Chariot Limited (AIM: CHAR): Adding portfolio depth and near term newsflow
• Chariot has raised US$16.1 mm of new equity priced at £0.14 per share. The company is also looking to raise up to an additional US$3 mm through an open offer.• The proceeds of the raise will be used to drill four new low cost/low risk exploration wells onshore Morocco in a licence expected to be awarded imminently. The new licence covers an area into which the reservoir fairways from Chariot’s Lixus licence are believed to extend. It is located close to existing infrastructure, as well as the planned processing facilities and onshore pipelines for the Anchois Gas Development. It is also close to the industrial offtake market with the potential to rapidly monetize a discovery. Domestic industrial gas prices have been reported to have reached ~U$16/mcf.
• The onshore wells are drill ready and a suitable drilling rig has already been identified in Morocco. Each well will target 8-18 bcf prospective resources and cost ~US$3 mm to drill.
• The raise also provides additional working capital, which is important to negotiate the best farm out terms for the Anchois project.
• With seven wells expected to be drilled in Morocco (three development wells at Anchois and four exploration wells onshore) over the coming 18 months, and a farm-out partner at Anchois due to be announced shortly, the story now benefits from much more frequent and material newsflow.
• As we incorporate the impact of the raise to our ReNAV, with onshore drilling anticipated to commence around year end, we have changed our target price to £0.50 per share.
More on the onshore opportunity
The expected imminent award of the onshore acreage is the result of a bilateral negotiation between Chariot and the Moroccan authorities rather than a competitive process. Some of the area is already covered by 3D seismic and gas and reservoir presence has been proven on-block from previous exploration wells. The prospects consist of a conventional, shallow gas play in a basin with a high historic success rate of 80-85% and low development costs. Production from an onshore discovery could start before Anchois first gas.
Value and newsflow
Finalising gas sales agreements, announcing an industry partner and taking FID at the Anchois project remain the key near-term catalysts and would take our Core NAV to ~£0.60 per share. Each onshore prospect has an unrisked value of £0.02 per share. This assumes (1) a similar value per boe as for Anchois and (2) 25% WI held by the Moroccan state company. Our new SoP valuation of £0.51 per share includes only two onshore wells. with a conservative 50% chance of drilling success.
Chariot Oil & Gas is an independent oil and gas exploration company focused offshore in West Africa with a portfolio of assets located in the under-explored regions of Namibia, Mauritania and Morocco.
Auctus Advisors is a specialist Equity Capital Markets and Advisory business with a focus in the Energy Sector.
The partners have complementary skill sets, with decades of experience across Equity Capital Markets, Investment Banking and the Energy industry. We have worked at Société Générale, Canaccord Capital, BMO Capital Markets and Schlumberger. Most recently we have worked together for many years at GMP FirstEnergy.
Auctus has been set up at the beginning of a new decade in which we see significant opportunities in the Energy space. Globally, demand for energy is at record levels and continues to grow. Conversely, investment in traditional energy sources has been severely constrained. We believe this imbalance creates opportunities for both companies and investors.
Auctus provides Corporate Broking, Equity Research and Investment Banking services.
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