Simba Energy Kenya CPR Results
Edison | Jul 09, 2012 02:37AM ET
Simba Energy’s (SGD.V) investor focus is likely to centre firmly on Kenya for the foreseeable future. The recent Block 2A CPR has booked the company’s first prospective resources while corporate deal flow in the region and most significantly the eagerly anticipated drill results from the Tullow operated Ngamia-1 well could make Kenya the next hot address in Africa. Valuations remain highly speculative, but 60c a share could be realistic in the event that prospectivity in the Mandera-Lugh basin is proven and Simba can move its Kenya assets through to being drill ready.
CPR confirms first prospective resources
Despite the availability of only limited and poor-quality 2D seismic data, independent consultant Sproule has estimated 27mmboe of risked and 445mmboe of unrisked prospective resources from three leads in Block 2A where Simba has a 100% interest. The company is set to start a passive seismic programme in July 2012 that should help prove up resources ahead of a likely 2D seismic campaign and drill programme.
Accelerating in-country activity
Timing for the CPR and passive seismic campaign could hardly have been better, with investor focus clearly on Kenya at the moment. Leading this is the Ngamia-1 well being drilled by Tullow Oil where preliminary well results have been highly encouraging. Afren is shooting seismic in Block 1 while partner Lion Petroleum provides corporate newsflow with its ongoing reverse takeover into TSX-V listed Taipan Resources.
Simba remains a portfolio play
Although Kenya is clearly the current focus the company continues to build a pan- Africa portfolio that could lead to more resources being identified. Guinea is the most active address with a recent agreement to acquire interests in Blocks 1 and 2, while Liberia interest is likely to grow with Chevron’s first well offshore currently being drilled.
Valuation: Deal flow could reset expectations
Simba’s early mover strategy means valuations are obviously speculative in nature, although with Kenya now the key valuation driver we can envisage a range of valuations based on different scenarios. Using this approach our valuations range up to 202c per share with 60c a reasonable outcome in the event that prospectivity of
the Mandera-Lugh basin is proven and Simba can move its assets through to being drill ready. If Ngamia-1 is declared commercial we see significant potential for major deal-flow in Kenya, which could rapidly escalate the value of Simba’s acreage.
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