TomCo Energy (LON:TOM) shares have plenty of upside if neighbour Red Leaf can prove its oil distillation technology works, according to SP Angel.
Red Leaf and Tomco have adjacent oil shale blocks in Utah.
Shares in Tomco were hit by the decision recently by Red Leaf (and Total) to delay a proof of concept trial on this EcoShale process until 2018.
Tomco will now wait for the results before proceeding with its own heavy expenditure plan.
SP Angel sees TomCo’s programme getting underway in 2020. Accordingly, it has estimated its assets are worth US$30.3mln or 0.95p allowing for some of the risks involved.
It also points out that this resource is oil shale, not shale oil, and the Holliday Block is a surface mining operation not drilling and fracking.
The broker is impressed with the progress TomCo has made at Holliday Block, where some 126mm barrels of 2C equivalent have been identified.
At present, the broker believes the share price reflects just the option value of a fully permitted project with significant contingent resources.
Should Red Leaf declare commerciality for the EcoShale technology, the shares should subsequently trade much higher, but even if it fails there are other options.
SP Angel has started coverage with a ‘buy’ recommendation and 0.95p target.
Shares today were 0.14p.