MGI Recommendation Recommendation
We reiterate our Speculative Buy recommendation and $8.00 target price, based on a 1.0x multiple of our
estimate of risked net asset value. Our target price represents a potential return of 250.9% from the recent closing price of $2.28. Our recommendation remains speculative, mainly due to the company’s lack of production base or reserves in this formative stage of development.
We welcome the operational update FO has provided, since trading activity seemed to indicate an assumption of negative results by parts of the market, which has now been clearly refuted by the company. We note that this is now the second time since the start of the year that the company has felt compelled to issue a reactionary press release to negative press coverage or rumors (see the company’s press release of Jan. 10, 2007). Since we expect
timelines for release of flow testing information to remain uncertain, we believe that rumors and uncertainties could
continue to influence the company’s share price going forward. However, we aim to await the official release of
testing results before making any significant adjustment to our analysis of Falcon Oil & Gas