Production difficulties in Brazil

Growth remains on top of the agenda – Hello Oman

Share discounts USD 42/bbl

Operational challenges in Q3
Monthly production reports through Q3 reflect a production of 3,580boe/d; this is below our original estimate of 4,599boe/d. We lower our estimates accordingly, explaining our 2020 estimate revisions. The main explanation for the softer production than we expected is related to operational hiccups in September at the Tie field (a blanking sleeve was stuck and needed to be retrieved from the GTE-4 well). Activity has also been hampered by ten COVID-19 cases amongst staff and contracted personnel in Brazil. The general production ramp-up thus appears to be taking somewhat longer than anticipated. In a company update on 7 October, however, Maha said that it expects to meet its full year guidance of 4,000-5,000boe/d, and to exit 2020 with production above 5,000boe/d (with the increase stemming from the TIE-2 producers which are expected on stream in November). Our Q3 EBITDA is in line with consensus at USD 6.4m vs. cons at USD 6.3m.

Growth remains on top of the agenda – Hello Oman
Growth is a key part of Maha’s strategy, and during Q3 the company was awarded Block 70 in Oman. There is a discovery in the Block from 1988: Maha guides for 185-280mill barrels of oil in place and indicated a 9% recovery rate. Hence, it could become another leg to its geographical footprint and growth. Maha’s CEO Jonas Lindvall has experience with operations in Oman, from his time in Tethys Oil.

Share discounts USD 42/bbl
On our estimates, Maha discounts an oil price of USD 42/bbl. The balance sheet is robust at current oil prices, in our view. We find there to be fairly high NAV sensitivity, as an oil price increase from USD 40/bbl to USD 50/bbl would lift our NAV per share from SEK ~11 to SEK ~20.

research@abgsc.com (Introduce.se)

ABG Sundal Collier - Introduce.se