Tap Oil (TAP): More gains on tapWe have calculated risk-weighted...

Tap Oil (TAP): More gains on tap
We have calculated risk-weighted option values for TAP's exploration program,
and this adds at least 111cps. We have therefore upgraded TAP's 12-month price
target and expected total return to $2.60 and +29.8%.
Source: Proview / Aegis Equities
Company Risk: Share Price Risk: Ethical Rating:
What to do (Investors): BUY
TAP is an oil stock, the performance of which will depend largely on additions to reserves. It has a
12.2% stake in the strategically located oil and gas gathering facilities on the Varanus Island on the
NW Shelf. A large drilling program is currently being carried out, and exploration success could be a
turning point for the company. TAP is fully exposed to oil price movements, as it has no hedging in
place.
What to do (Trader): HOLD - bound by trading range between $1.80 and $2.20
We placed a Speculative Buy recommendation on TAP in mid-May noting, "The situation will improve
dramatically if resistance at $1.75 is overcome." That resistance was overcome in early June and the
stock moved swiftly to $1.95 before pulling back to "retest the breakout point". This typical pullback
presented investors with another buying opportunity. The stock then resumed the uptrend, peaking at
$2.18 in mid-July. Since then, TAP has retreated by 10% and has found short-term support.
However, neither momentum nor volume indicators are suggesting that a quick reversal is imminent
and the stock could spend some time preparing for the next upswing.
Fundamental View
TAP has adopted an aggressive exploration program designed to generate new growth projects
beyond the currently producing assets and to extend production in the existing fields of Harriet and
Woollybutt in the Carnarvon basin. The company is financially strong, with no debt and high cash
levels.
KEY STATISTICS
FINANCIAL SUMMARY
COMPANY OVERVIEW
Price: $2.01
Price as at: 30-Jul-07
Market Cap ($M): 315.8
Equiv. Shares (M): 159.0
% Market: 0.02
12Mth Range ($): 1.41 - 2.18
Turnover ($M pa): 461.6
Index: S&P/ASX 300
Sector: Energy
Industry Group: Energy
Industry: Oil, Gas & Consumable
Fuels
Sub
Industry:
Oil & Gas Exploration &
Production
Yr to Dec 06A 07F 08F
NPAT Rep ($M) 0.8 11.0 22.2
NPAT1 Adj ($M) 19.2 11.0 22.2
EPS (c) 11.9 7.0 13.9
DPS (c) 0.0 0.0 0.0
P/E (x) 16.9 28.7 14.4
Yield (%) 0.0 0.0 0.0
Franking (%) 0 0 0
EPS growth (%) (52.9) (41.3) 99.1
1 Profit & EPS adjusted for options,
goodwill, notional earnings and non
recurring items.
TAP is a Western Australia–based
petroleum exploration and
production company, which
concentrates on the prospective
Carnarvon basin. The group has
grown by organically generated
exploration, which has increased
the group’s reserves from some 6
million barrels of oil equivalent
(mmboe) on listing to around
25mmboe presently.
13 15 19 Aegis Independent Research
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