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India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Bharat Petroleum (BPCL IN, INR 728, Buy)
Bharat Petroleum’s (BPCL) upstream venture (Bharat Petroresources, BPRL) recently reported yet another discovery - 59 metres net pay of natural gas in the Rovuma Area 1 offshore block in Mozambique. The discovery, termed as ‘Golfinho’, is estimated to hold 7-20 tcf of recoverable gas (13-45 tcf of in-place gas reserves). Additionally, the company also announced third successful drill stem test (DST) at Barquentine-1 well (located in the prosperidade complex). Including Tubaro discovery, the total recoverable reserves estimate for the Mozambique block now stands at 25.5–51.5 tcf, the lower band of reserves now nearing our base case assumption of 30 tcf. With more exploration drilling planned for the year (Atum, Orca, Black-Pearl), we see upside risk to our base case numbers. We maintain our bullish stance on BPCL’s E&P assets and retain ‘BUY’ on the stock with TP of INR 843/share. BPCL remains our favourite among the three OMCs.
Intense exploration drilling activity to continue till FID in 2013
After tasting success in the Golfinho well, Anadarko (operator of the block) plans to move the ‘Belford Dolphin’ drillship for drilling Atum-1 well. Other exploration drilling locations includes Orca (CY12) and Linguado (CY13). Continued drilling of drill stem tests will provide the consortium confidence to gradually increase the lower band of recoverable reserves from 25.5 tcf currently (our base case assumes 30 tcf). We maintain the base and bull case value of BPCL’s Mozambique assets at INR130/share and INR298/share, respectively. Also, Shell recently revised its Cove Energy bid to USD1.8bn, implying BPCL value at INR258/share (assigning 80% value to Mozambique block). ENI’s recent discovery in the Coral 1 exploration prospect of 7-10 tcf (in the adjacent block) confirms a larger petroleum system than envisaged earlier.
Outlook & valuations: Expect news flows every 2 months; ‘BUY’
Along with Mozambique, BPCL is also currently drilling certain prospects in Brazil. We expect news flows from the same towards first week of July. We peg BPCL’s E&P assets at INR166/sh (base case) and bull case at INR389/sh. Apart from E&P, we also like BPCL as a play of increase in diesel prices after completion of the parliament session (1st week June). Triggers: News-flows every month from Mozambique and Brazilian blocks. Maintain ‘BUY’ with a target price of INR843/sh.
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