Global Petroleum (LON:GBP) is under the radar of investors with seemingly little appreciation of the attractions of the new portfolio in Namibia, according to broker Northland,
The company acquired a stake in licence 29 in Namibia when it bought Jupiter Petroleum last year.
While Namibia is at an early stage of exploration, the recent completion of a high-resolution 2D seismic survey confirmed the existence of two mega-structures in licence 29 capable of housing multi-billion barrel reservoirs.
The licence comprises an 85 per cent operator-interest in the deep water exploration blocks 1910B and 2010A, offshore Namibia, which encompasses 11,730km2 adjacent to the Arcadia/Tower exploration acreage in Block 10.
Northland said Global has fulfilled its work commitments up to December 2014 and can now farm down its 85 per cent stake from a position of strength.
The broker sees an exploration programme and the benefits of a number of near term valuation events such as a high quality farm-in partner, shooting 3D seismic and an updated CPR as the main drivers for a share price improvement.
Global will also be able to use its strong balance sheet to add further exploration assets.
Recent weakness is largely a consequence of Chariot’s dry well drilled on its Tapir prospect in May that caused Global shares to drop 27 per cent, but Northland believes the Tapir well provided a useful read across that was encouraging for the company especially as analysis confirmed the presence of a reservoir helping to lessen one of Global’s key risks.
As a relatively late entrant into offshore Namibia exploration, Global will also benefit from the vast amounts of ongoing work in the region by major oil companies.
This should include near term drilling campaigns from Petrobras/BP/Chariot (LON:CHAR) (underway), HRT (expected 2013) and Arcadia/Tower (LON:TRP) (expected 2013) among others sid the broker.
Elsewhere, the Jupiter acquisition also brought 30 per cent of an exploration licence offshore the small Juan De Nova islands in the Mozambique Channel, operator Wessex (LON:WSX) holds the remaining 70 per cent. Global expects to farm down after funding its share of the acquisition of new 2D seismic.
The company also has production assets in Texas that are up for sale.
Northland concludes that with Global Petroleum trading at only a £4 mln premium to its cash at present, it offers low risk exposure to offshore Namibia exploration.
The broker has initiated coverage with a buy stance and short term price target of 18.1p.
Shares were little changed at 9.88 pence valuing the company at £19.7 mln.