Copied from Advfn17 Sep 2019 09:14
Berenberg updateAnother success in Guyana ? Joe is a discovery: Eco Atlantic and its partners on the Orinduik block offshore Guyana have made a second discovery with their second well drilled so far. Eco Atlantic is one of the most attractive exploration plays in our coverage. We raise our price target to 230p (from 200p previously) and reiterate our Buy. ? Joe is a play opener: The partners chose to focus on shallower-water prospects in the lower and upper tertiary zones, updip from discoveries in the neighbouring Stabroek block, seeking lower-cost development opportunities. The thesis has worked: Joe has a derisked oil system in the western part of the Orinduik block, where multiple additional leads and prospects exist. ? Resource size has not yet been defined: The partners have not provided a resource estimate for the new discovery, although we note that a competent person's report (CPR) by Gustavson Associates had estimated a gross recoverable resource (P50) of 148mboe. The partners are evaluating additional thinner sands above and below the main pay for possible incremental pay. While a gross oil column of 14m is not big and compares with 55m at Jethro, we note that the aerial extent of Joe was also significantly larger than Jethro based on the CPR. We therefore add Joe as a 100 mboe prospect to our NAV, risked at 50%. ? Jethro already underpins a commercial development on the block: We assume Jethro is a 250mboe discovery, making it large enough for a standalone commercial development. In this scenario, smaller discoveries can be used as tie-back developments, lowering commerciality threshold. ? More data analysis needed: The partners will now focus on assessing the full results of the two exploration wells, as well as on understanding resource upside from the extension of Exxon's Hammerhead discovery onto Orinduik before selecting the next prospect to be drilled in 2020. We expect more colour on recoverable resource potential of the two discoveries, with an updated CPR potentially sanctioned before year-end. ? One of the most attractive M&A targets in our coverage: Eco is potentially sitting on net recoverable resources of 600mboe, of which over 70mboe may have now been derisked through exploration. Eco Atlantic is an explorer and as such, we would expect it to monetise its 15% stake in Orinduik before development, focusing instead on its exploration assets in Namibia. ? Valuation: We raise our price target to 230p from 200p on the back of: 1) the addition of 100mboe Joe prospect, and 2) the increased gross resource estimate for Hammerhead to 800mboe from 500mboe previously.
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