Ascent Resources (LON:AST) – BUY*: Initiation of coverage
Market Cap: £35m; Current Price: 2.3p; Target Price: 4.3p
Descent unlikely as production expected to continue to rise
With Pg-10 now extracting gas and condensate and Pg-11a expected to follow shortly, Ascent has laid the foundations to allow it to move toward profitability. Following the construction of the gas processing plant, expected in 2019, we forecast the Company to make a profit of £6.2m in 2019, with this forecast to increase in 2020 and 2021.
Ascent Resources is expecting the Integrated Pollution Prevention and Control (IPPC) permit to be awarded this year following confirmation from the Environmental Agency that the Company will not be required to carry out a full revised Environmental Impact Assessment (EIA).
Ascent Resources is currently trading on EV per attributable 2P reserve of £0.09/TCF, compared to an average of £0.28/TCF of its peers, highlighting the undervalued nature of the business.
We initiate coverage of Ascent Resources with a BUY* rating and a target price of 4.3p per share based on discounted cash flow analysis.
NORTHLAND CAPITAL PARTNERS VIEW: Ascent Resources has commenced the extraction of untreated gas and condensate from its 75%-owned Petišovci Gas Project, located in Slovenia, following the re-entry of well Pg-10 and is preparing to re-enter well Pg-11a. The two initial re-entries should de-risk the next phase of development by demonstrating well performance and improving its understanding of the reservoirs and flow rates while it awaits the award of an IPPC permit. The IPPC permit will allow the Company to increase its production levels through the construction of its own gas processing plant. Plant construction followed by several plant expansions are expected to occur alongside the re-entry of several other existing wells, the re-stimulation of stratigraphic units from existing wells and the drilling of new wells. This strategy will result in a ramp of operations allowing Ascent to increase gas and condensate production in a conservative manner with a reduced reliance on external capital. As a result, we expect to see production increase from 3MMscfd of untreated gas in 2017 by over 1,000% to 35MMscfd of treated gas by 2021. This will result in net revenues to Ascent increasing from €4.4m in 2017 by over 1,200% to €57m by 2021 assuming gas and condensate prices remain flat. Should gas and condensate prices rise from their current lows there would be further upside for Ascent. We initiate coverage of Ascent Resources with a BUY rating and a target price of 4.3p per share based on discounted cash flow analysis.
URU Metals (LON:URU) – CORP: Investment in MRS
Market Cap: £26m; Current Price: 3.7p
Acquires 8.79% of Management Resources Solutions
URU Metals has acquired 7,550,000 shares in Management Resource Solutions Plc (MRS.L) from SCOPN Pty Ltd (8.79% of MRS) for a total consideration of £1,132,500 (15p per share), satisfied by the issue of 25,166,666 shares in URU at a price of 4.5p per share.
The Company also announces that it has issued and allotted 20,000,000 new ordinary shares following the exercise of warrants granted to Adam International Investments Limited in January 2017 at an exercise price of 1p per share.
Following the issue of the New Shares, the Company's share capital consists of 772,571,488 Ordinary Shares with voting rights.