On a risked basis, the broker estimates the assets are worth 16p compared to the current market price of 4p.
The flagship asset is Block LB-13 offshore Liberia, operated by ExxonMobil, where drilling of the Mesurado-1 exploration well is rapidly approaching.
“COPL guides towards drilling in late FY2016/early FY2017 and we believe that an early spud date is quite possible given the advanced stage of well planning. Importantly, COPL benefits from a lucrative $120mln gross carry, sufficient to see the company funded through at least two wells, we estimate,” Shore Capital said in its initiation note.
“The first drilling target is a relatively low-risk prospect mapped using advanced techniques; gross mean prospective resources exceeding 590mmbbl are estimated for Mesurado-1. Given COPL’s lack of any real cost exposure for the foreseeable future, the risks to the company lie firmly on the upside, in our opinion. We also highlight COPL’s strong technical capability, plans to build out its African portfolio and healthy financial position. We calculate Risked NAV of 16p/share,” the broker added.
The broker also said that in addition “we highlight plans to diversify the portfolio via the ShoreCan joint venture, which has already secured new acreage offshore Namibia and is actively pursuing further portfolio additions in Nigeria and Equatorial Guinea. We believe that such new ventures, in addition to de-risking the proposition, could be very accretive to our sum-of-the-parts valuation.”
COPL’s diversification strategy makes a great deal of strategic sense, Shore said, allowing the company to leverage its in-house technical expertise and expand its regional footprint (while avoiding the need for shareholder dilution).