Navitas Petro in the first quarter: Shenandoah proves production, Sea Lion raises the capital test

Navitas Petro opened 2026 with a strong answer to one of the questions left after the previous annual analysis: Shenandoah is not only in production, it already carries almost the entire quarter. Revenue was $238 million and EBITDA reached $188.2 million, while the partnership's share of Shenandoah production averaged about 55 thousand barrels of oil equivalent per day and the FPS operated continuously throughout the quarter. But this quarter also sharpens the cost of expansion: profit attributable to unit holders was only $3.2 million, mainly because of financing, FX and debt refinancing costs, while net financial debt already stands at about $1.43 billion. Sea Lion is progressing, but the relocation of FPSO upgrade works added $45 million to the project budget on a 100% basis and lifted the equity the partnership expects to provide to about $773 million, until the first project-finance draw expected at the end of the first quarter of 2027. Block 1 CBK in South Africa adds a large, relatively low-cost exploration option, but at this stage it is prospective resource exposure, not cash-flow value. So the quarter is positive as production proof, but still incomplete for unit holders: the Shenandoah cash exists, yet it is already competing with the RBL, dividend, hedging, Sea Lion, Monument and a new exploration layer.

Shenandoah is no longer a promise, it is the 2026 cash source

The important move in the quarter is not the revenue jump by itself. It is Shenandoah's shift from a field promising change to a field actually producing it. The partnership's share of production was 4.77 million barrels of oil equivalent in the quarter, including about 42 thousand barrels of oil per day on average, and Shenandoah contributed about $188.1 million to EBITDA. That explains why the previous annual analysis framed 2026 as an execution year: there is now an operating base from which every other promise can be tested.

The higher-quality data point is facility availability. The FPS worked continuously during the quarter with no shutdowns, and the partnership notes that after the end of March, total production remained high through the approval date, at 56.1 thousand barrels of oil equivalent per day, including 52 thousand from Shenandoah. At the same time, in April the partnership completed a shut-in of one producing layer in one well. That does not change the positive quarter, but it reminds investors that the next year is less about first oil and more about sustained production rate, well management and facility availability.

The planned expansion sharpens the same test. By the end of 2027, five development wells are expected to be added: two Monument wells, the fifth and sixth Shenandoah wells, and a first Shenandoah South development well. The positive scenario is that these wells increase FPS utilization and extend the production pace. The point to test is whether that timetable requires more investment before the existing cash flow is enough to serve both debt and growth projects.

There is also a more balance-sheet-oriented option. Based on media reports cited by the partnership, Shenandoah's operator is examining a possible sale of Hub rights at a valuation of about $10 billion for 100% of the rights. The partnership is considering selling up to 20% of its holdings if an attractive offer is received. That could crystallize value and reduce debt, but it would also reduce the partnership's future cash-flow share. For now, it is an option, not a secured cash source.

Net profit barely describes the quarter

The quarter shows an unusually wide gap between operations and the bottom line. Revenue rose from $17.6 million in the comparable quarter to $238 million, and EBITDA rose from $5.1 million to $188.2 million. Still, profit attributable to unit holders fell to $3.2 million from $11.1 million in the comparable quarter.

The gap does not mean Shenandoah is not working. It means the first quarter was also a heavy financing quarter. Net finance expenses were $100.9 million, partly because of about $50 million of expenses from early repayment of debt and financing facilities. About $34 million of that was non-cash amortization of discounts and issuance costs. The partnership also recorded about $22 million of FX expense, mainly because shekel liabilities exceeded shekel assets.

This is an important economic change: once Shenandoah began commercial production, part of the interest expense is no longer capitalized to oil and gas assets and instead moves through profit and loss. In Q1 2025, interest expenses were fully capitalized, so the net-profit comparison is misleading. The adjusted profit number the partnership presents, about $59 million excluding the one-time debt-refinancing loss and FX expenses, helps show the activity's earning power. But it is not free cash flow to unit holders: it does not replace the need to fund capex, dividends, hedging, interest and new wells.

Hedging also matters. The partnership recorded an other comprehensive loss of about $70 million on cash-flow hedges, and the RBL requires hedging a meaningful portion of expected production in the coming years. That protects the debt and the lenders, but it also makes part of the oil-price upside less accessible to unit holders.

All-in cash flexibility remains the test, not just cash on hand

All-in cash flexibility means how much room remains after actual cash uses: oil and gas investments, interest, debt refinancing, dividends and project commitments. This is not a normalized cash-generation view of Shenandoah alone, because the quarter includes significant growth capex in projects that are not yet producing. But for unit holders, this is the relevant frame now.

Operating cash flow was $95.8 million in the first quarter. Against that, the partnership invested $144.6 million in oil and gas assets and paid another $7.7 million of interest that was capitalized to oil and gas assets. In other words, even before the dividend paid in April, operating cash flow did not cover the group's reported capex. This is not an operating failure. It is the cost of running one producing asset while building several additional assets at the same time.

The $1.35 billion RBL solved one problem and created another test. It enabled repayment of the old Shenandoah financing, Series C and Series E bonds, preferred shares and the Trafigura facility, while also reducing net shekel exposure from about $853 million at the end of 2025 to about $407 million at the end of March 2026. At the same time, it moves cash access into a bank model based on reserves, oil prices, hedging and coverage ratios.

The RBL details matter more than the headline. The borrowing base will be redetermined starting in September 2026, the interest rate starts at Term SOFR plus 4.25%, net debt to adjusted EBITDAX is capped at 3.5, and the borrower must maintain a rolling hedge layer on part of expected production. This structure increases certainty for lenders, but reduces the partnership's room for maneuver if oil prices, production pace or project progress do not fit the model.

At the end of March, liquidity was $922.1 million, but that was before payment of the roughly $150 million dividend in April. Near the approval of the financial statements, liquidity was down to about $620 million, alongside about $250 million of undrawn RBL availability. Against that stood net financial debt of about $1.43 billion, including the dividend payable. The removal of negative watch on the bond ratings is an external signal that immediate pressure has declined, but it does not replace the 2026 and 2027 financing test.

Sea Lion and Block 1 CBK raise both optionality and proof burden

Sea Lion is the asset that could change the partnership's scale after Shenandoah, but the first quarter reminds investors that it is still pre-production and before the first project-finance draw. Phase A was approved in December 2025 with a development budget of about $1.8 billion on a 100% basis, and first oil is planned for March 2028. By the end of March, about 8% of development costs through first oil had been spent, so the project has moved from theoretical approval into execution, but most of the investment is still ahead.

The new event is the change in location for FPSO upgrade and adaptation works. Following the war with Iran in March 2026 and its consequences, the partnership moved the work from the Middle East to Southeast Asia. The change adds about $45 million to the project budget on a 100% basis and lifts the equity the partnership expects to provide to about $773 million, including the loan component to partner Rockhopper. This funding is expected to come from existing sources until the first project-finance draw, expected at the end of the first quarter of 2027.

What is working: Falklands works have started around the wharf and shore base, long lead items are being manufactured, the FPSO owner updated in early May that the vessel had finished serving its previous project and was expected to sail to the shipyard, and drilling is planned to begin in early 2027. Still, until project financing begins to be drawn and until the FPSO returns from the shipyard, Sea Lion consumes capital and does not generate cash.

Monument and Shenandoah South add to the same picture. In Monument, drilling of the first development and production well began in April, and first production is expected by the end of 2026. By the end of March, $12.3 million had been drawn from project financing, with another $14.5 million drawn afterward. In Shenandoah South, the first well was moved forward to 2027 and first production is expected in early 2028. These projects help keep Shenandoah as a high-production hub, but they still consume capital before they return cash.

Block 1 CBK is still an option, not a proven value layer

The South Africa transaction fits the partnership's exploration strategy: pay relatively little today to obtain operatorship in a basin that could be large. The partnership will acquire 37.5% of Block 1 CBK and become operator for $4 million, and will carry Azinam's share of costs up to $7.5 million with 8% annual interest. Completion is subject to South African regulator approval and approval by the additional license partner.

The attention-grabbing number is about 4.5 TCF of unrisked prospective gas resources. That is a large number, but it is not reserves and not contingent resources. Geological probabilities of success in the prospect and lead tables range from 5% to 35.1%, and the area does not yet have significant commercial activity or meaningful production and transport infrastructure. Block 1 CBK should therefore be read as a strategic option, not as a core component of current value.

The first quarter strengthens the partnership's operating read more than its accounting bottom line. Shenandoah has become a real EBITDA and cash source, but as the producing project proves itself, the need to separate project profitability from unit-holder flexibility grows. The rest of 2026 should be treated as a cash proof year: Shenandoah has to maintain a pace that supports the RBL borrowing base and hedging requirements while Sea Lion, Monument and Block 1 CBK continue to move without drawing too much capital too early. The near-term checkpoints are Shenandoah production stability, the RBL borrowing-base redetermination, Sea Lion FPSO progress toward the shipyard, Monument first production by the end of 2026 and approval of Block 1 CBK. If these move together, the first quarter will look like the start of a transition from a development company to a multi-asset producer. If one begins to slip, the market may go back to pricing the partnership mainly through debt, not through the size of its resource portfolio.