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Jefferies thinks Ophir Energy shares are worth more than Medco’s 57.5p offer

The US investment bank says the stock is worth 60p, with its value having been boosted by its recent full-year results and progress in Mexico
offshore oil rig
Ophir produces around 25,000 barrels of oil equivalent per day (boepd) in south-east Asia

US investment bank Jefferies thinks Ophir Energy PLC (LON:OPHR) shares are worth more than what Indonesia’s Medco Energi is offering.

Medco confirmed earlier this week that it would up its bid to 57.5p a share in response to interest from AIM-quoted Coro Energy PLC (LON:CORO) which had been weighing up a debt-backed takeover.

READ: Medco improves Ophir takeover offer

Shareholders will get the chance to vote on the deal on Monday, and bosses have already told them to accept what is on the table.

But Jefferies isn’t too sure and has asked whether investors want to crystallise “today’s value” or take a chance on “tomorrow’s potential”.

“[Recent] full-year results raise our core net asset value by 6% to 55p per share but potential Mexico discovery raises price target by 15% to 60p/share with 5p/US$48m of risked Mexico value,” said analysts in a note to clients.

“Medco's increased (final) offer of 57.5p/sh offers immediate crystallization of the value added via the ‘Santos deal’.

“Almost ironically, however, Ophir's exploration portfolio has brought the prospect of further value before we even get to Africa liquified natural gas (LNG).”

Does Medco deal undervalue Ophir?

As for Monday’s vote, the number crunchers didn’t state whether they expected investors to approve the Medco takeover, but they did note that a “number of shareholders have been vocal in their view of the various offers under-valuing the assets”.

Despite upping its price target to 60p, Jefferies cut its rating to ‘hold’ (from ‘buy’) given that the shares are now not far off that figure.

Shares were broadly flat at 57.1p on Friday morning.

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