Tangiers Petroleum Ltd (TPT, $0.21, Mkt cap $37M) – Ministerial approval granted for farm-out to Galp Energia.
TPT announced it has received approval from the Ministries of Energy and Finance in Morocco for the assignment of a 50 per cent interest in the Tarfaya Offshore Block to Galp Energia (Galp). The signed Joint Order from the Ministries means Galp will now assume operatorship of the Tarfaya Offshore Block. With ministerial approval received TPT cash balance will be bolstered by an additional US$10.5m consisting of US$7.5m in back costs and US$3m bond. Galp Energia is already well advanced with their planning with environmental approval process underway, site survey underway and screening the market to book a drill rig. The TAO-1 well is expected to be drilled in 1HCY14. Given the delays in receiving approval for the farmout the Moroccan government have approved a six month extension for the first extension period meaning the partners will have until Feb 2015 to drill and evaluate the results and decide to enter the second extension period. Quick recap on the Tarfaya block. TPT have retained a healthy 25% interest and are free carried for the first well, targeting 758MMbbl expected to be drilled by 1HCY14. The well will be drilled in shallow waters (~110m). Relative to deep water drilling, this means cheaper drilling costs (~$30m vs. ~$75m deep water targets), cheaper development costs, lower discovery threshold which ultimately provides for more attractive economics. With an un-risked upside of >50 times, we believe investors will not ignore the risk/reward proposition for too long and anticipate that in the lead up to drilling the share price will correct sharply. On the corporate front, TPT and Jacka Resources (JKA) recently announced a friendly off market takeover which should it be completed, would create a well-funded and premier African focussed upstream O&G company. [Attached is our recent research report providing commentary on the proposed merger] Recommendation and Price target RESTRICTED. Foster Stockbroking are acting as financial advisor to TPT in respect of the JKA takeover bid.
