AIM-quoted Chariot revealed earlier this week that the drilling of the Prospect S well at its Central Blocks licence offshore Namibia is slated to begin in the fourth quarter of the year and for which it is fully-funded, having raised US$16.5mln earlier in the year.
Depending on the outcome of the outcome of that well, the plan is to either find a partner to drill a second well in this region – Prospect W – or move on to drilling the Kentira-1 and LKP-1a targets offshore Morocco.
At the end of April, Chariot revealed that the Rabat Deep exploration well – adjacent to the Kenitra licence – was dry.
Italian supermajor Eni footed the bill for the drilling costs due to a prior farm-out deal, with Chariot retaining a 10% interest in the well.
A more detailed analysis of the Rabat Deep drill results is underway so the company can get a better understanding of what they might mean for its other targets in the region.
Taking advantage of depressed oil markets
“Over the course of 2017 we continued to deliver on all aspects of our strategy - investing in the lower cost oil price environment through extensive seismic acquisition, processing and interpretation to develop our technical understanding and high impact prospect inventory; completing a drilling partnership with Eni, enabling us to initiate our drilling campaign at no cost to the company; and locking in additional prospectivity in neighbouring acreage with the successful acquisition of Kenitra, Morocco, as well as securing an innovative back-in option on legacy acreage in Namibia,” said chief executive Larry Bottomley.
“With no remaining commitments across the portfolio we are in a robust financial position to pursue our new venture strategy as well as focus on maturing our remaining assets at the current low point in the cost cycle.”
He added: “The funds raised earlier this year will allow the company to deliver a second well in 2018 and strengthen our position in ongoing partnering negotiations, enabling us to protect equity and optimise value whilst gaining third party validation and a share in capital requirements for our priority prospects, S and Kenitra-1."
Chariot recorded a loss before tax of US$55.4mln (2016: US$6.7mln) for the 12 months ended December 31 2017, largely as a result of an impairment charge of US$51.2mln relating to its decision last summer not to proceed into the first renewal period for the Southern Blocks in Namibia.
At the end of the period, the company had no debt and cash in the bank of US$15.2mln, although the current bank balance will be significantly higher, given the recent fundraise.
Chariot still offers “significant upside potential”
“Understandably, Chariot shares have been in the doldrums since its Moroccan dry hole,” wrote finnCap analyst Jonathan Wright in a research note.
“Unfortunately, that is the nature of frontier exploration, yet this is a stock that still offers significant upside potential from a broad portfolio of material exploration prospects.
“A strong financial position gives Chariot the clout to go it alone on the next major well in Namibia, which is on track to drill in Q4 2018, with a rig secured.
“However, management is pursuing farm-outs in all regions, and successful partnering would liberate funds and extend the drilling horizon; steps are being taken to prepare for an accelerated drilling programme in H1 2019 that could see an additional two wells drilled with risked potential of 43p/sh.”
Chariot shares were up 3% to 8.5p in mid-morning trade on Wednesday.
-- Updates for share price and analyst comment --