Roth MKM analyst John M. White, in a research report published on June 11, 2024, provided an update on Vaalco Energy Inc. (EGY:NYSE) following the company's recent acquisition of Svenska Petroleum Exploration AB. The analyst increased the target price for Vaalco Energy from US$7.25 to US$8.00 and maintained a Buy rating on the stock.
"Our estimate for 2Q 2024 sales increases from 16,280 BOE per day to 18,717 BOE per day due to the updated guidance to reflect the closing of the Svenska acquisition," White noted. "The acquisition adds 13 million BOE of proved reserves, and after updating our NAV model, we are increasing our target price from US$7.25 to US$8.00."
The increased sales estimate has also led to improved financial projections for Vaalco Energy. White improved his Q2 2024 estimates for EPS, CFPS, and EBITDA to US$0.13, US$0.76, and US$76.8 million from US$0.06, US$0.57, and US$57.3 million.
White highlighted that the increases in sales estimates for the third and fourth quarters of 2024 reflect Roth MKM's estimate of increased crude oil liftings in those periods, as no drilling and completion activity is planned for the second half of 2024.
The analyst believes that Vaalco Energy's shares appear attractive at current levels, trading at an enterprise value to 2024 EBITDA multiple of 1.9x and a price to 2024 cash flow per share multiple of 2.0x.
"EGY has zero debt, US$113 million of cash on hand and by our estimates is set to generate US$181 million of free cash flow during 2024," White noted. "The annual dividend of US$0.25 per share produces a yield of 4.1%."
Roth MKM's valuation methodology for Vaalco Energy is based on a net asset value (NAV) model, which incorporates the company's proved reserves, production estimates, and financial projections. The analyst's target price of US$8.00 per share represents a significant potential upside from the stock price at the time of the report of US$6.06.
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Disclosures for Roth MKM, Vaalco Energy Inc., June 11, 2024
Regulation Analyst Certification ("Reg AC"): The research analyst primarily responsible for the content of this report certifies the following under Reg AC: I hereby certify that all views expressed in this report accurately reflect my personal views about the subject company or companies and its or their securities. I also certify that no part of my compensation was, is or will be, directly or indirectly, related to the specific recommendations or views expressed in this report.
Disclosures: ROTH makes a market in shares of Vaalco Energy Inc. and as such, buys and sells from customers on a principal basis. Within the last twelve months, ROTH has received compensation for non-investment banking securities-related services from Vaalco Energy Inc..
ROTH Capital Partners, LLC expects to receive or intends to seek compensation for investment banking or other business relationships with the covered companies mentioned in this report in the next three months. The material, information and facts discussed in this report other than the information regarding ROTH Capital Partners, LLC and its affiliates, are from sources believed to be reliable, but are in no way guaranteed to be complete or accurate. This report should not be used as a complete analysis of the company, industry or security discussed in the report. Additional information is available upon request. This is not, however, an offer or solicitation of the securities discussed. Any opinions or estimates in this report are subject to change without notice. An investment in the stock may involve risks and uncertainties that could cause actual results to differ materially from the forward-looking statements. Additionally, an investment in the stock may involve a high degree of risk and may not be suitable for all investors. No part of this report may be reproduced in any form without the express written permission of ROTH. Copyright 2024. Member: FINRA/SIPC.
