Maha Energy: Roll-up of 3R Offshore finalised
Potential for value creation in the combined 3R and Enauta
The merger of 3R and Enauta, and hence the roll-up of Maha’s holding of an interest in 3R Offshore, closed on 31 July 2024. Following the transaction, Maha holds 4.76% of the merged companies. The managements of 3R, Enauta, and Maha expect synergies of USD1.2bn from the merger, and the companies also expect to raise production by 85–90% over the next couple of years. We do not consider these factors to be reflected in the 3R share, and we see a chance for the value for the holding in 3R to appreciate.
Next: outcome of application for exception to US sanctions in Venezuela
Maha has exclusivity to acquire 24–40% of PetroUrdaneta, a company holding assets in Venezuela. The country is under sanctions from the US government, but Maha has filed an application to the Office of Foreign Assets Control (OFAC) for a specific licence to be exempted from these sanctions. Maha’s management is optimistic about the prospects of the application being approved. With limited capital expense, Maha sees potential to increase PetroUrdaneta’s production from around 1,000 boepd to more than 20,000 boepd.
Maha’s share only reflects the value of its 3R stake
Following the roll-up of the holding in 3R Offshore and the direct interest in Papa Terra and Peróa, we deconsolidate the holding. Going forward, the mark-to-market of the value of 3R will impact the financial net, and net profit will thus be volatile. Maha’s share basically corresponds to the value of its 4.76% holding in 3R, thus failing to reflect the NAV of its assets in the US, the value of the net cash position, the potential from 3R appreciating, and the optionality in Venezuela. Removing the NAV from Papa Terra and Peróa in our valuation, replacing this with the market value of the holding in the new 3R prompts us to lower our fair value range to SEK11–14 (14–16).
Read the full report, published on 15-08-2024 at 07:33 AM: https://researchdocs.carnegie.se/research/2024/08/14/maha_q2_2024_edited.pdf
This is a commissioned research from Carnegie Investment Bank. Read more here: https://epaccess.penser.se/