Eco (Atlantic) Oil & Gas - Update
Highly successful explorer in frontier regions in Guyana, Namibia and South Africa where preparations for further drilling have begun
Eco started trading on the TSX-V in 2011 with Namibian oil interests. In 2016, Eco teamed up with Tullow to acquire a licence in Guyana to explore similar basins in the margins on the other side of the Atlantic Ocean, ahead of becoming dual-listed in 2017. The shares began rising on Eco’s announcement to drill and climbed to 190p+ following the drilling of two discovery wells in Guyana which confirmed the prospectivity of the upper & lower Tertiary fairways. However, the stock price fell by two thirds in a matter of days following Tullow’s announcement that the wells contained heavy oil disappointing the market and since then the stock has remained unloved.
Prolific hydrocarbon provinces where Eco teams up with oil majors
The acreage in Guyana, South Africa and Namibia has huge potential and Eco has a good track record of being able to successfully negotiate farm out deals with majors to develop its projects. Eco is in good shape, with US$6 million of cash, no debt and proven backing of major shareholders like Africa Oil.
Next door in Guyana, ExxonMobil has discovered more than 10 billion boe
June/July 2022 could see Eco’s partners in the Orinduik Block unveiling a decision to resume drilling into light oil Cretaceous targets, the source of ExxonMobil’s huge success on the adjoining Stabroek Block where the 120,000 bopd Liza Field went into production in late 2019, following discovery in 2015.
Plenty of potential catalysts for wider regional success in SA and Namibia
Eco’s strong strategic positioning in Namibia could rapidly become more valuable on rumours of Shell discovering light oil at its Graff-1 exploration well. Namibia could become one of the hottest global plays – so a good time for Eco to up its interest by acquiring Azinam. This deal also adds two South African Orange Basin blocks, Block 3B/4B, that is directly correlated to Graff-1 and Block 2B, a shallow water block with previous light oil discovery.
Big disconnect in share price - our risked NPV revealing 383% upside
Our highly conservative, heavily risked NPV shows the opportunity. We update coverage of Eco with a target price of 114.65p and Conviction Buy stance.
RISK WARNING & DISCLAIMER
Eco (Atlantic) Oil & Gas is a research client of Align Research. Align Research own shares in Eco (Atlantic) Oil & Gas. Full details of our Company & Personal Account Dealing Policy can be found on our website http://www.alignresearch.co.uk/legal/
For full disclaimer information please refer to the last page of the full document. This investment may not be suitable for your personal circumstances. If you are in any doubt as to its suitability you should seek professional advice. This note does not constitute advice and your capital is at risk. This is a marketing communication and cannot be considered independent research.
| Year to March | 2020A | 2021A | 2022E | 2023E |
|---|---|---|---|---|
| Revenue (C$’000) | 378 | 47 | 20 | 20 |
| PTP (C$’000) | (20,073) | (3,680) | (2,843) | (23,729) |
| EPS (C$) | (0.11) | (0.02) | (0.01) | (0.09) |