Clontarf Energy could be transformed by any one project, says Optiva Securities

Optiva Securities this morning initiated coverage of the junior oil explorer Clontarf Energy (LON:CLON) with a strong buy.

The City research firm says any one of its projects has the capacity to utterly transform the company if they meet with a modicum of drilling success.

The group is also a “closeology play”, according to analyst Jason Robertson, who points to the Tano 2 exploration acreage in the newly emerging oil district of Ghana, which lies very near to major oil discoveries made by Tullow.

“Closeology projects with high impact potential are abundant elsewhere in the portfolio, such as Monteagudo in Bolivia and Block 183 in Peru which both lie near significant discoveries,” Robertson adds.

“Any one of these licences have the potential to be a company maker and move the stock far beyond its current sub £10m value. 

“Along with blue sky exploration, the stock offers exposure to near term production revenue streams from Bolivia. “Income of this kind opens up the possibility that exploration work in the future could be self funded.”

The Optiva analyst says Clontarf is misunderstood. He reckons the legacy gold projects in Iran and legal issues surrounding the US and Bolivian projects have “unfairly clouded investor judgment on the stock”. 

Sentiment has also been impacted to some extent by the delay in securing final approval from the Ghanaian cabinet and parliament for Tano 2A, he adds. 

“Once the licence is secured we could see an immediate bounce in the stock price,” said Robertson. 

“The identification of drillable targets, securing of a farm out partner to commence active exploration and publication of any future CPR estimates on the property could all excite investors. 

“Similar project development activities are possible from the Peruvian licences. 

“In Bolivia the focus will be on resolving existing issues to capitalise on immediate cash flow opportunities to the gas hungry end-markets of Argentina and Brazil, along with adding to existing resource estimates.”

Clontarf joined the AIM market back in April. The group combines the remnants of two previously listed companies that many investors will recognise, Persian Gold and Pan Andean Resources (some of the demerged exploration assets that weren’t included in Petrominerals £18 million takeover in 2009).

On listing the group raised £2.7 million, issuing around 45 million new shares priced at 6 pence each, which at that time valued the company at £11.9 million. 

In last month’s results statement Clontarf told investors that it has the funds, skills and contacts to deliver.  

"We have a top class team which has delivered value to shareholders before,” the company said.

“We have excellent early stage exploration projects in Peru and, when ratified, in Ghana and we have stakes in producing fields in Bolivia. We have the funds for our immediate needs."

While acknowledging that last month’s results pre-dated the April merger, Shore Capital analyst welcomed the group’s first piece of material news-flow.

“We think that final ratification/award of Clontarf’s blocks in Ghana and Peru would be viewed by the market very positively,” Craig Howie said in a note on 29 June.  

"In the meantime, we believe that Clontarf has already made good progress with data interpretation work in both locations. The management team’s past success with the disposal in 2010 of Pan Andean Resources to Petrominerales provides added encouragement, to our minds."