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Vermilion Energy — Spartan – a value-accretive transaction

Vermilion Energy — Spartan – a value-accretive transaction

On 16 April 2018 Vermilion announced the proposed acquisition of Spartan Energy, a south-east Saskatchewan producer with estimated 2018 production of c 23kboed (91% oil) for a consideration of C$1.4bn, funded through C$1.23bn in Vermilion shares and the assumption of c C$175m of debt. The deal was priced at a 5% premium to Spartan’s closing price and is recommended by its board. In this note we incorporate Spartan’s asset base into our Vermilion forecasts and valuation based on the planned 15 June 2018 transaction closing date. We estimate the acquisition to be 9% accretive to cash flow per share in 2019 and 10% in 2020. Our valuation rises from C$48.2/share to C$/53.8/share as a result.

Analyst avatar placeholder

Written by

Vermilion Energy

Spartan - a value-accretive transaction

Acquisition

Oil & gas

10 May 2018

Price

C$44.4

Market cap

C$5452m

US$/C$1.29

Net debt (C$bn) at 31 March 2018

1.3

Shares in issue

122.8m

Free float

94%

Code

VET

Primary exchange

TSX

Secondary exchange

NYSE

Share price performance

%

1m

3m

12m

Abs

5.3

3.7

(3.5)

Rel (local)

2.6

0.2

(13.4)

52-week high/low

C$40.3

C$30.0

Business description

Vermilion Energy is an international E&P with assets in Europe, North American and Australia. Management expects FY18 production to average 86-90kboed after incorporating the acquisition of Spartan.

Next events

Q2 results

30 July 2018

Analyst

Sanjeev Bahl

+44 (0)20 3077 5742

Vermilion Energy is a research client of Edison Investment Research Limited

On 16 April 2018 Vermilion announced the proposed acquisition of Spartan Energy, a south-east Saskatchewan producer with estimated 2018 production of c 23kboed (91% oil) for a consideration of C$1.4bn, funded through C$1.23bn in Vermilion shares and the assumption of c C$175m of debt. The deal was priced at a 5% premium to Spartan’s closing price and is recommended by its board. In this note we incorporate Spartan’s asset base into our Vermilion forecasts and valuation based on the planned 15 June 2018 transaction closing date. We estimate the acquisition to be 9% accretive to cash flow per share in 2019 and 10% in 2020. Our valuation rises from C$48.2/share to C$/53.8/share as a result.

Year end

Revenue
(C$m)

EBITDA*
(C$m)

Operating cash
flow (C$m)

Net (debt)/
cash** (C$m)

Capex ex
acquisitions (C$m)

Yield
(%)

12/16

828.5

361.7

509.5

(1,298.9)

(242.4)

5.9

12/17

1,024.4

673.5

593.9

(1,223.8)

(320.4)

5.9

12/18e

1,447.8

865.5

833.9

(1,330.2)

(435.2)

6.1

12/19e

1,841.6

1088.9

1,044.6

(1,228.9)

(561.9)

6.3

Note: *Reported EBITDA includes hedging and FX gains/losses. **Net debt = long-term debt, short-term debt minus cash and equivalents.

Accretive WTI leveraged transaction

Vermilion’s WTI exposure increases from c 16% of forecast 2018 production to 32%, with acquired volumes unhedged. The deal increases our valuation sensitivity to oil relative to European gas prices, and decreases exposure to low-netback North American gas prices. Our valuation is based on EIA short-term WTI forecasts of US$58.7/bbl in 2018, trending to US$70/bbl in 2022. A 10% increase/reduction in our price deck would drive a valuation of C$61.2/share/C$46.0/share respectively.

Synergies and material drill bit upside

Spartan’s asset base offers synergies with Vermilion’s existing south-east Saskatchewan (Sask) asset base. This includes pipeline and infrastructure optimisation, which should drive down unit opex as well as drilling/completion economies of scale, leading to reduced unit F&D costs. Synergies also exist across the areas of engineering, geoscience and corporate overhead. Our drilling inventory NPV10 benefits from the inclusion of a subset of Spartan’s 2,100 net conventional and unconventional drilling locations. This inventory comprises south-east Sask open hole locations where IRRs are estimated at 113-192% and fracked Midale and Torquay at 55-80%, all based on Spartan estimates.

Blended valuation of C$53.8/share

Our valuation methodology is outlined in further detail in our recent initiation note and uses a combination of P/CF, EV/EBIDAX, Gordon’s growth model and SOTP based on sustainable FCF and drilling inventory NPV10. The addition of Spartan drives a valuation upgrade of 11.6% to C$53.8/share, as we include higher forecast cash flows for 2019 and the NPV10 of Spartan’s drilling inventory.

Spartan acquisition metrics

Spartan’s asset base consists of high-netback (C$38.4/boe), light oil production covering 480,000 net acres in Saskatchewan, Alberta and Manitoba. Production in 2018 is expected to average c 23kboed from a 2P reserves base of 113.5mmboe (Sproule 20 Feb 2018) and the acquisition includes control of producing infrastructure as well as 2D/3D seismic datasets that offer synergies with existing assets. Post-acquisition, Vermilion guides to group production of 86-90kboed for FY18 (previously 75-77.5kboed) with an exit rate in excess of 100kboed.

Vermilion acquired Spartan under an all-share deal for a total consideration of C$1.4bn. This compares to Spartan’s last reported post-tax proven NPV10 value (Sproule price deck of US$55/bbl WTI in 2018 rising to US$70/bbl in 2020) of C$1.16bn and 2P valuation of C$1.7bn (both excluding debt of C$175m). We note that the valuation is highly levered to the oil price, with estimated FY18 production biased 91% towards oil and 2P reserves 92% towards oil and NGLs. Spartan volumes are unhedged.

Exhibit 1: Spartan NPVs at 31 December 2017

Source: Spartan Energy

Acquisition costs of C$19.2/boe (1P) and C$12.3/boe (2P) compare to Vermilion trading at C$27.8/boe at the time of our recent initiation (priced at 5 March 2018). Management estimates a reduction in leverage from 2x net debt to FFO to 1.4x for FY18. As the transaction is largely equity funded, we see a reduction in debt-based leverage metrics, remaining well within existing debt covenants. Vermilion maintains ample liquidity with over C$1.8bn of committed facilities (C$1.4bn of committed credit facilities and c.C$400m of long term notes) and C$1.36bn drawn as of end Q118.

Exhibit 2: Leverage metrics versus existing debt covenants

Source: Edison Investment Research

Cash flow per share accretion

After incorporating Spartan in our model, we see cash flow per share accretion of 9% in FY19e and 10% in FY20e after completion of the acquisition in mid-June 2018. A 2% downgrade in our 2018 cash flow per share (CFPS) forecast is driven by lower underlying production than previously forecast after marking to market for Q118 actuals. Cash flow from the Spartan asset base is expected to more than cover the incremental dividend on new Vermilion shares and an increase in group capex of c C$105m.

Exhibit 3: CFPS accretion post Spartan acquisition

Exhibit 4: Spartan delivers excess cash flow for debt service and selective investment

Source: Edison Investment Research

Source: Edison Investment Research

Exhibit 3: CFPS accretion post Spartan acquisition

Source: Edison Investment Research

Exhibit 4: Spartan delivers excess cash flow for debt service and selective investment

Source: Edison Investment Research

Valuation increases from C$48.2/share to C$53.8/share

Our valuation increases by 11.6% to C$53.8/share after including the Spartan asset base and acquisition consideration. Our valuation is based on four valuation approaches, as shown in Exhibit 5 and described in our recent initiation note. Our valuation range stands at C$40.8-53.8/share and we expect Vermilion to trade towards the top end of this range based on its track record of reserves and production growth, peer-leading dividend yield, low F&D costs, and commitment to emission disclosure and reduction. We provide a valuation sensitivity to the underlying commodity price in Exhibit 6 below.

Exhibit 5: Valuation range C$40.8-53.8/share

Exhibit 6: Valuation sensitivity to commodity price FY19e*

Source: Edison Investment Research. Note: Ke = required rate of return.

Source: Edison Investment Research. Note: *Base case commodity benchmark prices in Exhibit 7.

Exhibit 5: Valuation range C$40.8-53.8/share

Source: Edison Investment Research. Note: Ke = required rate of return.

Exhibit 6: Valuation sensitivity to commodity price FY19e*

Source: Edison Investment Research. Note: *Base case commodity benchmark prices in Exhibit 7.

Commodity price leverage and valuation

Benchmark commodity prices for FY19 are a key sensitivity to our group valuation. Exhibit 7 below indicates this sensitivity by flexing our commodity price inputs for 2019 by ±30%. Our valuation varies from C$30.5/share to C$75.7/share over this range, with the market implied discount to our commodity price deck for 2019 at c -12%.

Exhibit 7: Midpoint valuation sensitivity to commodity price input for FY19 (base case in bold)

Brent/(US$/bbl)

43.9

50.1

56.4

62.7

68.9

75.2

81.5

WTI/(US$/bbl)

41.1

46.9

52.8

58.7

64.5

70.4

76.3

NBP (C$/mmbtu)

4.9

5.6

6.3

7.0

7.7

8.4

9.1

AECO (C$/GJ)

1.2

1.4

1.5

1.7

1.9

2.0

2.2

TTF (C$/GJ)

4.9

5.6

6.3

7

7.7

8.4

9.1

-30%

-20%

-10%

0%

10%

20%

30%

C$/share

30.5

38.3

46.0

53.7

61.2

68.5

75.7

Source: Edison Investment Research

Shift in commodity exposure

As a result of the acquisition of Spartan, Vermilion’s commodity exposure increases its bias towards WTI away from European gas and low-netback North American gas prices. 2018e production (Vermilion mid-case guidance) shifts from 46% (Brent, WTI and NGLs) to 53%, Canadian gas drops from 24% of expected production to 22%, and European gas from 30% to 25%. Our production profiles below show our forecasts by geography and commodity post transaction.

Exhibit 8: Production split by commodity

Exhibit 9: Production split by geography

Source: Edison Investment Research

Source: Edison Investment Research

Exhibit 8: Production split by commodity

Source: Edison Investment Research

Exhibit 9: Production split by geography

Source: Edison Investment Research

Risks and sensitivities

Key company-specific risks and sensitivities include:

■

Political risks: Vermilion is exposed to fiscal and political changes in countries of operation. We see the greatest risk to operations in Europe, where the French Parliament recently approved a law banning all new exploration and production of oil and gas from 2040. This is in addition to a ban on fracking, which came into place in 2011.

■

Dividend risks: Cash dividends are paid at the discretion of the Vermilion board of directors and can fluctuate. Dividend payments will depend on the outlook for commodity prices, operational performance, fund flows from operations and anticipated capex spend. As such, we expect gross cash dividends to be maintained, with potential to be increased over our forecast period.


Key sector-specific sensitivities include:

■

Commodity price sensitivity: We provide a valuation sensitivity (Exhibit 7 to key benchmark prices in the valuation section of this note. As with most companies in the E&P sector, valuation is highly sensitive to the underlying commodity price.

■

Subsurface risk: Estimates of 1P and 2P reserves are underpinned by assets that are already in production, hence uncertainty about the reserve range is likely to be well defined. As with all companies in the sector, reserves and resources are defined by distributions and the amount of oil and gas recovered can differ from published point values.

■

Funding risks: Vermilion is relatively unlevered and cash generative and, based on current capex plans, we do not see funding as a risk. We forecast Vermilion to be significantly cash generative over the forecast period, with minimal risk to debt coverage, capex spend or dividend payout.

Financials

Edison versus consensus post acquisition

Our forecasts are higher than Bloomberg consensus for 2018 and 2019, as we include the positive impact of Spartan and assume continued drilling activity across the company’s asset portfolio in line with its announced 2018 capex programme. It is unclear how much incremental activity consensus includes over and above maintenance capex in future forecasts and not all analysts included in Bloomberg consensus have updated their forecasts to reflect the acquisition of Spartan. We would expect consensus to rise as forecasts are revised.

Exhibit 10: Edison forecast versus Bloomberg consensus

C$M

Edison

Consensus

Delta

2018e

2019e

2018e

2019e

2018e

2019e

Production

87.3

109.0

83.4

94.1

5%

16%

Revenues

1448

1842

1410

1590

3%

16%

Adj EBITDA*

894

1118

857

961

4%

16%

EBIDAX

837

1038

N/A

N/A

 

 

FFO

887

1104

N/A

N/A

 

 

CFPS

5.5

6.9

6.2

6.8

-11%

1%

Capex ex acquisitions

435

562

478

18%

Source: Edison Investment Research, Bloomberg. Note: *Adjusted for non-cash items.

Exhibit 11: Revenue and EBIDAX forecasts

Exhibit 12: CFPS and DPS forecasts

Source: Edison Investment Research, Vermilion Energy

Source: Edison Investment Research, Vermilion Energy

Exhibit 11: Revenue and EBIDAX forecasts

Source: Edison Investment Research, Vermilion Energy

Exhibit 12: CFPS and DPS forecasts

Source: Edison Investment Research, Vermilion Energy

Exhibit 13: Financial summary

 

C$m

2016

2017

2018e

2019e

2020e

Dec

 

 

IFRS

IFRS

IFRS

IFRS

IFRS

PROFIT & LOSS

 

 

 

 

 

 

 

Revenue

 

 

 

829

1,024

1,448

1,842

2,038

Cost of Sales

 

 

(262)

(286)

(444)

(604)

(635)

Gross Profit

 

 

567

739

1,004

1,237

1,403

EBITDA

 

 

 

362

673

866

1,089

1,254

Operating Profit (before amort. and except.)

 

(166)

182

204

263

403

Intangible Amortisation

 

0

0

0

0

0

Exceptionals

 

 

0

0

0

0

0

Other

 

 

 

0

0

0

0

0

Operating Profit

 

 

(166)

182

204

263

403

Net Interest

 

 

 

(57)

(57)

(60)

(57)

(50)

Profit Before Tax (norm)

 

(223)

124

144

206

353

Profit Before Tax (FRS 3)

 

(223)

124

144

206

353

Tax

 

 

 

63

(62)

(57)

(80)

(93)

Profit After Tax (norm)

 

 

(243)

104

126

126

260

Profit After Tax (FRS 3)

 

 

(160)

62

87

126

260

Average Number of Shares Outstanding (m)

 

116

121

144

152

153

EPS - normalised (C$/share)

 

(2.1)

0.9

0.9

0.8

1.7

Dividend per share (C$/share)

 

2.6

2.6

2.7

2.8

2.8

 

 

 

 

 

 

 

 

 

Gross Margin (%)

 

 

68

72

69

67

69

EBITDA Margin (%)

 

 

44

66

60

59

62

Operating Margin (before GW and except.) (%)

 

(20)

18

14

14

20

BALANCE SHEET

 

 

 

 

 

 

 

Fixed Assets

 

 

3,861

3,713

3,810

3,546

3,232

Intangible Assets

 

 

275

293

298

323

323

Tangible Assets

 

 

3,433

3,338

3,414

3,124

2,810

Investments

 

 

153

82

99

99

99

Current Assets

 

 

226

262

304

305

343

Stocks

 

 

 

15

17

22

22

22

Debtors

 

 

 

132

166

166

166

166

Cash

 

 

 

63

47

89

90

129

Other

 

 

 

17

32

27

27

27

Current Liabilities

 

 

(291)

(363)

(385)

(385)

(385)

Creditors

 

 

 

(218)

(258)

(294)

(294)

(294)

Other short term liabilities

 

(73)

(105)

(91)

(91)

(91)

Long Term Liabilities

 

 

(2,218)

(2,069)

(2,303)

(2,228)

(2,010)

Long term borrowings

 

 

(1,362)

(1,270)

(1,419)

(1,319)

(1,073)

Other long term liabilities

 

(856)

(798)

(884)

(909)

(937)

Net Assets

 

 

 

1,578

1,543

1,426

1,237

1,180

CASH FLOW

 

 

 

 

 

 

 

Operating Cash Flow

 

 

510

594

834

1,045

1,207

Capex

 

 

 

(242)

(320)

(435)

(562)

(538)

Acquisitions/disposals

 

(99)

(28)

(1,372)

0

0

Financing

 

 

 

(17)

(4)

1,241

(5)

(5)

Dividends

 

 

 

(105)

(200)

(306)

(377)

(379)

Net Cash Flow

 

 

47

41

(38)

101

285

Opening net debt/(cash)

 

1,346

1,299

1,224

1,330

1,229

HP finance leases initiated

 

0

0

0

0

0

Other

 

 

 

0

34

(68)

0

0

Closing net debt/(cash)

 

 

1,299

1,224

1,330

1,229

944

Source: Company accounts, Edison Investment Research. Note: Edison calculates net debt as long-term debt, plus short-term debt minus cash and cash equivalents. We assume completion of the proposed Spartan acquisition at the planned closing date of 15 June 2018.

Edison is an investment research and advisory company, with offices in North America, Europe, the Middle East and AsiaPac. The heart of Edison is our world-renowned equity research platform and deep multi-sector expertise. At Edison Investment Research, our research is widely read by international investors, advisers and stakeholders. Edison Advisors leverages our core research platform to provide differentiated services including investor relations and strategic consulting. Edison is authorised and regulated by the Financial Conduct Authority. Edison Investment Research (NZ) Limited (Edison NZ) is the New Zealand subsidiary of Edison. Edison NZ is registered on the New Zealand Financial Service Providers Register (FSP number 247505) and is registered to provide wholesale and/or generic financial adviser services only. Edison Investment Research Inc (Edison US) is the US subsidiary of Edison and is regulated by the Securities and Exchange Commission. Edison Investment Research Pty Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

DISCLAIMER
Copyright 2018 Edison Investment Research Limited. All rights reserved. This report has been commissioned by Vermilion Energy and prepared and issued by Edison for publication globally. All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report. Opinions contained in this report represent those of the research department of Edison at the time of publication. The securities described in the Investment Research may not be eligible for sale in all jurisdictions or to certain categories of investors. This research is issued in Australia by Edison Investment Research Pty Ltd (Corporate Authorised Representative (1252501) of Myonlineadvisers Pty Ltd (AFSL: 427484)) and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. The Investment Research is distributed in the United States by Edison US to major US institutional investors only. Edison US is registered as an investment adviser with the Securities and Exchange Commission. Edison US relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. As such, Edison does not offer or provide personalised advice. We publish information about companies in which we believe our readers may be interested and this information reflects our sincere opinions. The information that we provide or that is derived from our website is not intended to be, and should not be construed in any manner whatsoever as, personalised advice. Also, our website and the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. This document is provided for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research. Edison has a restrictive policy relating to personal dealing. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report. Edison or its affiliates may perform services or solicit business from any of the companies mentioned in this report. The value of securities mentioned in this report can fall as well as rise and are subject to large and sudden swings. In addition it may be difficult or not possible to buy, sell or obtain accurate information about the value of securities mentioned in this report. Past performance is not necessarily a guide to future performance. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (ie without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision. To the maximum extent permitted by law, Edison, its affiliates and contractors, and their respective directors, officers and employees will not be liable for any loss or damage arising as a result of reliance being placed on any of the information contained in this report and do not guarantee the returns on investments in the products discussed in this publication. FTSE International Limited (“FTSE”) © FTSE 2018. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Edison is an investment research and advisory company, with offices in North America, Europe, the Middle East and AsiaPac. The heart of Edison is our world-renowned equity research platform and deep multi-sector expertise. At Edison Investment Research, our research is widely read by international investors, advisers and stakeholders. Edison Advisors leverages our core research platform to provide differentiated services including investor relations and strategic consulting. Edison is authorised and regulated by the Financial Conduct Authority. Edison Investment Research (NZ) Limited (Edison NZ) is the New Zealand subsidiary of Edison. Edison NZ is registered on the New Zealand Financial Service Providers Register (FSP number 247505) and is registered to provide wholesale and/or generic financial adviser services only. Edison Investment Research Inc (Edison US) is the US subsidiary of Edison and is regulated by the Securities and Exchange Commission. Edison Investment Research Pty Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

DISCLAIMER
Copyright 2018 Edison Investment Research Limited. All rights reserved. This report has been commissioned by Vermilion Energy and prepared and issued by Edison for publication globally. All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report. Opinions contained in this report represent those of the research department of Edison at the time of publication. The securities described in the Investment Research may not be eligible for sale in all jurisdictions or to certain categories of investors. This research is issued in Australia by Edison Investment Research Pty Ltd (Corporate Authorised Representative (1252501) of Myonlineadvisers Pty Ltd (AFSL: 427484)) and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. The Investment Research is distributed in the United States by Edison US to major US institutional investors only. Edison US is registered as an investment adviser with the Securities and Exchange Commission. Edison US relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. As such, Edison does not offer or provide personalised advice. We publish information about companies in which we believe our readers may be interested and this information reflects our sincere opinions. The information that we provide or that is derived from our website is not intended to be, and should not be construed in any manner whatsoever as, personalised advice. Also, our website and the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. This document is provided for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research. 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Frankfurt +49 (0)69 78 8076 960

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Germany

London +44 (0)20 3077 5700

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United Kingdom

New York +1 646 653 7026

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US

Sydney +61 (0)2 8249 8342

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Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Volt Resources — Positioning for the next phase

Volt’s quarterly report provides few surprises, with all critical path work programmes and project financing requirements still in a state of progress. Unfortunately, delays getting core samples out of Tanzania has caused Volt’s management to push out deadlines for the estimation of resources and reserves, the calculation of production schedules and also revenue projections. With the much-awaited Stage 1 Bunyu feasibility study (FS) due by the end of June, as well as financing and project approvals, the next few months will be critical for the company to demonstrate its abilities to get Bunyu firmly into the next stage of its development.

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