CRCL : LSE : £4.00
Caracal Energy Inc. is a Calgary-based E&P focused on the Republic of Chad. By leveraging existing discoveries in the Doba and Doseo basins of southern Chad, the company has built a strong reserve base with a large inventory of prospective locations. The company holds a large contiguous land position, consisting of 6.45 million gross acres spanning three production sharing contracts (PSCs).
All amounts in £ unless otherwise noted.
Caracal released a positive operational update highlighting results from Badila-3 and Mangara-4 and 5. The company confirmed that production facilities are in place and that the system has been loaded with oil in advance of first oil; production is expected to commence later this month once transportation agreements have been finalized and signed. With a projected return of 65% to our target, we reiterate our BUY
recommendation and £6.60 target price.
A day after Caracal provided updated net 2P volumes of 50.6 million barrels (NPV $1.4 billion), the company announced a new discovery
that should add incremental reserves at Mangara in 2013.
Two high-impact exploration wells are planned over the coming quarter; Krim (offsetting Mangara) will spud in August and Bitanda
(offsetting Badila) will spud in September 2013.
A second rig has arrived and Badila-4 will spud at the end of July.
We used a DCF model to initially estimate 3P NAV of $12.05/share which we discounted in assessing our $10/share (£6.60/share) target
price. From a valuation perspective, the company’s recently published 2P reserve value now aligns with our target.
Execution in Chad remains the company’s primary risk in unlocking its value. As well, there is no assurance that any of the identified resources
will mature into a reserve classification. Current development scenarios are a “best estimate” and could change with new information.
- Caracal details its IPO plans and confirms FP Street item (business.financialpost.com)