD has completed a fully costed Concept and Feasibility Study (CFS) for the fast track development of the Loba Oil Field. The previous strategy sought to secure a farm out to drill larger exploration targets. The new strategy aims to take advantage of the significant deflation in services costs and equipment that has occurred over the last two years combined with the industries more conservative approach to capital spending.
The Company believe that Loba has an 81% chance of commercial success with an NPV10 ranging from US$37m to US$330m (un-risked, PVD’s internal estimates). Reducing the economic hurdle is the proximity to infrastructure including the Barbier Field which lies approximately 10km away. The Nkembe block contains the Loba oil discovery which encountered a 141m gross oil column (Gross unrisked contingent recoverable mean resource of 12MM bbls). The key to executing this strategy will be funding the future work program via a farm in partner. The Company is currently in discussion with numerous potential partners.
PVD has held 100% equity in the Nkembe PSC since being awarded the block in 2013. The current work phase on the block, which includes the acquisition of new 3D seismic data and a well, expires in January 2017. PVD has received approval for a 12-month extension from the regulator but requires further Government approvals to complete the approval process. This is expected before the end of the current quarter.
Conditional settlement in Morocco – more to come?
PVD has also reached a conditional settlement with a PXP Morocco B.V. (PXP) (a subsidiary of Freeport-McMoRan Oil & Gas) in relation to the second well obligation. Under the terms of the settlement, PXP has paid PVD an unconditional and non-refundable deposit of US$1.5m. Whether further payment is received will depend on whether the parties can reach a final agreement and obtain approvals from the Office National des Hydrocarbures et des Mines (ONHYM). The timing of any additional payment remains uncertain.
Balance sheet and target price
At the end of the June quarter PVD had a cash balance of $6m. After adjusting for corporate overheads and the Freeport payment, we think the current cash balance is circa $7m or 2.4cps. We value PVD at $23m (8cps). Given the uncertainty around the timing around material catalysts, we have a 12-month target price of 8cps. PVD continues to cut costs which has included salary cuts, staff reductions and the closure of the Melbourne office.