bby - $5.60

10 Bagger, Friday 30th May

Broker says imminent Tangiers well could see 23c stock worth more than $5

There’s nothing quite like the lure of a massive oil target to get investors hot ‘n sweaty, as the recent action in Tangiers Petroleum (ASX: TPT) shares has showed.
The stock has edged up from 16c to around 23c in the past week or so as the anticipation mounts in the lead-up to the start of the company’s eagerly-awaited well off the Moroccan coast.

The TAO-1 well is due to spud in just two to four weeks and will test an oil target which, in simple terms, has the potential to send the stock through the roof.
Institutional stockbroker BBY has put a speculative buy recommendation on Tangiers shares with a price target of 82c.

But the real upside is highlighted by BBY’s estimate of what could happen to Tangiers shares should just one of the three targets within the well contain oil.

Known as the Trident prospect, BBY says this target alone could see Tangiers’ shares valued at $5.60.

Tangiers has a 25 per cent stake in the well and is free-carried up to a total cost of US$33 million by operator, petroleum giant Galp Energia.

Tangiers’ share of the “unrisked recoverable oil target” is estimated to be 190 million barrels, meaning it is a potential company-maker by any measure.

While the potential size of the prize is undoubtedly a key driver of the excitement that is now brewing, the relatively high chance of the well coming up with the goods is also stoking the investor interest.

The chance of success, as measured independently using a somewhat complicated but widely accepted industry equation, is put at 21 per cent, a high figure when it is remembered that 5 per cent is considered a reasonable prospect.

While this piece of arithmetic might be rather dense, there are several simple reasons why TAO-1 is seen as such an outstanding investment prospect.

These include the fact that the reservoir being targeted shares the same host rocks and is in the same carbonate play as the adjacent Cap Juby oil discovery.

Tangiers also points out that the same seismic work which rightly predicted that a key zone in Cap Juby would be a poor reservoir has also predicted that the reservoir quality at TAO-1 would be of good quality.

BBY says the potential for Tangiers shareholders is abundantly clear. “Delivery of expectations could see the value (of Tangiers) exceed $1 billion – a value uplift of 30 times,” the broker said in its latest research note.

That’s around $5.60 a share.

http://resourcesrisingstars.com.au/infopage/4703