Brokers' view: Midas

Ophir Energy is a gas exploration company with a focus on Africa. The company recently undertook two drilling campaigns, in 2008 and 2010/11, drilling eight exploration wells, of which five made discoveries: two in Equatorial Guinea and three in Tanzania. Both countries are likely to see liquefied natural gas (LNG) developments, with Tanzania alone providing a potential for more than 21 trillion cubic feet of gas.

Ophir plans to use the capital raised in its recent IPO to drill a further 12-plus wells within the next 18 months, targeting 1.75 billion barrels of net unrisked resource in Tanzania, Equatorial Guinea, Gabon and the Senegal/Guinea Bissau Common Zone.  The company currently has a combined net acreage of approximately 90,000 sq km, including 65,000 sq km in deep water, and has established partnerships with BG Group, Petrobras and Noble, which strengthen its prospects and potentially provide enough resources to fully feed a two-train LNG facility.

On Midas’s estimated risked NPV basis, Ophir should be valued at US$1.8 billion, compared with the current market capitalisation of just $1.3 billion. Ophir trades at just $1.05 per barrel of oil equivalent (BOE) of risked resources, compared with a peer group average of $1.44. As a result, Midas sees Ophir as a very attractive oil and gas play.

Further opportunities
Also due to embark on an African drilling programme of its own is Afren. Targeting nine wells with over 600 million BOE of net resources, including key H2 2011 wells in Nigeria, Kenya and Tanzania, Afren is another potentially attractive sector play.