Buccaneer Energy Plc (AIM:BUCE, FRA:LMU1) could be approaching a re-rating as production growth and stronger cash generation begin to close the gap between the company's market value and the underlying worth of its assets.
This was suggested in a new note from house broker SP Angel, which reiterated a 'buy' recommendation and 0.05p target price, arguing that the shares offer more than 350% upside to its risked net asset value.
Buccaneer currently produces around 150 barrels of oil per day from its onshore US assets, primarily the Pine Mills field in East Texas, and is targeting production of about 200 barrels per day by the end of 2026.
The key catalyst is a proposed waterflood programme in the Fouke area of the field, which was mentioned in annual results yesterday. Waterflooding is a secondary recovery technique that injects water into a reservoir to maintain pressure and push additional oil towards producing wells. Subject to regulatory approvals, the project is expected to begin operating in the third quarter of 2026.
SP Angel believes higher and more consistent production should help close the gap between Buccaneer's market valuation and the estimated value of its reserves. The broker estimates the company's proved reserves have a net present value of around $10 million at an oil price of $60 per barrel.
The recently acquired Carlisle-1 well is also contributing to growth. The asset added around 25 barrels per day of production and generated approximately $70,000 of free cash flow in April, implying a payback period of less than six months.
Looking further ahead, SP Angel expects Buccaneer to generate around $2.2 million of EBITDA in 2027 if production reaches 200 barrels per day, creating additional opportunities for investment, drilling and acquisitions across Texas.