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Suspension of Oil Production Good Time To Buy Co.’s Stock

Source: Stephane Foucaud

July 11, 2023 ( Newswire) Production will be resumed once the third-party operator’s safety and operating practices are reviewed and deemed acceptable, noted an Auctus Advisors report.

Valeura Energy Inc. (VLE:TSX; PNWRF:OTCMKTS) temporarily curtailed production in the Gulf of Thailand’s Wassana oil field as a precaution after an “operational mishap” by a third party operator, reported Auctus Advisors analyst Stephane Foucaud in a July 7 research note. Production will restart once it is safe to do so.

“We view any weakness in the share price following this announcement as an opportunity,” Foucaud wrote.

Significant return on investment

The company’s share price has fallen 10% since June 7, despite the Brent oil price remaining flat, and now is about CA$1.78 per share. In comparison, Auctus’ target price on Valeura is CA$6 per share. The difference between the current and target prices implies a gain for investors of 233%.

Foucaud pointed out the stock could rerate if and when Valeura confirmed it could apply the roughly US$300 million of tax losses relating to Wassana to other fields.

What happened?

The analyst explained that the floating storage and offloading (FSO) vessel in the Wassana moved and bumped into the oilfield’s catenary anchor leg mooring buoy. No one was hurt, the vessel and buoy were not damaged and no hydrocarbons were released.

“This follows a previously reported incident by the same third party contractor that delayed first oil,” noted Foucaud.

Going forward

Before restarting production at Wassana, Valeura will review this outside company’s safety and operations aboard the FSO and potentially replace the contracted operator, Foucaud wrote. The latter could take a few weeks. None of this, however, should affect the drill program, due to commence later this month.

To account for the lost production time, Auctus lowered its Q2/23 Wassana production estimate to 2,400 barrels per day (2.4 Mbbl/d) from 3 Mbbl/d.

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