VSA Morning Flow Test
This Morning’s News
Prospex Energy () has now completed its placing and retail offer raising a total of £4.2m at a price of 6p/sh. The new funds give PXEN a 7.5% interest in the producing Viura gas field in Northern Spain and will aid funding for a new well to increase output. With permits for two wells in place, the new well Viura 1B was spudded on June 24 2024.
The Viura project ahead of the deal was c.58.8% owned by HEYCO Energy, an independent, family-backed, US natural gas company. Viura currently accounts for around 85% of Spain’s natural gas production and is one of three currently producing onshore fields which include Viura and PXEN’s El Romeral. The entry into Viura therefore significantly expands PXEN’s interests not only by adding a third producing interest to its portfolio and diversifying its asset base, but also by increasing PXEN’s standing within Spain as an energy company.
Viura has gas in place of 211BCF and 2P Reserves of 105BCF and PXEN is now entitled to a 7.5% share in production and reserves with costs covered on a 2:1 promote basis for the first three years. However, this may be fully or partially covered by production.
The new Viura project on a 100% basis is expected to generate €249m in net income with an NPV of €64m and breakeven price of €12/MWh. The total cost of phase 1 is US$26m covering Viura 1B and a water injection test while in the second phase a further two wells are planned. Phase one investors may opt to fund their future commitments through new equity or production share.
We have not yet incorporated the new interest into our valuation and will update it in due course, however, the combination of incremental production, near term cashflow and optionality on future terms indicate an attractive deal for PXEN shareholders, in our view, and an accretive addition to PXEN’s portfolio.
We reiterate our Buy recommendation and target price of 18p/sh..