Heritage4 Sep 2012 15:46
Heritage should become leading oil producer after Nigerian deal, says broker
2:03 pm by Jamie Nimmo
Canaccord has raised its recommendation to ‘buy’ from ‘hold’ with an improved target price of 400 pence, bolstered by the recent sale of the Miran Block in Kurdistan to Genel Energy
Heritage Oil (LON:HOIL) should become one of the leading exploration and production companies following its acquisition of a 45 per cent stake in block OML 30 in Nigeria, says Canaccord Genuity.
Analyst Charlie Sharp believes that the FTSE 250 oil and gas firm is now a “far stronger company” with a much improved valuation and a “better balance of assets”.
As a result, he has upgraded the stock to ‘buy’ from ‘hold’ with an improved target price of 400 pence, bolstered by the recent sale of the Miran Block in Kurdistan to Genel Energy (LON:GENL).
“The transactions transform Heritage’s position in the E&P [exploration and production] sector, putting the company in the front line of production focused companies in the sector, and placing the company’s emphasis on development rather than appraisal and exploration,” said Sharp.
“With the production growth potential from the Nigerian assets, Heritage should become one of the leading oil producers in the sector over the next few years.”
He says the Nigerian deal will boost Heritage’s working interest production to around 7,700 barrels of oil per day (bopd) from 600 bopd, while its working interest reserves will shoot up to 290 million barrels of oil (mmbbls) from 65 mmbbls.
The analyst also reckons OML 30 will be entirely self-financing from the outset.
Shares in Heritage rose 7.5 pence or 4 per cent to 197.6 pence.
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