Tethys Oil: Al Jumd soon to reveal its potential - ABG

Estimates slightly down on lower production guidance

Continued progress on Block 56

Share discounts LT oil price of USD 54/bbl

Estimates slightly down on reduced production guidance
In Q2, Tethys announced a slight reduction in its FY’22 production guidance to 10.27kboe/d, from the previous 10.5-11.0kboe/d. This was mainly due to the need for maintenance on a processing facility at Block 4 scheduled in Q3’22. In addition, the company reduced its FY’22 capex forecast from USD 91m to USD 87m. We revise our estimates to reflect the new guidance, with ~10.3kboe/d for H2’22e. Given a lower exit rate production from ‘22e, we also make minor revisions to our ‘23e production forecast.

Al Jumd soon to reveal its potential
All three appraisal wells at the Al Jumd discovery are scheduled for a six-month production test from October. This means we will soon get indications of the resource volume in the discovery and the production potential. In our view, the fact that the company decided to expand the drilling program with the two additional appraisal wells should be interpreted as a promising indication of its view of the discovery. With good results from initial testing of Al Jumd-2, the outcome is of high importance for the future development at Block 56. If successful, the tests could also have a positive impact on production volumes towards year-end.

Discounts oil price of USD 54/bbl
At the current share price, our SOTP valuation estimates that Tethys discounts a long-term oil price of USD 54/bbl. We highlight that our current valuation does not attach any value to Block 56. As such, this could give upwards revisions to our valuation if it proves its potential over the coming quarters.
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