Ann: November 2012 Investor Presentation , page-4

Foster Stockbroking
12-Nov-2012
Morning Report\

Pura Vida Energy. (PVD.ASX, $0.68/sh, Mkt Cap $34m). Farm-out to serve as a major catalyst. BUY PT $1.50/sh

Today’s Top Picks.

Pura Vida Energy. (PVD.ASX, $0.68/sh, Mkt Cap $34m). Farm-out to serve as a major catalyst. BUY PT $1.50/sh

•Last week our analysts held a call with PVD management for an update on the farm-out process of its prospective Mazgan permit located offshore Morocco.

•The farm-out process formally began in late October and is being managed by London based EZDataRoom, the same group that managed the farm out of the adjacent blocks. Management conveyed a high level of interest has already been shown by E&P majors and super majors. This comes as no surprise given the resource potential and high quality technical work completed today on the permit.

•Resource potential has been independently assessed as containing net 5.3 billion bbl of mean prospective resources. The giant Toubkal prospect is the lead drill target with a mean unrisked prospective resource of 1.5 billion bbl and has a striking structural and 3D seismic similarity to the prolific 1 billion bbl Jubilee discovery, offshore Ghana, made by Kosmos in 2007.

•We understand there are a number of large E&P companies with Moroccan assets looking to increase their in-country presence (Anadarko, Genel, Cairns and Kosmos). With this in mind, we expect to see PVD generate a level of competitive tension that should enable it to achieve farm-out terms at least as good as those in the recent Cairn Energy farm-in to Foum Draa (50% interest in exchange for a $60m capped carry).

•Given the high working interest the company has in the permit (75%) it places PVD in a strong position to attract a partner while still retaining a healthy free carried interest. We envisage that PVD will farm down its interest in the Mazagan permit from 75% to 30.0% and be free carried through a 1 – 3 well exploration program. Expected cost of a deepwater well is ~$50m.

•Our risked NAV across the prospect inventory is $558.7m, $6.00/sh. We have assumed PVD will retain a 30% working interest post farm out, applied a 10% COS across the Miocene prospects, 5% COS across the Upper Cretaceous and ascribed a conservative in ground value of $5/bbl. Given the fully diluted market capitalisation is currently $64m, it demonstrates the risk/reward equation is very promising indeed and provides significant valuation upside for those understanding the risk/return potential of oil and gas investment.

•Our price target has been set at 75% discount to our equity valuation, we will look to unwind our risk factor as key milestones are achieved, first of these being a farm in deal targeted for Q4CY12, followed by conformation of drilling. We rate PVD a BUY and PT of $1.50/sh.


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