Beaufort Securities thinks shares in Solo Oil PLC (LON:SOLO) could almost quadruple if its Ntorya Gas Project in Tanzania progresses as has been suggested.
Back in 2012, Solo and Aminex plc (LON:AEX) – which work together on this project under the Ruvuma Project Sharing Agreement – had a commercial gas discovery with the Ntorya-1 (NT-1) well.
Even if the discovery stopped here, analysts at City broker Beaufort say it would still be a decent find, but it’s expecting more.
“Although NT-1 alone would underpin a mid-sized operation (and Solo’s share price), the Tanzanian government, Aminex and Solo expect much more,” Beaufort’s Charles Long said in a note today.
Because of this potential, the two companies have pressed ahead with a further two well appraisal phase to try and determine the true scale of the project, which Long thinks could prompt a serious hike in the share price.
“The first appraisal well (NT-2) is spudding in December, which if successful could result in contingent resources of up to 300 BCF.
“We anticipate the NT-2 drilling process to generate buying interest in the shares and initiate with a BUY recommendation and 0.84p target price.”
On top of this potential at Ntorya, Long also notes the three other main assets in Solo’s portfolio that, in his opinion, only serve to further the investment case.
“Solo’s other Tanzanian investment is the producing Kiliwani North gas project, where its 7% interest should produce approximately $125k per month of free cashflow, sufficient to cover Solo’s G&A and all other pre-capex expenses.”
Slightly closer to home, Solo also has a 30% interest in PEDL 331 on the Isle of Wight which was previously estimated to host almost 16mln barrels of oil.
Horse Hill – which Solo has a 6.5% stake in - is the other major project in the company’s portfolio and one which Long is very excited by.
“Horse Hill-1 (HH-1) recently flowed at a combined rate of 1,688 bopd from three horizons with no appreciable pressure depletion.
“This HH-1 test was a fantastic result and in our view, makes Solo’s 6.5% worth upwards of $6m.”
Shares in Solo were up 5% to 0.22p on Wednesday.