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Energy Co. Looks for Cash Producing Oil & Gas Assets in Africa

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Tenaz Energy Corp. reported it was unsuccessful in obtaining the number of votes needed from SDX Energy Plc.’s shareholders to acquire the company. The firm continues to search for other oil and gas assets to acquire in North Africa and the Middle East that are congruent with its high free cash flow generation strategy. Research Capital Corp. advised in a research note that it is maintaining its Speculative Buy rating and CA$5.00 Target Price on the company.

In a July 29 research update, Research Capital Corp. Energy Analyst Bill Newman, CFA advised that public energy company Tenaz Energy Corp. (TNZ:TSX), has terminated its plans to acquire SDX Energy, Inc. (LON:SDX).

The analyst commented that Tenaz Energy said it terminated its agreement to acquire SDX Energy after it was unable to secure the number of votes necessary from SDX Energy’s shareholders to go forward with the transaction. SDX owns producing assets in Egypt and Morocco which were believed to be a good fit with Tenaz’s corporate strategy. According to the analyst, for the deal to be approved, 75% of SDX shareholders would have had to vote in favor of the transaction. When SDX could not secure the required threshold, the company elected to terminate the arrangement.

Tenaz Energy is focused on the acquisition and sustainable development of global oil and gas assets with solid prospects of returning free cash flow to shareholders. The company also is involved in the development of a semi-conventional oil project in the Leduc-Woodbend area in central Alberta.

The report from Research Capital noted that even though the cancellation of the deal was unfortunate, Tenaz still has a strong financial position which will allow it to pursue investments in other conventional and semi-conventional oil and gas assets in the Middle East & North Africa (MENA) region and to continue developing its large Rex oil field in Canada. In the meantime, the company is continuing with its efforts to identify new international targets that have proven reserves that offer high margin, low decline production, and development upside to support a free cash flow and high dividend payout model.

The analyst indicated that the firm does not carry any debt on its balance sheet and that as of March 31, 2022, it had positive working capital of CA$21 million and access to a CA$16 million credit facility if needed. When the company issued its results for Q1/22 it stated that it is continuing to buy back shares under its previously announced Normal Course Issuer Bid.

Development and production at the company’s 44,000-acre Leduc-Woodbend Property Rex Oil Play are ongoing. The company holds an 87.5% working interest in the project which to date has 47 booked drilling locations. Research Capital mentioned that the property is expected to produce an average of 1,175 boe/d in 2022 that will provide a funds flow of CA$13.2 million.

Tenaz is an oil and gas exploration and production company based in Calgary that is engaged in the development of a large semi-conventional Rex oil pool in central Alberta Canada. The company is focused on acquiring and developing international oil and gas assets that are sustainable and capable of delivering free cash flow to shareholders. Tenaz Energy is actively seeking to establish new international operations in Europe, MENA, or South America.

Research Capital Corp. advised that it is maintaining its Speculative Buy rating and CA$5.00 price target for Tenaz Energy Corp. The research firm stated that though the cancellation of the acquisition presents a negative short-term impact for the company, the overall investment thesis remains intact.

Tenaz Energy Corp. shares trade on the Toronto Stock Exchange under the symbol “TNZ” and last closed for trading at CA$2.08 on Monday, August 1, 2022. The company has approximately 28.9 million (fully diluted) shares outstanding and a market cap of around CA$59.19 million.

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Disclosures for Research Capital Corp., Tenaz Energy Corp., July 29, 2022

Analyst Certification: I, Bill Newman, CFA, certify the views expressed in this report were formed by my review of relevant company data and industry investigation, and accurately reflect my opinion about the investment merits of the securities mentioned in the report. I also certify that my compensation is not related to specific recommendations or views expressed in this report. Research Capital Corporation publishes research and investment recommendations for the use of its clients. Information regarding our categories of recommendations, quarterly summaries of the percentage of our recommendations which fall into each category and our policies regarding the release of our research reports is available at or may be requested by contacting the analyst. Each analyst of Research Capital Corporation whose name appears in this report hereby certifies that (i) the recommendations and opinions expressed in this research report accurately reflect the analyst’s personal views and (ii) no part of the research analyst’s compensation was or will be directly or indirectly related to the specific conclusions or recommendations expressed in this research report. 

General Disclosures:  The opinions, estimates and projections contained in all Research Reports published by Research Capital Corporation (“RCC”) are those of RCC as of the date of publication and are subject to change without notice. RCC makes every effort to ensure that the contents have been compiled or derived from sources believed to be reliable and that contain information and opinions that are accurate and complete; RCC makes no representation or warranty, express or implied, in respect thereof, takes no responsibility for any errors and omissions which may be contained therein and accepts no liability whatsoever for any loss arising from any use of or reliance on its Research Reports or its contents. Information may be available to RCC that is not contained therein. Research Reports disseminated by RCC are not a solicitation to buy or sell. All securities not available in all jurisdictions.

Fair Dissemination of Research Reports and Ratings:  To the extent reasonably practicable, Research Reports will be disseminated contemporaneously to all of Research Capital Corporation (“RCC”) customers who are entitled to receive the firm’s research. Until such time, Research Analysts will not discuss the contents of their reports with Sales and Trading or Investment Banking employees. RCC equity research is posted to our proprietary website to ensure eligible clients receive coverage initiations and changes in rating, targets and opinions in a timely manner. Additional distribution may be done by the sales personnel via email, fax or regular mail. Please contact your investment advisor for more information regarding RCC research.

Potential Conflicts of Interest:  All Research Capital Corporation (“RCC”) Analysts are compensated based in part on the overall revenues of RCC, a portion of which are generated by investment banking activities. RCC may have had, or seek to have, an investment banking relationship with companies mentioned in this report. RCC and/or its officers, directors and employees may from time to time acquire, hold or sell securities mentioned in our Research Reports as principal or agent. RCC makes every effort possible to avoid conflicts of interest, however readers should assume that a conflict might exist, and therefore not rely solely on this report when evaluating whether or not to buy or sell the securities of subject companies.

RCC USA: Information about Research Capital Corporation’s Rating System, the distribution of our research to clients and the percentage of recommendations which are in each of our rating categories is available on our website at The information contained in this report has been drawn from sources believed to be reliable but its accuracy or completeness is not guaranteed, nor in providing it does Research Capital Corporation assume any responsibility or liability. Research Capital Corporation, its directors, officers and other employees may, from time to time, have positions in the securities mentioned herein. Contents of this report cannot be reproduced in whole or in part without the express permission of Research Capital Corporation. US Institutional Clients – Research Capital USA Inc., a wholly owned subsidiary of Research Capital Corporation, accepts responsibility for the contents of this report subject to the terms and limitations set out above. US firms or institutions receiving this report should effect transactions in securities discussed in the report through Research Capital USA Inc., a Broker – Dealer registered with the Financial Industry Regulatory Authority (FINRA).

( Companies Mentioned: LON:SDX, TNZ:TSX, )


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