Berenberg has opened a ‘buy’ recommendation on Eco Atlantic Oil & Gas Ltd (LON:ECO) and described the AIM-quoted firm as ‘the only pure-play on one of world’s the most attractive exploration hotspots."
With a price target pitched at 110p, Berenberg suggests some 140% upside to the Eco share price (before today’s note), though in Friday’s deals it was up 3.5p or 7.6% to 49.5p.
Pitched at 110p Berenberg’s target is some 140% upside to the Eco share price (before today’s note), though in Friday’s deals it was up 3.5p or 7.6% to 49.5p.
“Partnered with Tullow Oil and Total, Eco will embark on a potentially transformational exploration programme starting in Q2 2019, launching a multi-well campaign on the Orinduik block, next to Exxon’s Stabroek block,” Berenberg analyst Ilkin Karimli said in a note.
Exxon’s major successes at Stabroek has been the driving force behind the Guyana excitement. The US oiler has found billions of barrels of resources in a faultless series of exploration wells offshore.
Eco has a 15% interest in Orinduik which is the neighbouring block, and, importantly it has well-funded, experienced partners to push the high potential project forward.
In Berenberg’s note, Karimli highlighted: “The Exxon-led consortium has made 10 discoveries in the neighbouring Stabroek block, with total recoverable resources of more than 5bn bbl.
“These discoveries, currently in development, may deliver upwards of 750kbpd of production by 2025, making Guyana one of the largest oil-producing nations in the world.”
“Eco and its partners will be targeting over 1bn barrels of gross unrisked resources in 2019 (Eco has a 15% working interest). We estimate total un-risked upside for Eco could be over £5 per share, compared with our risked NAV of £1.1 per share.”
Hammerhead, one of Exxon’s ten Guyana discoveries, has particular significance as it is at least very close to Eco’s Orinduik area.
“Exxon will be appraising the discovery in Q2 2019, which should provide a volumetric estimate. The main question here is whether the field extends into Orinduik block,” the analyst said.
“Seismic data suggests that it may, and the commencement of negotiations between Stabroek and Orinduik partners about a potential monetisation plan would be a major positive for Eco.”
Berenberg also noted that the Guyana programme will be key to Tullow Oil’s investment case for 2019 as it is the project operator and it has 60% of the asset.
For Tullow, the Berenberg analyst reckons Orinduik could be worth between 50p and 252p per share.