(Idea) Valeura Energy
Editor’s Note: Ideas from HFI Research is a separate paying subscription from HFI Research. VLE.TO is not a holding in the HFI Portfolio.
By: Jon Costello
Note: Dollar values are in Canadian dollars unless otherwise specified.
Valeura Energy (VLE:CA) is a Canadian oil-weighted E&P operating in offshore Thailand. The company has grown its production and shareholder value rapidly over the past few years. Its success is reflected in its share performance over the past two years.
Notwithstanding today’s ugly price action that sent the shares down almost 9%, Valeura’s longer-term share price performance begs the question of whether more upside is likely from such a skilled management team.
Valeura’s Background
Valeura’s founders had previously founded Canadian E&P Verenex Energy, which produced crude oil in Libya. The Libyan government purchased Verenex in 2009. The group then formed Valeura in 2010 and ended up focusing the company’s operations on conventional natural gas production in the Thrace basin of Turkey.
In 2020, Valeura changed strategic direction and sold most of its conventional onshore producing assets in Turkey for $15.5 million to go on the hunt for acquisitions.
In 2022, management acquired operating interests in offshore licenses in the Gulf of Thailand. In June of that year, Valeura acquired the Wassana field, a 3,000 bbl/d shallow-water field, from a bankrupt KrisEnergy for $19 million. Valeura paid $3.1 million for the offshore operating license, $9.2 million for a mobile offshore production unit, and $7 million in contingent payments associated with future development milestones.
In the transaction, Valeura also acquired KrisEnergy’s $275 million of tax loss carryforwards.
In December 2022, the company acquired interests in the Jasmine, Nong Yao, and Manora fields from Mubadala Energy, a UAE state-owned enterprise. The fields had production capacity of approximately 8,750 bbl/d, 7,100 bbl/d, and 3,150 bbl/d, respectively. The acquisitions were made for $10.4 million plus up to $50 million of payments contingent on certain upside price scenarios. Valeura also assumed decommissioning liabilities associated with the assets.
Given results to date, this acquisition is one of the best we’ve seen in the international oil patch. It had less risk than a pure exploration play. Moreover, it came in 2022, when oil prices traded at multi-year highs, during a time when most owners of oil assets weren’t interested in selling.
Valeura emerged from its transactions in 2022 as an offshore Thailand-focused E&P, as shown below.
Source: Valeura Energy Investor Presentation, March 7, 2025.
Valeura reactivated production in Manora in 2023 and recently completed an infill drilling program in the field. Manora has the lowest reserve life of the company’s Thailand assets, and extending it is a priority. Management believes the success of the infill drilling program demonstrates the company’s ability to increase production from existing fields in the Gulf of Thailand.
In November 2024, the company executed a restructuring that allowed its loss carryforwards acquired in its original KrisEnergy deal to be applied across the company’s Thailand assets. In total, Valeura has $373 million carryforwards that will shield cash flow from taxes for several years.
By the fourth quarter of 2024, the company was producing 26,100 bbl/d of crude oil.
At the moment, Valeura has no active operations or reserves in Turkey, though it does have a discovery under appraisal. It continues to look for a joint venture partner to restart Turkey natural gas operations. The company’s license expires in June of 2026, but it is likely to extend the license if necessary.