London-baserte Peel Hunt (peelhunt.com) tok opp dekning av WRL den 18 okt. og skriver mye positivt i sin 29-siders analyse. La oss plukke ut essensen. Kanskje blir den med det litt lettere å forstå?

Powering up a nation
By providing long-term visibility on both production and cash flow growth, Wentworth is differentiated versus its peers. Over the next 18 months, the Mnazi Bay gas field in Tanzania will enable rapid deleveraging of the balance sheet and will add support to the equity. In addition to the core producing asset, significant exploration/appraisal upside exists in both Tanzania and Mozambique that could add substantial new resource and provide further NAV upside.

Since Mnazi Bay was brought online in Q315, production has increased to c50MMcf/d (>60MMcf/d currently, FY17 guidance 45-50MMcf/d) and in the short-term the aim is to increase this further towards 70-80MMcf/d in 2018. Beyond this it is expected that continued demand growth for gas-fired power generation will see production continue to rise, enabling Mnazi Bay to deliver PHe 110MMcf/d gross production in 2019. It is worth highlighting that geologically, Mnazi Bay’s gas reservoirs are capable of delivering these volumes from the existing well stock. This is an important point as it means no more significant capex is required in order for Wentworth to double production from current levels.

In addition to Mnazi Bay, Wentworth also holds an 85% operated interest in the onshore Rovuma concession, Mozambique, which contains the potentially material Tembo oil and gas discovery (20p/sh risked). Efforts are currently focused on securing a farm-in partner in the months ahead to help fund the drilling of a high-impact appraisal well in 2018. In our view, a successful outcome that proves Wentworth’s geological model could add incremental NAV in excess of the current market capitalisation.

Investment case
Wentworth Resources is an exploration and production company currently focused on producing PHe c16MMboe of remaining entitlement natural gas reserves from its Mnazi Bay field in Tanzania. In addition, efforts are also focused on working towards the likely 2018 appraisal of a potentially significant gas and liquids discovery in the onshore Rovuma Basin, Mozambique.

With a long-term gas sales contract in place, all of the major capex items now behind it and with the field likely to be in commercial production for the remainder of the licence term which expires in 2031, Mnazi Bay is the asset that currently defines the company and differentiates it versus peers.

Once Mnazi Bay is at plateau production, our modelling of the current 2P reserves base shows the field will generate free cash flow of >$20m/pa out to 2022. Beyond this it is our expectation that additional prospective resources will be discovered and tied-in, thereby extending plateau production beyond the 2P profile shown below.

Strategy
Wentworth aims to be a low-cost developer and producer of gas in Tanzania by delivering gas into existing infrastructure for sale downstream to industrial and power off-takers. Importantly, with significant spare capacity in the trans-national gas pipeline, Wentworth is ideally positioned to feed growing regional and national gas-fired power demand.
In addition to a stable production base, Wentworth will also look to add value via its prospective exploration and appraisal assets also located in the Rovuma Basin in southern Tanzania and northern Mozambique.

Receivables repayment to bolster cash flows
As a result of past development and operating costs at Mnazi Bay paid for by Wentworth on behalf of TPDC, a $35m long-term receivable had been accrued. By December 2016 this had been reduced to $27.1m and to $23.7m by end June 2017. We estimate that between 2017-19 Wentworth will benefit from a disproportionate share of production cash flows in excess of its PSC entitlement to eliminate the TPDC receivable and accelerate the pace of deleveraging.

A key point to highlight here is that due to the way in which the receivable is recovered, there is in our view a low risk of none recovery. More precisely, we understand that Wentworth’s Mnazi Bay operating partner, Maurel et Prom, gets paid directly from the buyers of the gas for 100% of the gas sold from the Mnazi Bay JV; Wentworth is then paid by Maurel et Prom its PSC entitlement revenue.

Maurel et Prom and Wentworth receive TPDC’s PSC entitlement revenue, which is split roughly 80/20 in favour of Wentworth until the receivable is eliminated. The impact on Wentworth’s cash flows is therefore disproportionately positive in the early years of Mnazi Bay production. Based on current and forecast production levels, our expectation is that the receivable will be eliminated entirely by end 2019.

WRL er definitivt "Den lekreste dama i gata" og hun blir bedre og bedre for hver dag.

:-)