Analysts at Auctus Advisors have initiated coverage on Sintana Energy (TSX-V:SEI, OTCQB:SEUSF) with a target price of C$0.90, representing an upside to its stock price at the time of writing of 221%.
The analysts believe that the C$75 million market cap, TSX-listed explorer provides unique exposure to the Orange Basin, offshore Namibia.
“About US$1 billion has been spent in the basin in just two and a half years and the majors are rushing to acquire licences,” the analysts wrote in a note to clients.
Sintana holds indirect interests in five assets, including three in the Orange Basin, of which two are adjacent to TotalEnergies’ Venus discovery and Shell’s multiple discoveries.
Chevron and Woodside have entered into two of Sintana’s blocks during the last year which has fast-tracked 3D seismic and well-planning, the analysts noted.
“The resource potential of each block must be very significant to justify a country entry for each of Chevron and Woodside,” they highlighted.
Additionally, exploration drilling is set to commence on Sintana’s blocks, with at least four wells expected from the fourth quarter of 2023 to the fourth quarter of 2024 and “each well is a potential company-maker,” according to analysts.
“Sintana’s indirect interests are carried by its partners for all these operations, which maximizes the value of the interests,” they wrote.
The target price of $0.90 reflects risked exploration net asset value (ReNAV) and implies greater than three times the current share price.
Sintana’s current share price broadly reflected the value of initial carries on each block pre-3D seismic but since the 3D seismic has now been shot, the value has already increased significantly, noted Auctus.
“A drilling success at PEL 90 (operated by Chevron) in early 2024 or PEL 83 (operated by Galp) in the fourth quarter of 2023 would add about C$0.63 per share for each well,” they estimated.
“A drilling success at PEL 87 (operated by Pancontinental) in 2024 could add about C$0.95 per share.”
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