Broker snap: Jefferies stays positive despite Chariot's Tapir South failure

14th May 2012 09:23

Jefferies has reiterated its buy recommendation for AIM-listed explorer Chariot Oil and Gas despite the recent disappoint at its Tapir South frontier exploration well in Namibia.Preliminary logging results have shown that, although excellent reservoirs were penetrated, no commercial hydrocarbons were found and the well will be plugged and abandoned. Jeffeiries says that Tapir South is valued at 90p per share (25% of the stock's 355p target price). "Chariot will now incorporate the data learned from this well, only the second well in the Namibe basin to re-estimate the remaining prospectivity of the northern blocks. Chariot had estimated a further two billion barrels in prospective resources across the block with about half (one billion barrels) in the Tapir trend which we believe may now be written off or re-risked," the broker said.Nevertheless, Jefferies has maintained its positive stance on the stock.The broker highlights Chariot's "super-giant" Kabeljou (Nimrod) prospect, which is to be spud in the third quarter of 2012 and is chasing unranked prospective resources of 4.9bn barrels. Jefferies values this prospect at 231p a share risked and 2,645p unranked. "Kabeljou sits in a different basin than Tapir South and the unsuccessful results at Tapir have no impact on Kabeljou," the broker says.With around $100m in cash remaining (on the broker's estimates) after Tapir South, it believes that the company is "well-funded to continue to explore the potential of its large frontier acreage position in Namibia and Mauritania."Chariot's share price plummeted on Monday, trading 40.37% lower at 89p by the mid-morning.BC