Buccaneer Energy Ltd. (fka BCGFQ)

[eom7]

A Canaccord Update was released on September 17.

It’s worth noting that in their original May 22 Report on Buccaneer Energy they had a 12 months target price of $0.095c, so it’s been a significant rise to $0.15c - given the increased dilution since then.

Also, Canaccord seems pretty 'bullish' about Southern Cross with it seen as having the potential to be a 40mmbbl field. That would be nice!

There is a reconfirmed Buy recommendation.

The Update notes that…

“$0.15 Price Target represents 114% upside potential from the current share price of $0.07, and 371% upside to reach the unrisked estimate of $0.33….also….. the unrisked valuation could be as high as $0.33/share using 2P or “Best case” estimates which may in fact be exceeded. Gas and oil price assumptions could also be conservative, adding to the upside potential. If BCC meets with with success in some, but not all these projects, we expect the share price to reflect much more of the value as it becomes more evident.”

Canaccord says “CONFIDENCE RISING”

Investment Perspective

The Buccaneer Energy (ASX: BCC) share price has reversed the negative trend experienced in the last two years, and we believe there is more to come. BCC will have lots of news flow in the next 2-3 months: 1) Kenai Loop#1-4 well is in the target and should add to gas production in time for winter; 2) the Southern Cross-1 offshore well is about to spud, the first of up to 8 wells paid for by EOS Energy; 3) the West Eagle gas exploration well to spud in October; 4) new reserves and resource estimates for Kenai Loop; 5) new Board assembled. Our risked DCF valuation has increased to $0.15/share and we reiterate a Buy recommendation.

Investment highlights

The Kenai Loop#1-4 well is in the target zone...
... This well has been drilled from well pad #1 in a SE direction, with an expectation of adding reserves and production from a separate fault block to the two existing gas producing wells on the field. Assuming similar thickness and quality of the reservoirs, the well will probably be completed for production rather than undergo any flow testing. This may take 1-2 months, which will be in good time for the Alaskan winter market, where an extra 3-5mmcfd would add cash flow up to $5m annualised. Our 4.5¢/share DCF has upside potential.

Southern Cross is about to spud…
… only awaiting final approvals to start drilling. This is the first US$30m well paid for by EOS under the farm-in agreement, leaving BCC with a free carried 50% interest in the project once a second well is drilled. We have modelled Southern Cross as a potential 20mmbbl oil project, and risked the company’s share of the DCF at 50%, which generates a value of 2.7¢/share. Drilling may suggest that reserves are more like 25-40mmbbl, potentially valued in the 5-10¢/share range.

Raised Target Price to $0.15ps, Buy maintained

A detailed review of BCC’s oil and gas prospects has led us to increase the Target Price from $0.13 to $0.15/share.
Revised modelling of the deep oil rights at North Cook Inlet is the main reason for the valuation upgrade. We use the independent estimate of 2P reserves of 38.5mmboe gross, we delay the project until 2018, a year later than BCC’s plans, we include 10 water injectors at US$10m each which may not be needed, and we risk the project at 50% and still end up with a value of A$199m or 8.3¢/share. Netherland Sewell values North Cook Inlet’s 1P reserves of 9.8mmbbl at US$138m (A$150m). Drilling won’t take place until next year, but the upside is evident. We reiterate a Buy recommendation on BCC, with a $0.15 Target Price.

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See the Update here:

http://www.buccaneerenergy.com/pdf/sep202013_CGAU_BCC.pdf