Bullish broker note from Nomura on Ophir today.
Whilst 2012 was a great year for the stock – it really has just been scratching the surface and has plenty more opportunities for major growth to come.
Ophir featured in thesharehub’s 2012 Hotlist and is also in the list for 2013.
See previous note here
TheShareHub is awaiting the results from the Mzia-2 appraisal well, located 4km to the southeast of the Mzia-1 discovery well before reviewing targets. Mzia-2 is expected to complete in the next 2 weeks.
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Friday Jan 18th 2013.
(SHARECAST) – Nomura has upgraded its rating for oil and gas group Ophir Energy by two notches, from ‘reduce’ to ‘buy’, saying that highly-geared exploration and appraisal (E&A) drilling in 2013 could be a ‘company maker’.
The broker said on Friday morning: “Our investment strategy for E&Ps [explorers and producers] is to either seek ‘value’ based on production or back names that offer ‘company-changing’ upside potential through the drill bit. Our upgrade of Ophir reflects the latter.”
Analysts said that the upside of oil exploration in Pre-Salt Gabon is “underappreciated”, while the scope for data in the first quarter to de-risk key wells in Tanzania and Gabon is “high and largely overlooked”.
The broker said that Ophir has a leading exposure to pure exploration. “In a ‘blue-sky’ success scenario, 2013 drilling could be worth $17bn or c.500% of the current share price, the highest in our coverage universe.”
While E&Ps rarely drill every well in their annual programme, even with a third of Ophir’s wells being deferred beyond 2013, Nomura says that the stock’s upside is still 200%, above the sector average of 110%.
Other reasons for the double ratings upgrade include “overdone” funding concerns and the potential for near-term updates on pre-drill estimates in Gabon and Tanzania to “unlock value”.
Nomura said that with the stock down 19% from its 2012 highs of around 640p, it now trades at a 30% discount to its risked net asset value, versus the sector at 25%.
The target price has been raised from 683p to 750p.
Shares were up 3.32% at 544.5p by 10:44.
via Broker snap: Ophir Energy receives double upgrade by Nomura | ShareCast – News you can use.