Broker snap: Borders and Southern downgraded after Stebbing disappointment

17th Jul 2012 10:55

Jefferies has downgraded its recommendation for Borders and Southern from 'buy' to 'hold' and slashed its target price for the stock following yesterday's news that the Stebbing exploration prospect was unsuccessful.The group said on Monday that it had found very strong gas shows in the Tertiary section of the 61/25-1 well (Stebbing) but couldn't reach lower targets due to "anomalous pressure conditions".The broker's previous target price for Borders & Southern was 90p and Stebbing was valued at 54p per share.Jefferies says that the key focus for the company now is its Darwin prospect: "the Darwin result opens up the South Falkland Basin by proving a working petroleum system. However, commerciality will depend on the liquids content of the gas/condensate (currently unknown) and whether a more liquids-prone area can be found."Until better disclosure is obtained on the liquids content, which is expected late Aug/early Sept, we are maintaining a more cautious stance."The new target price is set at just 20p, a 40% discount to the broker's risked sum of the parts valuation due to the significant uncertainty surrounding Darwin and likely financing requirements.By 10:55, shares were trading 8.89% lower at 16.4p.BC