pura vida re-rating ‘inevitable’, says broker

Wednesday, August 08, 2012 by Jamie Ashcroft
In a particularly bullish initiation note, Australian broker Hartleys says a huge re-rating of Pura Vida (ASX:PVD) shares is inevitable.

Analyst Dave Wall notes other companies with Moroccan acreage of a similar size and quality to PVD’s are valued in excess of US$200 million versus PVD’s current US$12 million market value.

“The value proposition is extremely compelling,” he said in a note to clients, in which he set a 113 cents price target for the shares (versus the current price of 30 cents).
Pura Vida’s strong acreage position offshore Morocco, a hot exploration post code this year, is the reason for the broker’s bullish view.

Indeed, he says the firm’s early move to secure a 75 per cent interest in the Mazagan permit, spanning 10,900 square kilometres, was an excellent deal.

The company has reprocessed and has mostly re-interpreted existing seismic data - covering 3,570 square kilometres – which has allowed it to book potential recoverable resources of 2.4 billion barrels of oil.

It is currently re-interpreting the remainder of the data and, according to Wall, a farm-out process could occur as early as October. He says this would allow drilling to get underway late next year or early 2014.
Large US oil firm Kosmos Energy is planning to drill three wells in neighbouring acreage next year, and last month’s reported entry of London-listed Genel also highlights the increasing industry interest in Morocco.

The presence of Kosmos nearby is particularly significant. As the discoverer of the large Jubilee field offshore Ghana, it has been targeting new areas where it expects to find similar geology - formed millions of years ago before the world's continents are beleived to have separated.
Similarly, fellow Jubliee partner Tullow has made a 'related' discovery in South America, the Zaedyus field offshore French Guina, using this 'continental drift theory'. Other comparisons are made between potential discoveries in Morocco and Canada's east coast.
And it is in considering these apparently corresponding prospect that Hartleys derives its comparison to US$200 million peers.

“Pura Vida’s interest in the block hinges around the identification of very large prospects in the same play type that Kosmos made the billion barrel Jubilee discovery offshore Ghana, in 2007,” Wall said.

“Signatures on the seismic, including direct hydrocarbon indicators from AVO analysis, and clear cutoffs on amplitude along depth contours (indicating possible oil water contact) are all eerily similar to those seen at Jubilee.
“Industry opinion on the prospectivity has definitely started to converge and we expect that market interest and share price appreciation will follow.”
Wall goes on to recommend the stock to Hartley’s clients as a ‘buy’.

He says that all the ingredients are in place for a successful farm out, highlighting the ‘huge’ prospects, the similarity to the Jubilee field, as well as the excellent fiscal terms of Pura Vida’s contract with Morocco and its large working interest in the acreage.

http://www.proactiveinvestors.com.au/companies/news/32170/pura-vida-re-rating-inevitable-says-broker-32170.html