Shares in Ramco are ‘seriously undervalued’

SHARES in Ramco Energy plc, the developers of the Seven Heads Gas Field, are seriously undervalued according to Davy Stockbrokers.

Shares in the Aberdeen-based exploration and production company, currently trading at close to £3.12, are regarded to be excellent value by Davy analyst Job Langbroek who believes the Seven Heads field on its own is worth more than the market value of the entire company.

“We estimate a current net asset value of £4.74 per share for Ramco. However, this includes a valuation for Seven Heads of 346p based on gross reserves of 304 BCF of gas, a figure that is almost certain to be revised upwards.

“This will add further value per share. For instance, increasing this reserve to 400 BCF adds another 75p to the valuation. This compares with a current market price of 312p, which does not even reflect a conservative value of the Seven Heads project.

“It also means that oil services and the exploration programmes in the group, either offshore Ireland or in Europe, are not priced into the stock at all. The shares look to be excellent value,” Mr Langbroek said.

Mr Langbroek said the Seven Heads gas project, offshore Ireland, fits neatly into Ramco’s strategy to become a European gas producer. When operational, Seven Heads will give Ramco a circa 12% share in the supply side of the Irish gas market.

“In fact, Ramco’s entire Irish gas portfolio should add significant value to the group. Its other Celtic Sea targets could potentially add materially to the net 263 bn cubic feet (BCF) of gas now attributable to Ramco in the Irish sector. In the long run it aims to build a 1 trillion cubic feet (TCF) gas business offshore Ireland.