hang in there, exoma investors told

Hang in there, Exoma investors told

Monday, 8 October 2012

RESEARCH firm Edison Investment sees plenty of upside in Queensland oil and gas explorer Exoma Energy, but says it understands investor reticence to buy its shares, which slid nearly 20% last week.
Exoma shares received a boost last month when it announced its Chinese backer, CNOOC, had increased its share in the Galilee joint venture from 50% to 60% – and had also bought a 13% stake in Exoma – in a deal worth at least $23.4 million.

CNOOC can increase its shareholding to 19.9%, subject to Exoma shareholder approval.

Edison said the CNOOC share investment was at an issue price of 17.2c per share, about double what the stock has traded at since.

It said this was partly because the failure of Exoma’s Katherine West well had pushed Exoma’s price down since early August compared to what it had traded at during the three months previous, the timeframe used to calculate CNOOC’s intended 25% premium.

“In a truly rational and liquid marketplace, Exoma’s share price could reasonably be expected to migrate toward the equity benchmark set by the cornerstone CNOOC deal,” Edison said.

“That this isn’t yet happening, in our view, reflects a number of distortions including the early-stage nature of the play, thin trading volumes, the stock overhang and market conditions.”

Edison said “inferred metrics” from the CNOOC investment indicated a valuation range of 12-17c per share for Exoma, meaning there was “significant upside headroom” for the stock.

Exoma shares closed last week at 7.1c after starting the week at 8.8c.

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