Both flanks of the African continent are quickly becoming oil and gas exploration hot-spots.
Anadarko (NYSE:APC), BG Group (LON:BG) and Cove Energy (LON:COV) have had success off the east coast and Tullow Oil (LON:TLW), Aminex (LON:AEX) and Dominion Petroleum have high-impact projects up their sleeves.
Meanwhile, on the continent's western coastline Tullow Oil’s (LON:TLW) success in bringing the Jubilee field into production has been the highlight so far.
However there are many other London-listed operators with big plans for the emerging oil region.
One of the most fancied of the juniors is Chariot Oil & Gas (LON:CHAR), which owns the Northern, Central, and Southern licence blocks in the Namibe Basin off the coast of Namibia.
While the AIM-listed explorer doesn’t have the largest footprint offshore west Africa, it has some very high impact targets.
Indeed after a resource update this morning it now has prospects with 13.9 billion barrels of gross mean un-risked prospective oil resources - of which 10.4 billion barrels are attributable to Chariot.
This morning Chariot added 700 million barrels of oil to its prospective resources in the Northern licences.
This represents a 36 percent increase from 1.94 billion to 2.63 billion barrels of gross mean un-risked prospective oil resources.
This increase has resulted from ‘continued technical work’ on the 3D seismic data that has been acquired across the blocks. Chariot also highlighted that this work also led to a significant improvement to the ‘chance of success’.
The northern Namibia licence includes the Nimrod prospect - a ‘mega structure’ with an attributable gross mean prospective resource potential of 3.7 billion barrels.
The shares gained around 8 percent in the handful of deals before trading was abruptly suspended across the entire the London Exchange. It then shot up 11 percent to 257 pence a share as the market re-opened shortly after noon.
At 14:00 the price was up 14.5 pence, 6.3 percent, trading at 245 pence a share which values Chariot at more than £360 million.
Successful exploration drilling as well as potential merger and acquisition (M&A) activity in the region could see plenty of upside from current levels.
Werner Riding, oil and gas analyst at Ambrian Capital, reckons the stock may be worth much more. He rates Chariot as a ‘buy’ and sets his target price at 411 pence - which implies about 67 percent upside to the current price of 245 pence a share.
“This announcement shows that Chariot’s ongoing interpretation of its extensive proprietary 3D data continues to yield significant results. The clear positive impact of this work is the incremental increase of prospective resources that may be present within its offshore licence areas,” Riding said in a note to clients.
“Any successful hydrocarbon accumulation requires all of the usual components (ie, trap, seal, source, reservoir) to be in place, and based off the data available most of these are thought to be present with sufficient confidence to allow management to increase its overall geological chance of success from 14 to 23 percent.”
Furthermore the analyst points to the US$781 million takeover bid for UNX Energy (TSX-V:UNX) that was made by Brazilian firm HRT Participacoes yesterday.
This acquisition sends ‘the most clear signal yet’ that the oil and gas industry is taking offshore Namibia very seriously as an exploration venue.
Riding highlighted how the UNX bid implies that Chariot’s assets are worth more than the stock market is currently giving the company credit for.
Looking at the UNX bid, the analyst comes up with a ‘proxy asset value’ of US$0.08 per prospective resource barrel - based on UNX having 9.472 million barrels of oil equivalent. He subsequently reckons Chariot’s ‘comparative metric’ would be around US$0.05 a barrel.
“In our opinion, there will be a positive knock-on effect for Chariot,” Riding said.
He adds: “it is possible to imply a prospective resource asset value of US$857.7 million or £532.7 million (equivalent to 368 pence a share); this compares favourably with the current market value of 230 pence.”
Meanwhile Westhouse Securities analyst David Hart looked ahead to other near-term developments.
“This is clearly another positive development for Chariot as both resource estimates have been upgraded and prospects within its acreage are further de-risked,” Hart adds.
“While additional news is likely regarding resource estimates within its Southern licences, we are also looking forward to further updates in the coming months regarding the group’s farm out process and drilling plans.”
Chariot has been inviting potential partners to join it in Namibia. It opened up a ‘data room’ for potential farm-in partners just over a year ago.
Now this latest upgrade and future development regarding the Southern license could improve the chances on a corporate level too.
Additionally Chariot has continued to evaluate a number of other plays within its Northern and Southern licence areas.
It will be interesting to see how the Chariot story plays out. Will it be allowed to further define and develop its projects off the coast of Namibia, or will it be gobbled up by a cash rich major looking to replenish its reserves?
Only time will tell. But if you stick with us, we'll keep you up to date as the latest details emerge.