Broker snap: Chariot Oil upgraded to buy

22nd Feb 2013 10:25

Chariot Oil and Gas was upgraded from 'hold' to 'buy' by analysts at Jefferies, which said the stocks were trading at good value for money. "Chariot is trading at a discount to its current cash and we see three key wells drilling near its acreage in 2013 as low cost options on potentially material de-risking events," the broker said of the company's exploration operations in Namibia."While we do not expect any drilling on Chariot's assets in 2013, we believe the de-risking effect of nearby wells could more than double our risked sum of the parts."The broker's comments come after Chariot's shares fell as it announced it had plugged and abandoned its Tapir South-1 well Namibia and reported a 39.2% fall in its cash balance. However the group has identified 19 new targets across 13 prospect areas in central Namibia and plans to begin drilling at new licences in Mauritania and Morocco in 2015 and 2016 respectively. "We see the highest potential in its Namibian central blocks and its Mauritania acreage," Jefferies said."Our risked sum of the parts of 120p per share assumes at least half of its working interest in each block is farmed-out to get drilling carries and assumes an average chance of success of 4%."Jefferies increased the target price to 50p per share, set at a 30% discount to the 72p per share.While the assets are high risk, the potential rewards are attractive, the broker added. Shares recovered 2.53% to 20.25p at 11:04 Friday.