Investec hails Circle Oil's latest discovery, sees substantial upside

22nd Dec 2014 10:38

Investec said it sees substantial upside to shares of oil group Circle Oil after the company announced a "significant gas discovery" onshore Morocco.Results from the drilling of KSR-12 in the Sebou permit showed that the well encountered gas shows at two different levels within the objective 'Hoot' sands.The company said the net gas pay encountered from wireline log analysis is 19.5 metres in the main target Intra Hoot sands and 1.0 metre in the Upper Hoot. "This is greater than pre-drill sand thickness expectation," it said.The main Hoot sands flowed at a sustained rate of 8.09m standard cubic feet per day.The new discovery makes it "three-from-three" from the company's 2014/2015 Moroccan campaign, Investec said."The well encountered a thicker sand section than pre-drill prognosis, flowed at the highest rate of the campaign and should result in an increase to existing reserves booked in Morocco," the broker said."KSR-12 is therefore, in our view, just what was required against an unsettled commodity backdrop and a company in transition," the broker said.It said that the stock continues to trade at a "deep discount" of over 60% to the value ascribed to Circle's discovered barrels."We also flag that Circle's risked exploration net asset value as the least sensitive in our coverage to oil price fluctuations," Investec said.Circle's shares were up 8.4% at 11.25p by 10:36.