Treasure Chest | Nov 28 2013
By Greg Peel
The US Geological Survey regards the North Slope in Alaska to potentially be one of the last prolific shale oil/gas plays in the US. The area is also rich in conventional reserves. It is little wonder the heavyweights Shell, ExxonMobil, Chevron and ConocoPhillips have invested in the region. US private equity firm Caelus Energy has now moved in via acquisition having previously participated in the highly successful listing of Kosmos Energy. Another private equity firm, Hilcorp Energy, is now one of the dominant producers in Alaska’s Cook Inlet.
Watching proceedings with interest is ASX-listed Rampart Energy ((RTD)), which has an agreement to secure up to a material 42,380 acres in the Western and Central blocks of the North Slope, notes stockbroker DJ Carmichael. Rampart is planning a 3D seismic program which the broker estimates will cost around $10m. The company recently raised $4.5m of new equity and is close to completing a revolver financing facility which could fund a substantial amount of the seismic costs.
DJ Carmichael believes the delivery of a revolver facility could prove a major catalyst for Rampart.
The broker believes substantial value could be delivered on completion of the 3D seismic program which should delineate a substantial prospective conventional resource. In the analysts’ view, the scale of a resource estimate provided by an independent resource report represents material value and provides a compelling endorsement of Rampart’s acreage. Such scale provides Rampart with the potential to monetise the asset pre-production by farming out stakes to other energy companies.
The US offers low geopolitical risk and the Alaskan government is strongly supportive of energy exploration, have recently improved fiscal terms for exploration companies.
DJ Carmichael has lifted its valuation of Rampart to 24c per share from 19c and set that value as its 12-month price target. The capital raising and reduced funding risk lead to a higher assumed Probability of Success attributed to the resource (rises to 12% from 10%, so plenty more upside).
The broker has a Speculative Buy rating on RTD. This is a high risk play for potentially high reward and not a stock for those looking for safe growth and yield.
Find out why FNArena subscribers like the service so much: "Your Feedback (Thank You)" – Warning this story contains unashamedly positive feedback on the service provided.
