Tangiers Petroleum - worth a trade
BY GARY NEWMAN | FRIDAY 4 JULY 2014
Share prophets
The AIM market finally seems to be showing some appetite for oil and gas stocks and I’d expect some of that to spread to Tangiers Petroleum (TPET). A lot has happened since I tipped this company here at 12p back in January, including the deal with Jacka Resources falling through, suspension of trading for a couple of months after the resignation of some of the board members, and the raising of $9 million through equity issues. Given all that has gone on in recent months this is far from being one of my personal AIM favourites, but with the way the market is currently I can see plenty of upside to come in the near term now that the TAO-1 drill on the Tarfaya block in Morocco is underway – albeit after a delay to spudding.
Tangiers has a 25 per cent interest in this license (Galp Energia is the operator) and the drill is targeting three stacked targets – the main objective being the middle Jurassic, and the drilling of the lower Jurassic being dependent on results achieved in the other two targets. The company is targeting net resources on a best estimate basis of 190mmbbl, based in the 2011 CPR carried out by NSAI, and any oil find in any of the targets is likely to have a big impact on the company’s £32 million current market cap. This drill has a 21% Chance of Success and Tangiers has a free carry on it, capped at $33 million, making the company liable for $13.2 million as long as the drill is on budget, and was why they raised funds in recent months.
A lot of the previous drilling close to this block date back to the late 60s through to the late 80s, and the 13 wells drilled during that period were hardly a success – although a small amount of 38API oil was flowed from the Middle Jurassic by ESSO back in 1972, and in 1969 it managed to flow 2,377bopd of heavy oil from the upper Jurassic. Like any exploration drill the chances of failure outweigh those of success by some margin and it would be a real gamble leaving any amount of money in for the results.
But given the current share price of around 13p I would expect a chance to at least take out your initial stake prior to any results, and either bank a profit or leave some free shares running if you like to gamble. The recent warrant conversion has dragged on the SP and helped keep it down at this level, and I’ve bought some myself at 13.25p purely to trade the rise I expect – I don’t risk money on drills like this when it comes to being in when results come. I do anticipate it gaining some momentum in the near future, and with only 248 million shares in issue it does have a tendency to move quite quickly and could see 18p or higher in a short space of time. It is still a highly speculative buy though and by no means a safe bet.
Tangiers Petroleum - worth a trade BY GARY NEWMAN | FRIDAY 4...
Add to My Watchlist
What is My Watchlist?