Broker snap: Chariot upgrades resource estimates

6th Sep 2010 13:04

Broker Daniel Stewart is patting itself on the back after predicting that the volume estimates and chances of success ratings for Chariot Oil and Gas's Namibian assets were too low, after the company upgraded both on Monday morning."In our initiation note on Chariot we said that updating the resources and chance of success (CoS) would be one of many catalysts that should propel the share price towards our target price of 291p. Part of our analysis at the time included calculations that showed that volume estimates are too low and/or that the estimates for the CoS were excessively conservative. Both parts of that thesis now have been confirmed," said investment analyst Richard Nolan, who added that he is now much more confident in the broker's 291p price target."We estimate most of the improvements occurred in the Southern blocks which Chariot farmed-out to Petrobras. Obviously they knew a good thing when they saw one however, with the presence of direct hydrocarbon indicators (DHI) in the Northern block prospects and the on-going studies of them, they may turn out to be superior to the Southern blocks," Nolan said."The current Northern CoS values do not include the DHI response so far. If the on-going studies result in a positive outcome revised CoS values could be in the range of 25% - 33% on a per prospect basis providing a significant boost to the potential of this area. Consequently the Northern blocks may be superior to the Southern Blocks. Increasing prospective resources and improving CoS could increase bidding tension amongst those companies that are looking at this and other information in the data room," Nolan added.Daniel Stewart rates the shares a "buy".