Irish broker has confidence in PetrocelticWednesday, February 13th, 2013
Dublin based broker Davy says it is confident that the merger between Petroceltic (LON:PCI) and Melrose has created a group that is stronger than the sum of its parts.
In a note today, following the group’s capital markets day, Davy analyst Job Langbroek said he was also confident in the broker’s 21.4p valuation – which is some 180% higher than the current price of 7.42p.
“Petroceltic showed how its current production assets produce a stable cash-flow core,” the analyst said.
“Both Egyptian and Bulgarian production profiles are predictable and reassuring and provide a platform of cash to pay down the current debt package as well as providing some of the capacity to finance the development of the Ain Tsila gas development in south-east Algeria.”
Langbroek also highlights that Ain Tsila will be among the drivers for the stock.
“This project will advance rapidly in the next two years notwithstanding the recent tragic events at In Amenas (the group took the opportunity to explain how the government response to this event had demonstrated how strongly oil and gas assets would be protected in the future),” he said.
“A FEED (front end engineering design) study should be completed by the end of the year with the award of major contracts to follow.”
Lanbroek points out that Petroceltic expects to sell an 18.37% stake in the project later this year, and that the project could ultimately recover ‘substantially more’ than the 2.1tn cubic feet of gas envisaged in the field design – the project has up to 10trn cubic feet of gas in place.
In addition to this development project Langbroek also expects that exploration and appraisal drilling will also be key, with around fifteen wells currently planned.