Small Caps | Apr 17 2012
– Jacka seen as an attractive African oil and gas explorer
– Portfolio high quality with blue sky potential
– Company labeled 'The Most Undervalued African Explorer on the Market'
– DJ Carmichael rates Jacks a Spec Buy
By Chris Shaw
Jacka Resources ((JKA)) is a small cap oil and gas explorer based in Africa, the company holding both onshore and offshore assets in Tunisia and Nigeria in Africa and blue sky acreage in Tanzania and Somaliland.
The Somaliland assets come from a recent agreement to acquire a 50% interest and operator status for the Habra Garhais block, which covers an area of 22,000km2. As DJ Carmichael notes, this increases Jacka's footprint in what is currently the world's hottest hydrocarbon region.
DJ Carmichael rates Jacka a Speculative Buy, attracted to what it regards as a high quality asset portfolio and management team, a fully funded activity program this year and the potential for the generation of some near-term cash flow.
Jacka's assets include lower-risk and near-term cash flow potential assets such as Hammamet West in Tunisia and the Aje field in Nigeria. The latter has been deemed to be a commercial field following a successful appraisal program and DJ Carmichael notes Jacka has a share of around 10 million barrels of oil equivalent.
A fast track development option means Aje could be in production in 2013, DJ Carmichael estimating Jacka's stake could provide as much as $100 million in unrisked net present value. As the broker points out, this is more than double Jacka's current market capitalisation of a little more than $45 million.
At Hammamet West, Jacka has a 15% stake in the Bargou block and DJ Carmichael notes two exploration wells drilled to-date have encountered hydrocarbons. The discovery is estimated to contain from 111 to more than 210 million barrels of contingent resources and an appraisal well is due to be spudded in October. Jacka is estimated to be fully funded through core 2012 activities following a recent capital raising.
On DJ Carmichael's numbers, Jacka is trading at a significant discount to ASX-listed peers on an Enterprise Value/Contingent Resource/Reserve metric. This discount is not justified in the broker's view given the quality of both the management team at Jacka and the quality of the partners in its joint venture assets such as Chevron, Vitol, Dragon Oil and Apache. Possibly as an indication of just how undervalued the shares are at present, the stockbroker's latest research update on the company comes with the title "The Most Undervalued African Explorer on the Market".
Compared to a current share price of around 20c, DJ Carmichael values Jacka at $0.51, while its unrisked valuation is more than $1.00 per share. This disparity between the current share price and valuation opens up Jacka to potential corporate activity according to DJ Carmichael, especially given the portfolio of strategic assets held.
With a market cap of less than $50 million Jacka receives little coverage by the broader market, as evidenced by none of the brokers in the FNArena database providing research on the company.
Jaca shares have moved inside a range over the past year of $0.067 to $0.215.
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