‘Buy’ note for exploration firms

Irish exploration firms Providence Resources, Fastnet, and Tullow have all received strong “buy” recommendations.

A note issued by Numis Securities on Providence Resources is predicting a 34% upside to its earlier 832p/share target price.

This is based on its interpretation of data on the Barryroe oil field off West Cork, which it says “could be significantly larger than an RPS pre-drill estimate”.

Numis bases this estimate on a lower appraisal risk. It now expects that further appraisal could be more positive. However, Numis also sees a potential for Providence for a “farm down” of its 80% interest in Barryroe in return for an appraisal/ development cost-carry.

“Due to uncertainty on the ultimate size of the prize this could prove to be an expensive exercise,” Numis wrote. “We remain relatively conservative in our valuation approach and place our 832p/share target price at a 50% discount to NAV in order to pre-empt potential farm-down dilution.”

Fastnet has acquired the assets of Pathfinder Hydrocarbon Ventures from its US parent company, Pathfinder Energy Fastnet Oil and Gas, for an initial consideration of $8m (€6.5m). Davy stockbrokers said the acquisition added “a tradable level of equity in a high-risk but high-potential licence that is governed by an attractive fiscal regime consistent with first mover advantage”.

Tullow Oil’s positive reports from its exploration well in the Deepwater Tano licence off Ghana has met with a series of broker approvals, with a “buy” recommendation generally over 1380p in London prices.

Tullow has issued positive findings from its intersected oil and gas-condensate in a Turonian turbidite channel system. Merrion Stockbrokers gave Tullow a “buy” recommendation of 1382p.