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Wentworth Resources: Panmure ups target price for East Africa focused firm

Wentworth Resources: Panmure ups target price for East Africa focused firm

City broker Panmure has today upped its target price for East African gas firm Wentworth Resources (LON:WRL) by a penny to 114 pence.

Noting that the firm's activities in East Africa were gathering pace, Panmure repeated its view that the company offers investors an 'attractive' entry point to the region.

"Whilst Mozambique has been the darling of investors, we believe that Tanzania may soon share the limelight given the possibility that it may hold as much gas," said analyst Leila Reddy.

Last week the group released its fourth quarter results to December 31, in which it revealed it ended 2011 with just over US$9 million in the bank, with US$4.2 million in working capital. 

Furthermore, two deals agreed since year end are set to unlock a significant amount of cash without diluting shareholders. The company has agreed a US$13.5 million deal to sell its 18MW gas-fired power plant to national energy firm Tanzania Electric Supply Company (TANESCO) and it has agreed an asset swap with Cove Energy (LON:COV), which would give Wentwoth a larger stake in the onshore Mnazi bay project.

Since then, fellow Mnazi Bay partner Maurel et Prom has exercised what’s known as a pre-emptive right. It gives it the right to buy its proportionate share of the project equity being acquired from Cove by Wentworth. As a result M&P will pay Wentworth around US$19 million.

Analyst Reddy also highlighted in today's note that the latest bids surrounding the sale of Cove have "upped the ante" in East Africa.

Supermajor Shell was the first to make a bid but now Indonesian National Oil Company PTTEP has entered the race with a 220p/£1,119.6m cash offer, a 12.8 per cent premium on Shell’s proposal for Cove’s 8.5 per cent interest in the off-shore Rovuma Basin, Mozambique.

Panmure, which rates the stock a 'buy', said it has adjusted the target price following the reported results, Maurel et Prom exercising their pre-emption rights, and an expected US$10 million cash injection following the exercise of 14 million warrants.


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