Molopo on the up, say analysts. AFR - Street Talk 15th September 2010
Junior oil and gas play Molopo Energy has caught the eye of analysts at Macquarie, with the group initiating coverage of Molopo with an outperform recommendation and a target price of $1.60.
That’s 53% higher than its current share price of $1.04, with the bullish target a reflection of what Macquarie said was an offer of “unparalleled production growth”.
Molopo has been building up its presence in North America’s booming unconventional oil and gas scene, having pounced on some cheap assets during the depths of the financial crisis.
Production out of those assets is expected to hit 2000 barrels of oil a day by the end of the year and 3000 barrels a day by next June. The challenge will be funding the development over the coming years – Macquarie estimates Molopo needs $280 million in the next four years, the equivalent its current market cap – but that is unlikely to be a insurmountable.
“An investment in MPO offers attractive 2P reserves build potential and production growth in the near year term that is not subject o commercialisation constraints commonly faced by other Australian unconventional companies and is economically attractive at current oil prices,” Macquarie said.
Management has set a number of measurable and achievable production targets in Canada that with provide investors with tangible milestones to assess performance on a regular basis.
MPO Price at posting:
$1.11 Sentiment: LT Buy Disclosure: Held
