Coastal Energy CEN.to - target $25.50 First Energy
Coastal Energy Target Price: £16.00 per share ($25.50 CAD)
We have increased our target price on Coastal to £16.00 per share (previously
£15.00 per share), which is in line with our new risked NAV estimate
of £15.73 per share. In November, the Company was producing
17,500 boe/d, and with the tie-in of additional wells, Coastal has provided
production guidance at 22,000 boe/d by the end of January 2012e. Pending
results of the Company’s first horizontal well, we estimate this figure
could actually stand at 25,000 boe/d. The economics of developing Bua
Ban North with horizontal drilling could be materially boosted with lower
development cost, increased recovery factor, and higher initial flow rates.
Coastal is currently trading at a 2.1x EV/ 2012e DACF multiple and the
current share price is well below our core NAV of £13.48 per share and our
new risked NAV of £15.73 per share.
With 115 mmboe of Proved plus Probable reserves and 2011e production
well above 22,000 boe/d, Coastal is a likely take-over target. We estimate
the Company is also targeting 170mmboe of prospective resources by the
drill bit in 2012e.
My note, CEN trading at a big discount to 2P NPV continues to be a candidate for M&A for Asian countries via International Oil Companies and National Oil Companies looking for oil. Lots of undeveloped reserves and lots of exploration resources targeted in 2012. CEN soon begins completion testing of their string of H2 2011 oil discoveries. I'm speculating CEN's Bua Ban North horizontal production wells will exceed market expectations that were established modeling vertical production wells for Bua Ban North. |
