Maha Energy: Starting to deliver - ABG

Estimates up on higher production and oil prices
Q1 could mark a turning point
Discounts USD 68/bbl

Higher oil price and production assumptions drive estimates
Maha’s Q1 operational update showed higher than anticipated production levels of 4.8k boe/d, 18% above ABGSCe at 3.9k boe/d. The beat was driven by production from the Tie field, where it appears that the strong performance that we saw in late Q4’21 has continued into ’22. We therefore lift our production estimates to reflect the Q1 levels. We have also increased our oil and gas price assumptions, which along with higher production produces meaningful positive estimate revisions for ’22e-’24e. We estimate Q1’22e EBITDAX at USD 23m and free cash flow at USD 10m. Maha will be net cash in Q3’22e on our revised estimates.

Q1 could mark a turning point
A concern of ours has been that we have seen two years of negative guidance revisions. However, the Q1 operational performance was the first sign that this trend could be broken and mark a turning point for the operations of Maha. On our new estimates, average ‘22 production is 4.8k boe/d, which is the high-end of its 4-5k boe/d guidance. The forecast assumes flat Tie production in H1’21 and higher in H2’22, with a moderate production ramp-up from Tie-5, which is targeted to be on-stream in late Q2. If the current performance continues and Tie-5 is successful, we believe that we could see a guidance upgrade for ‘22.

Share discounts USD 68/bbl – NAV at SEK 27/sh
Maha discounted a low oil price at around USD 50/bbl through 2021, which we believe was largely driven by a lack of market confidence. However, confidence seems to be improving as the share has increased 51% the last 90 days and currently discounts USD 68/bbl on our core NAV estimates. After estimate revisions, the NAV/sh is SEK 27 (SEK 22), and the P/NAV is 0.73x (0.6x). We increase the value range to SEK 15-30 (SEK 10-20).
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