Tenaz is currently my largest position, and by far. I bought alot of shares at an avg cost of $2.25 and have held them all since. The majority of my account is now Tenaz due to the 10x in price, and the fact I went 50% in at the time was a great move, but in hindsight maybe too aggressive, but I guess with foresight I should of gone further in! Either way, the fact a large bet has moved so much and my other bets have moved very little, means I am sitting on alot of allocation to Tenaz (one win pays for them all). Its a nice situation to be in to try and find things which I'd like to sell Tenaz for. In order to sell I will incur the dreaded CGT which will go to Sir Kier (terrifying). Its hard for me to sell any shares now given the opportunity set I see out there as I compare to what I think Tenaz will bring to the table in terms of more deals and unlocking the asset potential within there current DNS portfolio.
You are probably thinking going in 50% at 2.25 was a crazy move. But my thinking behind it was; they just did there first NL deal with no money down and it was on the back of VLE's great deal where they handed over a bag of chips for 20k bpd in Thailand. So I could sort of see where TNZ was going by then, mature assets with lockboxes and very little upfront capital down due to ARO. And then the real nail in the coffin for my allocation was hearing Tony on a podcast with Shubham Garg (of all people?!) saying he was looking to do 5,6 figure production deals and then grow from there. Instantly my hair went up and I started buying shares over the next 2 months until I was more than fully allocated. A few months later they did the XTO deal, stock ripped into the 3's and 4's, and then in September Bloomberg leaked that TNZ was preferred bidder on NAM offshore so I held on, and the rest is history.
As Tenaz looks to grow its organic production at both Netherlands and Canada, everyone awaits the next great deal. Likely possibilities are anything in the Dutch North Sea, from Eni, Totalenergies, OneDyas, Wintershall Nordeeze, TAQA, and Vermilion Offshore all likely candidates. My preferred and most likely are Totalenergies and Eni. TTE assets look much unloved like the NAM assets with a single operator since inception more or less, these assets havent had the operator turnover that you see in North America where a new operator will bring new ideas and capital to a project to unlock value with. Both Eni and TTE assets have decent production, around 9-14k boepd each, and would offer great synergies into Tenaz Energy Netherlands. TTE doesnt have much in the way of midstream, whereas Eni has NGT and NOGAT stakes. TTE production is largely in just 4 blocks adjacent to blocks TNZ acquired from NAM. Eni has more production, but also much more sporadic blocks and infrastructure, but would enable TNZ to operate the majority of there production. Could TNZ buy both assets? Hard to know, but from managements comments, I'd say they'll get at least one. And if on similar terms to NAM, they'll be steals.
And then comes what outside of Netherlands could be open to them? Well, if you google search "tenaz energy 'country' BV", you get Mexico and Poland. Which clearly leads to thinking they have deals advancing in either country. Poland makes sense given they have taken over NAM staff within Poland already to do admin work. Tenaz could of opted to create deeper NL offices, but opted to retain the existing Shell structure. As for which asset in Poland, its hard to guess as there isnt much to go off. Maybe they do a deal with the gov like Horizon Petroleum (HPL.V) did. Or maybe they take something from Orlen's hands. Which might be plauisble. For keen eyes, you'd note the Tenaz map has changed in the last year to include Lithuania and some other countries surrounding it. Lithuania has one oil asset I can see which is owned by Orlen. So it links maybe Tenaz is dealing with Orlen for Polish and Lithuanian assets. As for Mexico, there are a few asset possibilities, Hokchi Energy (the PAE sub), maybe BP is looking to divest higher cost bbls and pay off debt? Hokchi did sell down to HBR.L, and HBR is big into Mexico developments as it is, so maybe TNZ could get that asset portfolio. Or maybe Cheiron's assets even. I cant imagine Perenco selling as they never do, but something to consider. A word on Perenco, they took a 5k bpd asset and built it into 20k bpd so that shows the opportunity on hand in the country for a new savvy operator. Also within Europe I have Croatia as a place maybe they'd expand in. Tony did it previously whilst at VET and I noticed lots of MOL/INA employees liking TNZ posts on linkedin. Another asset package I had was the onshore equiv of NAM in Germany. Lots of sour gas, and very undercapitalised with no drilling since 2015. Another country is Romania. Tony did a conference there in 2022 and I see OMV Petrom is looking to divest mature oil assets in the country as they seek to expand there gas portfolio in the Western Black Sea.
But the real hard thing with TNZ is valuation. Its relatively straightforward to value the DNS portfolio and Leduc asset (McDaniel does it for us), but how do you value the M&A optionality in an E&P like this? No other company has the M&A potential and breadth of opportunity like Tenaz does. They just bought NAM offshore for 8mm EUR effecitvelly (plus cotingent payments) and it produces 90mm EUR FCF. Its insane, like a 0.1x multiple on earnings. But how do you value a company which 'might' pull off a 1bn deal and only have to hand over say 50-100mm, and creating 900mm in value? Chose any number you want, whether its 100,200,500mm, the price effecitvely doubles from here with 500mm in value-creation. Its all to do with the lockbox mechanism which is used in intl deal making outside of US/Canada. Majors want to divest mature assets, and there just isnt the qualified bidders right now to scoop the assets up in selected countries. Its the opportunity of a lifetime to be building an oil and gas business in say the Netherlands. Even if the TTF price comes down to 25, TNZ still paid just 8mm EUR for the asset so they have very little risk at the opening. And as they scale production, cut fixed costs, the price to produce a gas molecule will drop over the asset also. The downside on this deal to the company is minimal. Let alone buying TTE/Eni assets and further enhancing economies of scale.
If TNZ does get the TTE and/or Eni assets in DNS, then I can see Tenaz Energy Netherlands (TEN) becoming a 50k boepd asset down the line, this would of course entail alot of drilling and development work. If they have exploration success in the northern blocks then new platforms will be needed. New wells should come on around 20-30mmcf/d and TNZ having on average 45-50% in each well I imagine, so you can soon add low decline production with those sort of figures. The water depth is shallow, around 30-40m and drilling should be quite rudimentary given the history and data with the basin. I assume drilling times of around 3 months per well, or 4 wells a year. They have a rig contracted for 1 year with 2 years of further extensions, so they have enough work cut out for them if pricing allows (which I think it will). They also have the largest gas gathering system in Europe sitting there underutilised, and TNZ having ownership and operatorship over a good majority of the network gives them great clout. The only one they dont have equity in is NOGAT, but they do operate Den Helder plant which NOGAT feeds into. If TNZ were to acquire Eni then they would have equity in NOGAT, couple that with production increases and Tenaz Energy Netherlands Pipelines BV could be worth a pretty song (predictable and reliable FCF). I imagine they'd look to monetize whilst keeping a small equity position as if you have equity in the pipeline you get discounted transportation costs. But in essence, TNZ could sell there high multiple asset and buy more lower multiple E&P assets with it and further enhance the FCF profile of the business without needing to raise capital via debt markets. I think its entirely possible TNZ could take there pipeline assets from around 15mm in FCF to >40mm, slap a 8x multiple on and its a 320mm asset for them, or just under half todays market cap. Of course that would mean buying Eni and scaling production, but its all stuff thats important in determining total upside potential.
So what is the end goal here? Well its no secret the team have a goal to create a 50-100k boepd company capable of returning cash to shareholders via buybacks and dividends. When management started TNZ the initial goal was to return via dividends, but the recent tone has been centered on buybacks. This is a sharp change in rheteroic given Tonys previous companies which were heavily focused on dividends. This show malleability and a willingess to adapt to capital markets demands. Buybacks are much more tax efficient and shareholders can elect to take cash out of the company when and how they chose at lower tax rates. Also, the market gets turned on for a company growing its top line and shrinking its share count, much more so than a dividend in a E&P which will yield say 10% like PXT, PTAL for example. But if you can show consistent buybacks and per share growth, suddenly you're a legend. I think personally that the 50-100k boepd is a milestone, I think the ambition will be to grow as much as possible if accretive deal making allowed for it. Tony mentioned on one video interview they were bidding on a multi-national asset portfolio of 125k boepd for example, far more than the 50-100k boepd goal. So if TNZ were to hit 50-100k boepd I wouldnt see this is a sell signal and that they had hit a ceiling, but rather see it as a milestone. There seems to be no shortage of mature assets within Europe, LatAm, an MENA which are screaming out for a new savvy opertator to take over from the SM's in restoring growth and investing hundreds of millions into drilling optimizing plant operations.
But lets take the Netherlands. If you didnt get the memo, there seems a high chance of growing both inorganically and organically, and I believe this could be a 50k boepd asset for them which will complete the lower end of there stated goal. Add on anoter country or two of similar scale and you have a decent company with decent production and reserves, and also a company which could be quite attractive from an M&A perspective
- My old VIC write-up which was declined at 3.90