Corcel plc (AIM: CRCL): Initiating Coverage

Corcel is a ~£6 mm market cap AIM-listed E&P company focused on Portuguese-speaking Angola and Brazil. It offers a unique exposure to the prolific Kwanza onshore basin in Angola which reopened to international companies in 2021. Corcel is also building a portfolio of mature onshore producing assets in Brazil. The key asset in Angola is the KON-16 licence, which Corcel operates. The last drilling in this area was in the 1960s. Multiple large shallow and deep prospects have been mapped, and offshore drilling success has validated the pre-salt play expected to continue onshore. An independent resources report could be published in 2025 and Corcel is already looking for farm-in partners. Drilling is anticipated to start in 2H26. Additionally, Corcel holds interests in rare earth metals exploration assets in Australia. Our 1.00p/sh target price reflects our ReNAV. It implies >6.5x the current s/p.

First entrant in a prolific basin frozen in time until 2023
In the oil industry, Angola is synonymous with “giant deep offshore oil” but back in the 1960s/1970s, the focus was on the onshore part of the Kwanza basin with production from 9 fields. This historic production was based on poor quality seismic and old technology. With the onset of the civil war (1975-2002), international oil companies moved offshore. The last onshore well was drilled in 1982. A modern multiclient seismic program was conducted onshore and offshore in 2010, but no other onshore activity took place until 2023, when international companies were finally allowed to acquire onshore licenses. Corcel holds 49.5%, 18%, and 22.5% stakes in blocks KON-16, KON-11, and KON-12, respectively. On KON-11 and KON-12, the focus is on redeveloping prematurely shut-in mature fields. There are also multiple post-salt (shallow) and pre-salt (deeper) prospects that were highlighted by the 2010 seismic. The most attractive ones are on KON-16 where the first exploration well will target both a post-salt (~100 mmbbl) and a pre-salt (~300 mmbbl) prospect. A 1960s well encountered oil at the edge of the pre-salt target, significantly de-risking it.

First production acquisition in Brazil
Corcel's management has extensive experience in Brazil's onshore sector. The first acquisition in Brazil, will potentially add approximately 25 boe/d of net gas production, if Corcel exercises the option it acquired in 4Q24. This could increase to 1 mboe/d by drilling new wells and acquiring the partner’s remaining working interest. This is just the first step.

Value build-up
Securing a farm-in partner at KON-16 post the new seismic ~YE25 would be a rerating event. A drilling success in a post-salt target could add 1.15p/sh with a further unrisked value of 3.44p/sh for the pre-salt target. There is follow-on potential. Our ReNAV for the company is 1.07p/sh.