This just from DJ`s
Tangiers Petroleum Ltd (TPT)
December Quarter 2012 Update
TPT has completed a successful December quarter highlighted by the delivery of two
material farm-out transactions. In addition, TPT s balance sheet has been significantly
strengthened following a capital raising and the expected inflow of back-costs due
following final approval of the Tarfaya farm-out to Galp. We believe TPT offers investors
high leverage to significant exploration programs which will be fully funded (post
approvals) and has a high calibre management team which has delivered material
transactions in a short timeframe. We maintain our Speculative Buy recommendation
with a slightly reduced price target of $1.55/sh.
Key Points:
Farm-outs reduce funding risk and provide attractive see-through value. TPT was
successful in negotiating two material farm-out agreements in the December quarter which
has reduced its near term funding risk and provided an attractive see-through value to
TPT s assets. The two farm-outs are worth a total value of ~$76m for its Tarfaya offshore
block, Morocco and its WA-442-P and NT/P81 blocks, offshore WA and NT, Australia. The
total value of these farm-outs imply a see-through value of ~$0.25/sh to TPT which
underpins a significant amount of TPT s current share price while providing investors with
high leverage to major exploration programs which will be fully funded. Furthermore, TPT
has retained a material interest across all permits post farmout (25% in Morocco and 27%
offshore Australia).
Balance sheet strengthened. TPT took significant steps to strengthen its financial
position during 2H CY2012 in which it completed a $7.2m capital raising (two tranche
placement and Share Purchase Plan). At the end of the quarter, TPT had $4.2m cash
which will be substantially increased on completion of the Galp farm-in agreement with
$US7.5m in back costs and the return of a $3m bank guarantee resulting in a cash
position of over $14m. We believe this will place TPT is in an enviable funding position to
further build its asset base.
Newsflow in 2013 to be driven by new ventures activity. We believe that despite the
attractive farm-outs secured the market has been reluctant to provide fair value to TPT s
share price. In our view this is due to the long dated expected drilling time for both Tarfaya
offshore (1Q CY2014) and WA-442-P and NT/P81 blocks (1Q CY2014). However,
management is advancing discussions on new venture opportunities supported by
potential drilling activity in CY2013. We believe new venture acquisitions will be the
key catalyst for TPT in 2013.
Management delivering. Since the appointment of Eve Howell as Executive Chairman,
TPT has delivered two material farm-outs which have mitigated exploration funding
commitments, significantly strengthened its balance sheet and is advancing new venture
opportunities to further build its African focused asset portfolio. We believe management
will continue to deliver value accretive transactions going forward resulting in material
share price upside.
That would be you on the right PAINO
There...someone had to say it.
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