Eddy17 Jul 2013 15:57
Alberta acquisition sets the tempo of future deals
Northern is looking to move into new developments where it can move faster than it could in its European strongholds of the Netherlands and Italy. The first of these targets is in north-west Alberta, which the company expects to develop in earnest from this coming winter subject to both early appraisal work being successful and funding being available from other asset deals such as the potential sale of its Netherlands production base. If successful, we expect Northern to seek to replicate this strategy in other locations, both in Alberta and further afield internationally.
Exploration upside on multiple fronts
Northern continues to offer investors upside via its 1.25% interest in the Guyane Maritime Permit with two further wells to be drilled in 2013 on the back of the 2011 breakthrough Zaedyus discovery. In addition, the company is looking to complete a farm-out deal in 2013 on its c 400mmbbl Cygnus property in the Southern Adriatic, while a recent acquisition in Australia could lead to shale oil exploration.
New management, but strategy shift unlikely
Northern has shaken up its board with the recent departure of both the longstanding MD, Derek Musgrove, and the chairman, Richard Latham. However, we do not expect this to prompt a change in strategy, with the new MD, Keith Bush, already an integral part of the team that is driving the accelerating business model.
Valuation: Focus will swing to exploration upside
Our core NAV of 35p is currently based on the Netherlands production base. However, should this be sold, the valuation focus will shift to exploration upside. In the near term, we expect our NAV to be at the bottom end of our upside range of 62-179p, although we expect to move this up if deals are executed as planned in 2013.
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