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Eland's progress clocked by Canaccord

Last updated: 15:07 12 Mar 2015 GMT, First published: 16:07 12 Mar 2015 GMT

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Canaccord is upbeat on West-Africa focused Eland Oil & Gas' (LON:ELA) progress and has lifted the price target on the shares 15 p to 155p.

An operations update yesterday showed production from the two Opuama producing wells in Nigeria was  averaging 3,100 bopd - well above pre-first oil estimates of 2,500 bopd, while in the rest of the year, it plans two re-entries on the field.

Number five well should add 400-600 bopd and it is expected to come onstream in May, with a more significant sidetrack at number 7 likely to come onstream in late Q3 adding around 3,000 bopd, notes the broker.

"We think that the demonstration of continuing better-than-expected subsurface performance allied to the dramatic improvements in surface delivery are significant steps forward for Eland.

"This new-found consistency of delivery, allied to the strong balance sheet, and a softening cost environment, provides an excellent basis for future growth."

Canaccord acknowledge the risks in Nigeria, particularly in the lead up to and outcome of the Presidential election, but given the operational progress so far, it thinks the risks will be manageable.

On the corporate front, the company has US$8.2mln cash at the beginning of March, with further receipts due of $2.4mln, and no drawn debt. Eland has a $35m RBL (reserves based lending) from Standard Chartered and expects the remaining $40m (to bring the total to $75m) to become available by end April, matching the planned work programme, said Canaccord.

The broker repeats a 'buy' rating on the shares.

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