Stockbroker finnCap has lifted its target price for Europa Oil & Gas (Holdings) PLC following news the explorer is seeking potential partners for a venture offshore Morocco.
The target moves from 5.1p to 6.7p, suggesting substantial upside to the current market price of 1.37p.
Significantly, finnCap analyst Jonathan Wright highlighted that the target price includes only one of fourteen exploration prospects seen in Morocco. Moreover, the analyst notes that finnCap’s valuation for Europa is heavily risked (assuming a 20% geological and 10% commercial chance of success).
“While any drilling activity is some way off, a successful farm-out would validate Europa’s excitement for this highly prospective acreage.” Wright said in a note, adding: “as this exploration opportunity matures, there should be scope for further upgrades.”
Europa this morning launched a formal process for the farm-out of a stake in the Inezgane Offshore Permit, an 11,228 square kilometre area, that’s described as a high-impact exploration opportunity.
The company noted that Inezgane is in an underexplored area but it is on the same geological trend with major oil and gas discoveries along the west coast of Africa.
Europa has to date identified more than 2bn barrels of exploration potential across its ‘top 5’ ranked prospects in Inezgane. It also said that Morocco offers excellent fiscal terms with a low tax take.
Chief executive Simon Oddie, in a statement, said: "We are delighted to announce the launch of the Farmout initiative of the Inezgane Licence which represents not only a high-impact exploration opportunity for Europa but also sits comfortably within the company's strategy of creating a balanced portfolio of complementary assets.
“The work completed thus far has focused on the top five ranked prospects which each have mean resources in excess of 200 mmboe at the Albian level, with total mean resources in excess of two billion barrels.
“These are extremely positive numbers for the company and we hope to capitalise on the prospectivity demonstrated along this prolific geological trend. I look forward to providing further information in due course."