Eco (Atlantic) Oil & Gas Ltd (AIM:ECO, TSX-V:EOG) this week saw its under-rated potential highlighted by European investment bank Berenberg, which sees “transformational” catalysts in the company’s future.
Undervalued potential is not especially rare on AIM, particularly in 2024 – there’s a long list of opportunities for which the market price doesn’t match what on paper the junior company could be worth.
Nevertheless, with a ‘buy’ rating and a 125p price target, Berenberg says very substantial upside to the current 11p per share price on London’s AIM.
It comes as Eco’s financial position is bolstered by a recently agreed farm-out deal in South Africa, and, as Berenberg’s analysts look ahead to further potential deals elsewhere in Eco’s portfolio.
Berenberg noted that the deal sees Eco with a $20 million funding inflow, which it says gives ‘comfort’ over the medium term and at the same time it is fully carried for the first two wells in the South African project.
“Eco has made good progress recently, confirming completion of the farm-out of Block 3B/4B to TotalEnergies and Qatar Energy, which provides a welcome balance sheet boost and moves the company closer to testing the huge prospectivity on the block,” Berenberg analyst James Carmichael said in a note.
“In the near term, we flag potential for catalysts elsewhere in the portfolio, notably the ongoing farm-out of the Orinduik block, offshore Guyana.
“Overall, Eco has demonstrated its ability to attract strong partners and secure funded drilling exposure.”
Carmichael added: “Replicating this success across its unique, high-quality exploration portfolio would provide exposure to potentially transformational drilling catalysts over the course of the next 12-18 months, in our view.”
Highlighting the possibilities in Guyana, the analyst said he expects interest is high, due to ‘the potential to test for light oil in Cretaceous reservoirs, similar to those in which Exxon has discovered more than 11bnboe in the contiguous Stabroek block’.
“We expect a deal here to be the next main catalyst for the company, potentially before the end of 2024,” Carmichael added.
“Elsewhere, Eco also has an 85% interest in four blocks to the north of Namibia covering 28,600km2, which should also generate strong interest given recent success elsewhere in the country, in our view.”