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.
TPT Price at posting:
38.0¢ Sentiment: Buy Disclosure: Held
