Mayan Energy – Update Note
Placing funds provide catalyst for continued re-rating of shares
Following news on the 16th Nov 2017 of a £2m placing & investment into SPV Deloro Energy LLC, in which a 49% interest is being acquired from Petroteq in the Utah based Asphalt Ridge heavy oil prospect, we revisit our valuation model for Mayan Energy. Trading at less than 2 times our earnings estimates for FY18 the stock remains dramatically undervalued.
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Oil production expected to hit 500 bopd net by early summer 2018
Mayan is developing shallow low-risk projects with low levels of capex and existing infrastructure in the mature oilfields of Texas/Louisiana. Management plans to add 1,000 bopd annually with the promise to shareholders of no shortage of high impact value trigger events over the next few months.
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New Asphalt Ridge project could add 400 bopd net within 30 months
The latest deal is a heavy oil play in Utah where oil sands are mined and oil extracted by a patented advanced technology invented by £40m market cap TSX-listed Petroteq Energy. In this deal, Mayan/partners will gain access to this technology to roll out to similar plays in Utah and worldwide.
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Significant increase in reserves is on the cards
Mayan has fast improving fundamentals and significant inventory of new wells & reserves, which should provide a significant reserves upgrade which we anticipate will provide a material uplift in the value of the company.
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DCF analysis reveals an upside of almost 700%
Discounting the forecast cash flows (at a conservative rate) from the workovers/new wells at the existing operations, as well as the new Asphalt Ridge project allows us to confidently increase our near term target price to 2.1p. We update coverage of Mayan Energy & move from a Speculative Buy to a Conviction Buy stance.
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DISCLAIMER
Mayan Energy is a research client of Align Research. Align Research & a Director of Align Research hold interests in the shares of MYN. For full disclaimer & risk warning information please refer to the last page of the full document. This investment may not be suitable for your personal circumstances. If you are in any doubt as to its suitability you should seek professional advice. This note does not constitute advice and your capital is at risk. This is a marketing communication and cannot be considered independent research.
| Year to Dec | 2015A | 2016A | 2017E | 2018E |
|---|---|---|---|---|
| Revenues (US$m) | 0.84 | 0.27 | 0.25 | 17.74 |
| Pre-tax profit (loss) (US$m) | (6.19) | (7.15) | (2.42) | 7.02 |
| EPS (US$cents) | (48.34)* | (24.27)* | (0.64) | 0.56 |