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Eco Atlantic Oil & Gas: Analyst suggests possible 230% upside as exploration assets advance

“While wildcat exploration is inherently high-risk, we see an attractive risk/reward in Eco,” the analyst said in a note
oil and gas operations
Eco is partnered with larger oil firms offshore Guyana and Namibia

Eco Atlantic Oil & Gas Ltd (LON:ECO) could be worth significantly more than the current share price suggests, according to research produced by Hannam & Partners.

Analyst Peter Hitchens said in a note that 2018 could be a pivotal year for the company as its exploration projects in Guyana and Namibia - which are partnered with major oil firms - are advanced towards drilling.

WATCH: Eco Atlantic boss expects "very successful alliance" with Africa Oil Corp

Hitchens highlighted a ‘total risked net asset value’ for Eco Atlantic of 113p per share, suggesting some 230% upside to the current price of 33.9p.

“While wildcat exploration is inherently high-risk, we see an attractive risk/reward in Eco,” Hitchens said.

“The current share price is supported by the Africa Oil strategic partnership, Eco has a net cash position of CAD 18.1 million and in 2018 we could see a significant de-risking of the exploration portfolio via extensive new 3D seismic in Guyana in 1Q18, which is key for Total to decide whether to farm into the block, and the drilling of a well adjacent to their Namibian acreage by TLW in the second half of 2018.”

The analyst said that in Guyana, where Eco has a 40% stake in the Orinduik licence alongside Tullow Oil plc (LON:TLW), “all eyes are on new seismic” following the recent capture of new data and results are due in the first quarter.

As Total has an option to acquire a 25% stake in the asset, subject to the outcome of the seismic results.

READ: Eco (Atlantic) will use balance sheet strength to advance all fields

Hitchens also noted that at Orinduik the main prospect is Amatuk, which is estimated at 700mln barrels oil equivalent.

In regards to Namibia, meanwhile, Hitchen said Eco “has built up a significant portfolio of acreage” in the Walvis basin, in the vicinity of a discovery of oil-source rocks.

 “The players in this basin have acquired extensive 3D seismic data and it is expected that drilling will restart in the latter half of 2018, with the first well being drilled by Tullow Oil in the licence adjacent to the South; success here would derisk Eco Atlantic’s prospects,” the analyst added.

The 245mln barrel Osprey prospect (Eco has a 37.5% stake alongside Tullow Oil) could be drilled subsequent to positive results nearby. Significantly, Eco’s costs would be carried by Tullow.

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