Maha Energy: No estimate changes after solid Q1 report - ABG

As expected, Q1 was a strong quarter
Estimates unchanged
Discounts USD 71/bbl

Record-high production and EBITDA in Q1
Q1 was the strongest quarter on record for Maha Energy in terms of both EBITDA and production. Production was 4.6k boe/d, compared to 3.7k boe/d in Q1’21. EBITDA was USD 22m, 3% below ABGSCe and 4% above FactSet consensus, driven by high oil and gas prices (USD 101/bbl realised oil price) and strong production from the Tie field. FCF was on the softer side, mainly due to negative working capital effects and capex timing.

Estimates unchanged after Q1
Headline Q1 P&L figures were broadly in line with estimates, while FCF was below. However, the negative FCF effects appear to be reversable, and thus do not lead us to make any estimate revisions. Our ‘22e production estimate sits at 4.7k boe/d on average, i.e. within the high end of guidance, which looks achievable based on Q1 production and the expected production ramp-up in H2’22. When asked about updates to its production guidance, the company indicated that it prefers to wait and see until H2’22, as there are some short-term moving parts related to e.g. Tie-5 completion, well reactivations and accessibility to equipment. We are 17% above FactSet consensus on ‘22e EBITDA and 25% above on EBITDA for ‘23e (however, we note that there seem to be some outdated figures in consensus).

Discounts USD 71/bbl
Activity in Oman will pick up in the coming months with the drilling of six wells, starting with two appraisal wells at the end of June. Additionally, the company said that it has recently placed an order for four more wells in Oman. In our SOTP valuation, we have valued the Oman asset as equal to the acquisition price, meaning that it represents a significant valuation upside potential in a successful drilling scenario. Based on our SOTP and estimates, Maha discounts an oil price of USD 71/bbl, compared to the current Brent price at USD 111.
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