FirstEnergy Rates SacOil Share Price Undervalued
In its March 7, 2016 review of oil and gas company, SacOil, listed on AIM and the JSE, FirstEnergy (FE) says the company is progressing steadily on three separate fronts.
The report says: “We reiterate our outperform recommendation and £0.05 ($0.072) target price given that the company is progressing steadily on three separate fronts. Our £0.04 ($0.057) core NAV, which is based on net cash, G&A and the currently producing Lagia field in Egypt, is 3x the current share price. The company has cash flow which could grow in the near-term, complemented by potentially transformational upside with no current commitments.”
First Energy adds: “SacOil has hit its production on target of 1,000 bbl/d upon completion of Phase II in Egypt with maiden production from the Thebes formation on potentially triggering a reserves upgrade later down the line. Light oil is being produced from the Thebes formation meaning it doesn’t require steaming and is expected to have lower opex/bbl than the Nukhul formation. Achieving the increase that the Company had been steering towards confirms the potential of this field.”
SacOil has also reorganized its structure in the DRC to improve its control of its investmentand brought in significant new partners for its pipeline project to transport natural gas from Mozambique’s Rovuma Basin to South Africa.
“We continue to like the story which offers low cost operations, cash flow which could grow in the near-term and potentially transformational upside with no current commitments.Though our valuation is unchanged, the shares continue to trade materially below our core NAV of £0.04 ($0.057) per share. The company is well-capitalized with a very strong shareholder base leading us to reiterate our outperform recommendation and £0.05 ($0.072) target price.”
“A Co-operation Agreement (CA) for the construction of the US$6 bn, 2,600km, African Renaissance Gas Pipeline to transport natural gas from Mozambique’s Rovuma Basin to Gauteng in South Africa has been signed, with three new partners being brought in: ENH, Profin and CPP,” First Energy says.
