In our recent oil sector report, we increased our oil price assumptions, which drives massive estimate revisions for Tethys, while our production estimates are left broadly unchanged. EBITDA is up 22%, 44% and 72% for ‘22e-’24e. For Q1, we estimate EBITDA of USD 23m, based on monthly production reports indicating average working interest (WI) Q1 production at 10.5k boe/d. We expect a gradual production increase throughout the year, leaving our FY’22e WI production at 11.3k boe/d, in line with guidance at 11-11.5k boe/d.
Q1 report likely to reflect high activity level
We expect that Tethys will reveal exploration updates in its Q1 report. Q1 has been a high activity quarter with spudding of the Hamdah-1 exploration well in Block 3&4 and a 3 well exploration appraisal campaign at Block 56. We particularly look forward to the results from Block 56, as this could be a play-opener for the block and diversify beyond Block 3&4. It would also entail upside to our NAV valuation as we have not included any value for this early phase asset.
Discounts oil price of USD ~70/bbl
We estimate a dividend yield of 11% for ‘23e, but we see upside potential to our dividend assumptions given the material cash flow generation at current oil prices and the ~SEK 21/sh in cash on the balance sheet at YE’22e. In line with comparable E&Ps, the discounted oil price has come up in the last few months and is currently about USD 70/bbl on our estimates. We increase our fair value range to SEK 70-110 (50-80).
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