RE: Are TRP worth a look? SP Angel think so "Speculative BUY"6 Dec 2023 13:54
«Rig contract will unlock forward programme:
To-date, drilling of the NJOM-3 appraisal well has been held up due to a combination of rig unavailability, COVID restrictions and the lack of a comprehensive financing package. Nonetheless, Tower anticipates that with a resolution on contracting a rig slot almost in place for 2024, the Company will be able to secure the necessary additional funding estimated at $13.4m. With these milestones in place, management expects that the Cameroon authorities will approve an application for an extension to the initial exploration period on the Thali PSC to complete the well».«We initiate coverage with a Speculative Buy rating and a 0.12p/share 12-month target price, which is based solely on the Core NAV assets and already embeds a c.£3m equity raise at the current share price (0.028p/sh). In our view, the current share price implies only token option value is being attributed to the asset ahead of realising a funding partner to participate in the drilling of the NJOM-3 appraisal well, which is expected to confirm the commerciality of the oil resources. We think that signing a rig contract for the NJOM-3 well will prompt a farm-in partner to come into the well and complete the required financing.
Our target price provides roughly 300% of near-term potential upside for investors looking to speculate that with a rig contract place, the rest of the funding and licence requirements can be completed. Following a successful farm-out process leading to positive results from the NJOM-3 appraisal well, investors can then look to bridge across to the Risked NAV valuation that reflects a development asset moving towards first production and cash flow within 18M. Our unrisked Njonji Phase 1 valuation is 0.57p/sh net to a 68% WI, which rises to 0.83p/sh based on a 25mb development at the SP Angel LT $90/bbl Brent oil price forecast.
Notwithstanding the potential for further share dilution or farm-downs to raise additional funds, investors could well look beyond our TP towards a higher risked valuation of the wider portfolio, subject to the timing and scope of the drilling programme. While investors should initially focus on the opportunity represented by an appraisal well on the Njonji discovery, they would be remiss not to also recognise the potential of the additional exploration opportunity in the rest of the Thali block, and Tower’s frontier acreage in Namibia and South Africa.»
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