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Eland Oil & Gas has made a great start to 2017 but experts see much more upside

Oil is flowing from the Opuama field into the market, now that Eland has established a shipping operation.
oil barrels in a stack
Eland delivered some 120,000 barrels of crude

Up 20% so far Eland Oil & Gas PLC (LON:ELA) has made a positive start to 2017 thanks to the recent restart at the Opuama field in Nigeria.

Production got underway in late January and the company has moved quickly to show investors the positive impact the operation can have.

Eland said, on February 21, that it had delivered some 120,000 barrels worth of crude for export following the restart.

The field has produced around 150,000 bopd from one well (Opuama-3), which began flowing crude at a rate of 10,000 bopd on January 29.

Crude shipments have thus far been made in batches of around 40,000 barrels and Eland says the operation has further capacity as the company brings additional wells online. Presently, two shuttles are in operation out of Opuama.

Getting around the pipeline problems

Eland’s move to establish crude shipping was a response to long running problems with the existing infrastructure, connected to the pipeline out of Opuama.

The Forcados oil terminal has been offline for about a year and is under force majeure.

George Maxwell, Eland chief executive, in a statement, said: “we have designed and engineered a unique and dedicated alternative export route via shipping due to the prolonged shut-in at Forcados Terminal.

“This has involved significant capital and operational challenges and it is of enormous credit to our staff and all our partners that we are able to report that we have completed a full export cycle.”

City analyst sees very significant upside as production ramps up

Cantor Fitzgerald has a ‘buy’ recommendation for Eland, and it has a price target of 149p which implies some 200% upside to the current price of 48.94p.

“We continue to be encouraged by Eland’s continued operational progress against the backdrop of challenging civil conditions in Nigeria,” said cantor analyst Sam Wahab.

“Although sales have been impacted by the Forcados terminal being shut-in since mid-February 2016, we expect production and revenue generated cash-flow to ramp up significantly once reopened.”

Last month, SP Angel analyst Zac Phillips in a note said: “While this is also good for the cash flow, it is good for the operational team, who has overseen the installation of the new facilities in what has been a difficult period and, more importantly, the addition of this export route also increases the prospect for enhanced operational availability, and having choice in Nigeria is no mean feat.”

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