Desire Petroleum’s (LON:DES) new discovery will focus attention on the potential of the north Falkland Basin, according to Goldman Sachs.
The investment banking giant believes the oil discovery could prompt a 97 percent uplift for the stock, once it has been de-risked.
“We currently value the Rachel prospect at 9p per share for Desire (which has a 92.5 percent stake), and 3p per share for Rockhopper (7.5 percent stake),” Goldman analyst Christophor Jost said.
“A full de-risking of this prospect would result in a 97 percent uplift to our valuation of Desire and 4 percent for Rockhopper ... but we note that it is too early for a full de-risking at this early stage.”
Goldman initiated its coverage on Desire in early November, with a ‘buy’ rating and a 12-month price target of 197 pence.
This price target is now under review in light of the discovery.
“The discovery of oil is a positive in our view,” Jost added.
“The presence of 20 percent porosity reservoir is also encouraging for both this prospect and the potential for the wider basin as a whole,
“We note, however, that the thickest section was 8 metres and that porosity was lower outside this section, which may mean additional work is required before the company is able to comment on commerciality or volumes.”
David Hart, Westhouse Securities oil analyst, also commented on Desire.
Hart described the discovery as a welcome development, particular given Desire’s earlier problems on the Rachel prospect.
The analyst emphasised the benefits that the second north basin discovery brings.
“A second discovery in the basin, following Rockhopper’s Sea Lion find, is also beneficial from a development point of view, given the opportunity to share infrastructure across projects,” Hart said.
“This is particularly important in the case of smaller discoveries which, at this early stage, appears to be the case with Rachel.”
In the wake of the discovery Hart gave Desire a revised price target of 142 pence. He gives the oil explorer a ‘Accumulate’ rating. Meanwhile, the analyst rates Rockhopper as a ‘Buy’ with an upgraded target price at 496 pence.
He adds: “Our new target price for Desire incorporates a smaller resource figure offset by lower risk afforded by the discovery,”
“Having said that, we have not de-risked the prospect to the extent we have Rockhopper’s Sea Lion discovery, given the still limited information available.”
Evolution Securities analyst David Farrell looked at Salamander Energy (LON:SMDR), in light of the disappointing results from its joint venture with Serica in Indonesia.
Yesterday, Serica revealed that the Marindan-1 well offshore Indonesia was plugged and abandoned after thin oil and gas reservoirs were found to be non-commercial.
“Looking at the remainder of 2010, activity switches back to the Bualuang field and two low risk/high value step out prospects that will be drilled,” Farrell noted.
He adds: “As we move in to the new year we expect Salamander to refocus investor attention towards its ability as a developer and the rising production profile (20,000 boepd presently to 30,000 boepd by 2013),
“This part of the portfolio is an interesting story which we think has been overlooked so far by the market and may rejuvenate interest in the shares after a poor 2010 with the drill-bit.”
Collins Stewart mining analyst John Mcgloin highlighted that Hochschild Mining’s (LON:HOC) decision to sell its remaining stake in Lake Shore Gold Corp (TSX:LSG) came as no surprise.
In a note to clients he commented on Hochschild’s strong performance.
“Following a renewed investor relation drive by Hochschild, the market took a liking Hochschild's organic growth strategy, with the stock doing extremely well in recent months supported by silver prices close to $30/oz,
“Hochschild shares should continue to keep on doing well, despite the considerable premium they are now enjoying.”
Meanwhile Fox-Davies mining analyst Peter Rose looked at African Barrick Gold’s (LON:ABG) high grade success at the North Mara underground development project in Tanzania.
Yesterday, ABG reported the project’s indicated resource at 1.15 million tonnes (Mt) grading 8.43 grams per tonne (g/t), containing 310,000 ounces of gold at Gokona and 0.23Mt grading 7.62 g/t and containing 60,000 ounces of gold under Nyabigena.
“A significant resource drill-out programme is scheduled to commence early in 2011 aimed at expanding the total underground resource to greater than one million ounces and an underground feasibility study is on track for completion by mid 2011,” Rose said.
“ABG will obviously want to get these high grade tonnes into the mill as soon as possible.”