RE:Dundee buy rec with 14 CAD targetContinued...
Africa Oil in sweden up strongly after this rec came out.
""Africa Oil (AOI CN)
-
C$ 14.00 Target, BUY
The commerciality of the Lokichar basin appears increasingly likely, underpinned by
recent analysis of well testing and log data from Ngamia and Twiga South-thicker net pay coupled with greater permeability within the upper sands contribute to a revised gross mean
unrisked estimate of 250 mmbbls for these two discoveries.
Note that this estimate excludes the western fault block at Ngamia, currently attributed 137
mmbbls on a gross, unrisked best-case basis.
Furthermore, the conspicuous success at Ngamia and Twiga has clearly derisked the Lokichar
basin, and in particular other prospects that abut the basin bounding fault, such as Ekales¿a 64 mmbbls(best case, unrisked)prospect due to spud in August.
Both Tullow Oil (TLWLN, not covered) and Africa Oil now both refer to ¿advancing towards
the commercial threshold for development¿. Indeed, Africa Oil has assembled a technical
team to commence planning for an early development scheme and large-scale pipeline.
On the eastern flank of the Lokichar basin, the ongoing Etuko-1 exploration well
encountered 40 metres of net pay within the Auwerwer and Upper Lokhone sands; results
from the main objective-the Lower Lokhone sands, assigned 231 mmbbls (gross, best-case,
unrisked) on the basis of 50 metres of net pay-are expected by end-July.
Elsewhere,Africa Oil's fully-funded2013 exploration drilling programcontinues to offer significant
near-term upside potential: whilst the recently drilled Sabisa-1 frontier exploration well
on Ethiopia¿s South Omo block is not a discovery itself, it has demonstrated that the key components for future exploration success are in place¿an oil-prone source rock, reservoir-quality sands and a thick shale section.
Tultule,a nearby prospect,offers a horst-block structural trap¿thus potentially completing
the ¿jigsaw¿ required for a successful discovery.
Tultule-1 is expected to spud in late 3Q13.
With four active 2D seismic crews and a 3D seismic crew being mobilised to the Lokichar
basin, three rigs in operation and three further rigs about to mobilise, Africa Oil's forward
exploration campaign should deliver newsflow on a near-monthly basis.
Our overall ¿base case¿
risked NAV stands at C$13.95/share¿which equates to 500 mmbbls
of net recoverable oil, or a 5.3% chance of success across the company's entire unrisked
resource base (excluding Somalia).
We remain BUY rated with a C$14.00/share target, the latter based on 1X our 'base case' risked
NAV.
Key Upcoming Catalysts: Etuko-1 Well, Block 10 BB: reach TD late July Ekales, Block 13T: spud late July Tultule exploration well, South Omo Block: spud late 3Q13
Updated CPR: 3Q13"
Regards FH_Trader