Ann: Quarterly Report December 2019, page-50

Top Australian Stock Picks

Carnarvon Petroleum Limited (CVN-ASX)
A final investment decision at CVN’s large, high returning, short gestation Dorado oil discovery is expected in 2Q CY20. This, in our view, should result in a catalyst-rich year for the stock. With CVN trading on an EV/2C of US$2.2/boe, a 20% discount to the mean transaction multiple for an undeveloped resource and a 42% discount to the top end of recent comps, we also believe the stock has corporate appeal.

https://www.livewiremarkets.com/wires/16-top-australian-stock-picks

BUY, A$0.59Target
Investment Highlights
CVN laid the foundation for development of the large Dorado discovery (20% CVN) in 2018 with completion of the appraisal drilling program and capital raisings which lifted its net cash position to $133m. A final investment decision on this short-gestation, high-returning project is expected in 2Q CY20 and this, in our view, will result in a catalyst-rich year for the stock.
Potential Catalysts
i) Resource upgrade – We expect Santos, the operator, to upgrade its 2C resource estimates for Dorado at its annual results on the back of “upper end” flow test results from the Baxter and Caley sands at Dorado 3.
ii) Final investment decision – Santos is targeting an FID for Dorado in 2Q.
iii) Corporate appeal - CVN is trading onan EV/2CofUS$2.2/boe;a 20% discount to the mean transaction multiple for undeveloped resource and a 42% discount to the top end of recent comps. Given Dorado’s location (shallow water, OECD country, etc.) and the running room available, an argument can be mounted that this is a "top end of the range” resource.
Performance Metrics
CVN was up 14% in CY19, compared to the ASX 300 which was up 21%.

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