Acquisition in Venezuela provides optionality
With the acquisition of 24% of PetroUrdaneta in Venezuela for EUR 9m (if the transaction is completed), Maha has created considerable optionality. Venezuela has the highest share of oil reserves in the world, but and production there has suffered significantly owing to the pandemic and sanctions. Due diligence for the acquisition is ongoing and details regarding potential production levels etc. are scarce at present, but we believe there should be considerable potential upside.

Ongoing deployment of the cash position – Oman decision next
We believe the next step in Maha’s transformation will be a decision on Oman, followed by further M&A. Maha has received an extension of the first phase of the exploration and production (E&P) sharing agreement in Oman until 31 December, after which it needs to decide whether to declare commerciality or not. Maha had cash of USD 140m at the end of Q3, which we believe provides it with about USD 200-250m in M&A fire power for acquisitions if debt financing is considered. We calculate this could add up to USD 1bn in asset values – a game changer for Maha.
 
Net cash still accounts for large part of market cap
Production is almost back to where it was before the divestment of Maha Brazil, but the balance sheet is considerably stronger. Net cash at the end of Q3 accounted for almost 60% of the market cap, or USD 120m. We value the assets at around USD 170m, which is in line with the market cap. We see Venezuela as pure optionality – our valuation does not reflect PetroUrdaneta. The key to value creation will be how Maha chooses to deploy this cash. We adjust our fair value range to SEK 16–17 (17–19) to account for the change in the cash position, while asset values are unchanged.

Read the full report, published on 17-11-2023 at 10:59 AM: https://docs.penser.se/research/5067-C/maha20231120.pdf
This is a press release from Erik Penser Bank. Read more here: https://epaccess.penser.se/