Sintana Energy Inc (TSX-V:SEI, OTCQB:SEUSF, FRA:3ZX1, AIM:SEI), the Atlantic Margin-focused explorer, has been tipped as a 'buy' at UK stockbroker Cavendish, which pitches a 62p target price.
It comes after the company secured a 12-month extension to its licence (PEL 87) offshore Namibia, a move the broker said keeps alive a potentially value-unlocking farm-out process.
The broker said the extension, granted after an application to the ministry, gives the Pancontinental-led partnership more time to market the Orange Basin asset and bring in a partner to fund exploration drilling. Cavendish noted that “a number of groups” are continuing to advance technical due diligence, with drilling of an exploration well still anticipated later this year.
At the current 26.5p share price, Cavendish’s unchanged target implies 134% upside.
Sintana has an indirect 7.35% stake in PEL 87 through its interest in InterOil/Custos and is expected to be carried through the exploration well.
Cavendish described the licence as a credible opportunity, pointing to modern 3D seismic coverage across 6,593km² and estimated gross recoverable 2U prospective resources of more than 2 billion barrels. The largest prospect, Oryx, is estimated at 1.09 billion barrels, while Hyrax is pegged at 733 million barrels.
Cavendish attributes 1.2p per share of its 62.1p sum-of-the-parts valuation to PEL 87 on a risked basis, against an unrisked value of 44p per share for Sintana’s interest.
The broker applies Pancontinental’s geological chance of success to the project, alongside a further commercial risk factor tied to securing a farm-in partner.
It said the licence extension gives the group more time to progress that process, which could materially improve the project’s risk profile.