| We are initiating research coverage on African Petroleum Corp Ltd. with a BUY investment rating and a A$1.85 12-month target price implying a target return of 81% from the March 28, 2011 closing price of A$1.02. Our 12-month target price is based on a 100% weighting to a 1.0 times multiple of our risked upside after-tax NAVPS estimate of A$1.83/FD share which reflects value for only two of four prospect areas on blocks LB-08 and LB-09 offshore Liberia. The Company has a dominant acreage position, a rigorous technical evaluation approach, has established a reputation for meeting exploration commitments on a timely basis, and is expected to drill two high-impact exploration wells in 2011 providing investors with near-term potential upside. With multiple prospects on each block, multiple examples of regional hydrocarbon occurrence, and a focused, experienced, and adept technical team, we have no doubt that APCL will make a discovery; we believe it is only a matter of time and capital availability. For investors with a speculative risk profile wanting exposure to offshore West Africa exploration we recommend adding this stock to portfolios ahead of 2011 drilling. EXECUTIVE SUMMARY African Petroleum Corp. Ltd. (APCL) is an emerging oil and gas exploration company with dominant land position offshore West Africa including blocks offshore Liberia, Sierra Leone, and Gambia. The Company has applied for more acreage and with government approval will increase its land position significantly by 2011 year-end. African is planning to drill two exploration wells on its Liberian blocks in 2011 providing investors with several potential high impact near-term catalysts. Key reasons to own this Company include the following: ? Dominant Land Position - Offshore West Africa is becoming one of the exploration hot spots on the Globe with recent major discoveries in the deep water by Tullow Oil Plc (TLW-L) {Jubilee field offshore Ghana} and Anadarko Petroleum (APC-N) {Venus and Mercury offshore Liberia}. Land grabs by majors and independents have already begun with the cost of exploration commitments increasing. African Petroleum recognized the potential of the area early and as a result of key relationships with government ministries, was able to execute first mover advantage establishing a dominant land position that will likely increase by YE/11. This makes the Company an attractive partner for larger players wanting exposure to the West Africa deepwater trend. |