Meren Energy

MER made me a little nervous when it released a big drawdown in reserves values and projected production volumes for this year. It's really no surprise given that it didn't drill any wells in 2025 and that it isn't expected to restart drilling until late 2026. I halved my position just in case the company gets the idea of temporarily cutting the dividend this year, but with oil prices where they are, that's not going to be a problem for MER at this stage. I'll look to increase my position here on either an acquisition or when drilling resumes. MER stands out as a very high-yield oil story.

MER had a big move earlier this month after Total Energies detailed its plans for the Venus oil development offshore Namibia where MER has a 3.8% interest carried to production (i.e., no capex), as well as material exploration acreage along the Namibian and South African offshore. That 3.8% interest would be about 5,700 bopd net to MER, which is not insignificant on its 35,000 bopd production base. Total estimates costs of $20/bbl at Venus, meaning that at $60 oil, MER's net interest would generate something like C$90 million of annual cash flow (net of costs and tax). First oil from Venus is contemplated in 2030, which really isn't that far away. In any case, by 2030, the NPV of that interest should be worth something like C$400-500 million based on some napkin math. In the meantime, MER is expecting to see development and exploration drilling on its Nigerian asset base where it is partnered with Total and Chevron in 2026 after a pause in 2025. Overall, MER is cheap-ish, but the kicker with MER is the yield... MER pays 3.7 cents U.S. per quarter... that's about 20 cents Canadian per year... meaning that at a $2.20 share price the yield is 9.1% with a free call option on its exploration portfolio and the Venus development. MER has been paying down debt and exhibits a low debt-to-cash flow ratio while paying its dividend. As the debt is reduced further, MER could arguably have the capacity to increase dividends further. There was a change in CEO recently and I'll be watching the company's messaging to see which direction they are going... they could just be a steady dividend story, they could be a growth-through-targeted-acquisition story, or a growth through exploration story. While I wait to see how this is going to play out, I'm long a decent chunk of MER for its juicy dividend. MER has been a good performer since it was first mentioned here and it should get active on the exploration and development drilling front in 2026.

MER has quietly moved into the $1.90's on no news. I wanted more dividend yields, so I doubled my position in the low $1.80's. I'm not worried about the day-to-day here. The current dividend yield is still over 10% and all of my previous comments are still the case, so MER could still have an interesting 2026 with a Venus resource estimate and FID, exploration drilling offshore Nigeria, and perhaps exploration drilling in the South African section of the Orange Basin.

Meren still trades with a double-digit (~11.3%) dividend yield (paid quarterly) and provides good upside optionality offshore West Africa (Nigeria, Namibia, and South Africa) that comes at arguably no cost.

Patient money can park here and get paid to wait as it rides along with supermajor operators Total and Chevron (they run MER's Nigerian production base). The offshore Venus oil megaproject (Namibia) is expected to see a final investment decision in 2026 and MER's 3.8% effective carried interest (carried to production) could be worth something like 50c a share or more in due course, excluding any upside from the rest of MER's exploration portfolio.

Additionally, a near-field exploration well (Akpo Far East) is planned on MER's Nigerian asset base, while exploration drilling (funded by MER's JV partners Total and QatarEnergy) in the South African section of the Orange Basin may be on the table in 2026 depending on permit timing. This isn't going to multi-bag, but there's a lot of embedded optionality for a stock with an 11% yield and no balance sheet stress.

Last but not least, I'll flag Meren Energy after thinking about it a little more lately. This, for me, looks like an attractive yield play. MER pays a quarterly dividend of 3.71 cents U.S., for a total 14.84 cents U.S. per year. Factor in the exchange rate and that's an annual yield of about 11.5% for MER at C$1.80. Now that is quite a yield. MER has (all numbers USD) $175 million in cash and $330 million of reserve-backed-lending debt. Cash flow in the first 9 months of the year (2025 YTD) totalled $240 million. They have been paying down their debt aggressively out of free cash flow as this year has been light on capex. In 2026 and 2027, they will get more active with the drill bit, including the potential testing of a 143 mmboe near-field exploration target which would extend the life of their assets further. Recall that MER's partners in the offshore Nigerian assets are Total and Chevron. MER is a minority partner in the Nigerian production assets… like a creek fed by the cash flow streams of two majors. So with a yield like that, the question is, "Is the dividend safe?" I think so. I don't see any reason why MER would have reason, or motivation, to cut its dividend unless oil prices fell substantially — in which case the whole group would suffer. MER's debt looks manageable relative to cash flow and is dropping, and I'm getting a free ride on the potential Venus mega-project offshore Namibia (MER has an effective 3.8% carried interest through to production there, with no financial cap) and MER's offshore exploration portfolio in the Orange basin. Earlier this year MER's ownership structure of the offshore Nigerian assets was simplified when MER's private partner rolled into MER in exchange for stock. That deal was done on metrics that were accretive to MER shareholders and I think the story is pretty simple to understand here. I just don't think many people are looking. At this yield, with these production partners, and this exploration/development upside, there's a place for this one in my stable today.