for new investors30 Jun 2015 13:15
Amedeo Resources (LON:AMED) is approaching a key milestone in the coming months as it prepares to deliver its first oil drilling rig. Chief executive Glen Lau says although Amedeo’s progress has slowed, he expects a recovery and that it will benefit from the upturn. Operationally, important progress continues towards the completion of Explorer 1, a mobile jack-up rig, which is due during the second half of this year. The vessel was launched into the water this April ahead of its full completion. “The build of Explorer 1 is to quality and schedule, building the New Yard's reputation and laying firm foundations for the New Yard's future,” Lau added.
John Cummins, analyst at WH Ireland, said the Explorer 1 completion is very much the focus for investors in the short-term. The analyst, who has set a ‘speculative buy’ recommendation for Amedeo, believes there could be much more to come from the young oil engineering services group even though the market is currently tough.
“Whilst the market backdrop has become more difficult following the decline in the oil price, and this is still a relatively early stage in the group’s development, the medium-term growth potential for Amedeo’s key investment in YZJ Offshore is significant,” Cummings said in a note.
At 0.75p per share WH Ireland’s twelve-month price target suggests some 180% upside to the current price of 0.32p.
That said, Cummings notes that it is a challenge to set a ‘fair value’ for the early stage company and there could be scope to raise the bar further in due course.
“The potential for the group is significant given the backing provided by operating partners, majority shareholder and track record of management.
Amedeo is both well backed, with Qatar’s state investment authority owning 61% of the shares, and at the same time it is partnered with Yangzijiang Shipbuilding (YZJ), a shipbuilder worth US$4bn.
With Yangzijiang Shipbuilding, Amedeo has a 19% stake in YZJ Offshore, which owns the yard in China.