Reading a straightforward assessment of where we are now.-
Price Target: $0.63/sh
Reason For Update: Downgrade to recommendation and forecasts
What We Know:
The current gross production rate from CVN’s onshore Thai acreage (CVN 40%) is 8-9,000 bopd – below our expectations.
Recent well results are as follows:
• The NSE-I1 well recovered oil (75 bopd and 200 bopd water) in a shallow volcanic reservoir where no reserves are yet allocated.
• The Bo Rang-1 RD exploration well encountered tight non-commercial reservoirs.
• The NSE-J1 and J2 development wells were drilled to total depth encountering reservoir sections as anticipated. Both are expected to be tested over the next couple of weeks with 500 - 1,000 bopd per well anticipated.
What We Think:
CVN has previously guided (Mar Q’09 report) to a gross sustainable production rate range of 12-15,000 bopd by the Sept Q’09. This has not been achieved and as a result we have downgraded our FY’10 average forecast of 13,500 bopd to 11,000 bopd (2 mmbbls reduced to 1.6 mmbbls net CVN production)
As a result of the downgrade to production our FY’10 NPAT has been reduced by 11% to $40m (12x PER) and operating cash flow by 5% to $63m.
Our valuation has dropped by $0.07/sh to $0.63/sh as a consequence of the production downgrade above and a 10% reduction for FY’11 and 12 also.
Whilst the recent well results at NSE-I1 and Bo Rang have been below the lofty market expectations, we remain optimistic a level of success will be achieved as more wells are drilled over the coming months.
News on the potential “game changer” at the L44-W oil prospect, straddling the boundary between L33/43 and L44/43, sholud be known in the next month from the L44-W2 well. A positive outcome (delineating an field in the L33/43 licence to the north) can potentially double the value CVN’s Thai business.
Investment Case:
Our key reservation on CVN at this stage is whether production will meet market expectations over the next 12 months. The gross 12-15,000 kbopd guidance will continue depend upon appraisal and infill well (NSE) wells to be drilled over the next few months. Decline rates over the last 12 months may indicate 10-15% annual declines estimates are a bit low.
Whilst we continue to be positive on CVN management and its exciting established position onshore Thailand, we anticipate the stock will mark time (following a strong run) as investors wait for production growth delivery and outcomes at the Bo Rang and L44-W appraisal wells.
- This was from Friday and may be the last of my "free offers" Meanwhile I hold.
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Last
17.0¢ |
Change
0.000(0.00%) |
Mkt cap ! $304.1M |
Open | High | Low | Value | Volume |
16.5¢ | 17.0¢ | 16.0¢ | $435.9K | 2.621M |
Buyers (Bids)
No. | Vol. | Price($) |
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2 | 248625 | 16.5¢ |
Sellers (Offers)
Price($) | Vol. | No. |
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17.0¢ | 335988 | 3 |
View Market Depth
No. | Vol. | Price($) |
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2 | 248625 | 0.165 |
5 | 108508 | 0.160 |
14 | 536050 | 0.155 |
14 | 972770 | 0.150 |
17 | 745185 | 0.145 |
Price($) | Vol. | No. |
---|---|---|
0.170 | 235988 | 2 |
0.175 | 1137347 | 8 |
0.180 | 501225 | 8 |
0.185 | 882813 | 5 |
0.190 | 716500 | 3 |
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