Maha Energy: Softer quarter expected - ABG

Q2 estimates down on lower production from the Tie field

Drilling campaign to commence in Oman from Q4

Share price discounts USD 58/bbl

Lower production from Tie field drives revision of estimates
After a record strong Q1’22 for Maha Energy, we see a softer Q2 driven by lower production from the Tie field. Based on production data from ANP, we lower our production estimate for Q2 to ~3.2k boe/d from 4.5k boe/d previously. Given a lower exit rate production from Q2, we also lower our Q3e to 3.7k boe/d, down from 4.9k boe/d. The disappointing production volumes lower our Q2e earnings. We now see EBITDA of USD 16.9m, below FactSet consensus at USD 23.7m, and free cash flow of USD 1m in the quarter, below consensus at USD 16m.

Mafraq back in focus for H2
Maha recently announced the contracting of a new drilling rig for the six well campaign at the Mafraq field. The rig is expected to mobilize in October and will replace the rig from GBS, previously announced to be withdrawn. In addition, Maha today announced a farmout agreement on Block 70 with Mafraq Energy, bringing its working interest down to 65% and reducing the future capex net to Maha on the field. The deal requires Mafraq energy to reimburse Maha for its prorated share of all past costs and pay its share of future expenditure. It is positive to see that Maha was able to secure a new drilling rig for the campaign and these events put the drilling at Mafraq back as a key event for H2’22. Currently, we have not included any production from Mafraq in our estimates and valued the block at book value. Thus, this represents upside potential to our current fair value range.

Current share price discounts USD 58/bbl
In line with other E&Ps and the energy sector in general, Maha’s share price has come down in recent months. At the current levels, we estimate that Maha discounts brent at USD 58/bbl, down from USD 68/bbl last quarter. The current NAV/sh on our oil price estimates is SEK 24.7 and the P/NAV is 0.57x.
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