Spreadbet Magazine’s top 3 picks for 2013
Sinochem bought Emerald Energy in 2009 to gain access to “Block 26” in Syria and it was expected the Chinese would want to eventually gain access to the other 50pc of site which is owned by Gulfsands. Six exploration and one appraisal well were in fact drilled on Block 26 in 2011 (see diagram below).
Four of the exploration wells encountered potential commercial levels of hydrocarbons and reserves were consequently increased by 34% to 76mmboe — this alone is worth at least $4/bbl and before the conflict the Syrian assets were valued at just under $8/bbl. NPV to the likes of Sinochem is therefore 80 - 160p (at current FX rates and adjusted for 50% they own) for this alone.
BLOCK 26 SEISMOLOGY MAP
“Additionally, another potential catalyst in the near term, albeit likely to be much less explosive to the stock price than a Syrian resolution, is the potential of near term production from their Tunisian fields and also continued disposals of the Group’s Gulf of Mexico assets which could act as a cash injection into the business and so bolster the balance sheet further. ” To conclude, Gulfsands trades at a modest premium to cash, a discount to its risked NAV, even with the Syrian fields marked down to zero, and it has two potential predators sat on its share register. Throw into the mix a serious re-rating should Assad be deposed and the sanctions on the Company lifted and this has the potential to be a multi-bagger in 2013.
January 2013
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