Longboat Energy plc (AIM: LBE): Velocette minor gas discovery
• The 6607/7-1 S well (Longboat plc net interest: 10%) encountered better than expected reservoir quality at Velocette but the gas column is only 9 meters. The trapping mechanism could have been breached.• The estimated gas volumes are at the lower end of expectations and the discovery is not considered commercial.
• Longboat indicated that the discovery of gas in much better reservoir quality than expected could have positive implications for the prospectivity of the area.
• We are reducing our target price from £0.90 per share to £0.60 per share.
• The shares continue to trade well below the value of the business based on the Kveikje discovery and Statfjord Øst & Sygna only.
• We anticipate a full update from the management on its growth plans at its interim results on 27 September after a busy period of transactions over the past few months.
What next?
The Lotus well, which the company is considering farming down to reduce cost, is expected to be drilled next year. Kveikje is an analogue to Lotus. Our unrisked NAV for the well is £0.22 per share. We expect the focus to increasingly be around (1) looking for development/production acquisition opportunities in Norway through the JV with JAPEX and (2) growing South East Asia.
Valuation
Our Core NAV continues to stand at £0.33 per share. We have reduced our ReNAV from £0.90 per share to £0.60 per share.
Longboat Energy PLC, formerly Longboat Energy Ltd, is a United Kingdom-based investment company. The Company's investment objectives is to create a full-cycle North Sea exploration and production (E&P) company in order to deliver value to investors.
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.
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