Madagascar Oil: Funding Required To Unlock Resources
Edison | Jul 08, 2015 07:28AM ET
Appointments and raise should take to next level
After the approval of the field development plan in April 2015, Madagascar Oil (LONDON:MOIL)) can start the development stages of the massive 1.7bn OIP Tsimiroro field. Further approvals (such as the recent EIA submission) and milestones need to be negotiated, but pilot results indicating commerciality of the resource mean that a staged development can start. A development of this size is too big for MOIL to fund independently, and it has appointed Jefferies to seek possible partners. Given the size of the resource, we would expect interest from many parties. Importantly, MOIL can now leverage the knowledge of two very experienced figures in the company, Robert Estill (CEO) and Michael Duginski (NED) following their appointments. We have made broad assumptions on a possible farm-down (of 40%) with partial carry to arrive at an indicative NAV of 38p/share, although we note the material uncertainty in the terms of a deal.
New management has heavy oil experience
We are encouraged by the appointment of two very experienced heavy oil executives. CEO Robert Estill worked for four years on the Duri project in Indonesia and was most recently senior vice president of strategic planning at Marathon. Michael Duginski (NED) was formerly COO at Berry Petroleum, which operated heavy oil assets in California. They are therefore well placed to help MOIL develop Tsimiroro from the pilot to a large commercial project.
Funding required to unlock resources
Existing key shareholders have indicated conditional support for a $50m equity raise, which should fund the initial steps towards full development (we assume $30m in 2015). The size of the project (currently 1.7bnbbls contingent, though with upside), low geological risk, proximity to Asia and potential to drive the Malagasy economy means it should be attractive to industrial and financial players.
To Read the Entire Report Please Click on the pdf File Below
Get The News You Want
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.