Carnarvon Energy Limited

CVN Details

Pavo Resource Updates: Carnarvon Energy Limited (ASX: CVN), was earlier known as Carnarvon Petroleum Limited. CVN is an Australian oil and gas exploration company and has projects: Dorado Project, Buffalo Project, Labyrinth Project, Pepper Project, Taurus Project, Outtrim Project, Eagle Project, and Condor Project.

• After the assessment at Pavo Resource, the company reported ~43 million barrels (gross, 2C) of contingent and prospective resources and another additional prospective resources to be estimated at ~55 million barrels (gross, Pmean). The successful Pavo-1 oil discovery is expected to increase CVN’s oil resources significantly, through the Dorado facilities.
• Change in Directors’ Interest: One of its directors Debra Bakker, acquired ~150,000 ordinary shares at a consideration of ~$35,231.
• Quarterly Update: In 3QFY22, the company reported nil cash receipts and negative operating cash flow of $1.108 million. The company closed its third quarter with a cash balance of $54.25 million at the end of 31^st March 2022, relative to $77.26 million as of 31^st December 2021.

 Quarterly Cash Balance; Analysis by Kalkine Group

Key Risks and Challenges

Considering the company’s exploration phase, the risk of exploration stands high with high reliance on studies. The company has yet not generated any revenue; hence a profitability concern is displayed.

Outlook

CVN’s Extraordinary General Meeting of shareholders is expected to be held on Monday, 23 May 2022. Developments in Dorado and discoveries at Pavo, ensures the energy demand continues to be met in the Asian region and also plays an important role in Australia’s long-term energy security.

At the end of 3QFY22, CVN took a pre-emptive position to de-risk its funding requirements for the Dorado development significantly, by managing a $70 million placement to institutional investors. Moreover, it is also proceeding with a range of potential capital sources like traditional debt facilities, alternative funding options such as offtake prepayments and the probable divestment of a portion of its share of the Dorado project and associated exploration acreage. The Dorado liquids development remains to progress with the Joint Venture (JV) which is working towards its Final Investment Decision (“FID”) this year, i.e., 2022.

Valuation Methodology: EV/Sales Multiple Based Relative Valuation (Illustrative)

Source: Analysis by Kalkine Group

*% Premium/(Discount) is based on our assessment of the company’s NTM trading multiple after considering its key growth drivers, economic moat, stock’s historical trading multiples versus peer average/median, and investment risks.

Stock Recommendation: The stock of CVN gave a negative return of ~13.46% in the past year. The stock is currently trading near its 52-weeks low of $0.212, forming a decent opportunity of accumulation. The stock has been valued using the EV/Sales multiple-based illustrative relative valuation method and arrived at a target price with an upside of low double-digit (in percentage terms). Considering the gold prices market fluctuations, nil debt-to-equity ratio and its positive Pavo resources update, the company might trade at a slight premium to its peers’ EV/Sales multiple average. For valuation, few peers like Santos Ltd (ASX: STO), Boss Energy Ltd (ASX: BOE), Strike Energy Ltd (ASX: STX), and others have been considered. Given the capital raising and related pre-emptive measures, nil debt-to-equity ratio and low asset-to-equity ratio. current trading levels, upside indicated by valuation, and key risks associated with the business, we give a “Speculative Buy” recommendation on the stock at the closing market price of $0.230, down by ~2.13%, as of 02 May 2022. Markets are trading in a highly volatile zone currently due to certain macro-economic issues and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.

CVN Daily Technical Chart, Data Source: REFINITIV

Tempus Resources Limited

TMR Details

Third Quarterly Update (3QFY22): Tempus Resources Limited (ASX: TMR) is a growth-oriented company in Australia, which actively explores gold projects in Canada and Ecuador.

• Besides commencing a large-scale soil sampling program at its Valle Del Tigre Project in Ecuador, the company signed an exploration agreement with the Stswecem’c Xgat’Tem First Nation related to the Blackdome Gold Mine Project during 3QFY22.
• During the same period, TMR announced the 2022 exploration drilling plan and extracted assays through its Blue Vein drilling at Elizabeth Project. The 2023 drill program will comprise ~30 drill-holes (~8,500 metres) centred on the mineral resource expansion.
• Sneak Peek of Financials: In 3QFY22, the company reported nil cash receipts and negative operating cash flow of $927k. The company closed its third quarter with a cash balance of $1.53 million at the end of 31^st March 2022, relative to $2.47 million as of 31^st December 2021.

Cash Flow Movements; Analysis by Kalkine Group

Key Risks and Challenges

Considering the company’s exploration phase, the risk of exploration stands high with high reliance on studies. The company has yet not generated any revenue; hence a profitability concern is displayed.

Outlook

As announced in 2022, the drill campaign (2022) at the Elizabeth Gold Project will target Blue Vein along with new vein targets (Main Vein, West Vein, Ella Zone) and the overall resource expansion. The campaign targets will include up to 30 diamond drill-holes for ~8,500 metres. On other hand, Tempus initiated the Phase 2 soil sampling program at its Valle del Tigre Project (south-eastern Ecuador), and the sampling program was expected to be completed in Q2FY22.

Technical Commentary: On the daily chart, TMR stock prices are hovering around the downward sloping trend line support level and taking the support of the trendline. Moreover, the momentum oscillator RSI (14-period) is trading at (~35.85 level), near an oversold zone. However, the prices are trading below the trend-following indicator 21-period SMA, which may act as a resistance level. An important support level for the stock, is placed at AUD 0.075 while the key resistance level is placed at AUD 0.103.

Stock Recommendation: The stock of TMR gave a negative return of ~59.99% in the past year, forming a decent opportunity to accumulate. The stock is currently trading near the 52-weeks’ low of $0.076. After considering exploration prospects, 2022 drilling campaign at Elizabeth Gold Project, current trading levels, its trading at support levels and key risks associated with the business, we give a “Speculative Buy” recommendation on the stock at the closing market price of $0.080, down by ~2.439%, as of 02 May 2022. Markets are trading in a highly volatile zone currently due to certain macro-economic issues and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.

TMR Daily Technical Chart, Data Source: REFINITIV

Note 1: The reference data in this report has been partly sourced from REFINITIV.

Note 2: Investment decisions should depend on the investors’ appetite for upside potential, risks, holding duration, and previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the Valuation has been achieved and is subject to the factors discussed above.

Technical Indicators Defined: -

Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.

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