Declaration of commerciality:
Block 58 On 9/13 Total Energies confirmed plans for a first development in Suriname at the Sapakara South & Krabdagu discoveries. For APA this vindicates a decision in late 2019 to forego an up-front cash payment when it farmed down a 50% interest in the block, in return for a carry on any confirmed development. In what effectively constitutes a 'declaration of commerciality', TTE will now commence FEED, working towards an FID by year-end 2024 and first production in 2028. Preliminary costs are suggested at $9bn, developing 700mm bbls of recoverable oil, confirmed by a subsequent APA press release and oil production capacity of 200,000 bpd. Assuming the Suriname Gov’t backs in for 20%, the net impact on APA is incremental capex for its 12.5% share of $900mm spread over five years. At our $80 base case, we see the value net to APA at $2.7bn for one of the most capital efficient projects in the industry by virtue of the capital carry by TTE. How does this c/w our base case: better at $9/sh Since our first assessment of Suriname as a prospective oil province in late 2019, we have assessed a theoretical ‘risked’ development in block 58 at ~$8/sh. Our standing assumption anchored on adjacent Guyana analogs has been 600 mm bbls, a $10bn development, 200,000 FPSO and first oil by mid-2027. Frankly we see TTE’s timeline as conservative. Still on its declared parameters that has a $1bn lower cost, and a slightly later schedule but confirms production capacity & resource we believe a development that can support a 5-plus year plateau increases our assessed value to $2.7b or $9/sh. BofA Global Research
