Bharat Petroleum (BPCL) announced another gas discovery in the Atum well in Offshore Mozambique block, taking its total tally of gross recoverable reserves from the block to 30-60 tcf; the company’s share in the same is 3.0-6.0 tcf (500mn-1.0bn barrels of oil equivalent). The Atum discovery well encountered more than 300 net feet (92 meters) of natural gas pay in two high-quality Oligocene fan systems and was found to be an extension of the Golfinho discovery. The Atum-Golfinho complex on its own is expected to hold 10-30 tcf of recoverable reserves. With more exploration drilling planned for the year (Orca, Black-Pearl) along with multiple drill-stem appraisal wells, we see upside risk to our base case numbers for the Mozambique block. We maintain our bullish stance on BPCL’s E&P assets and retain ‘BUY’ with TP of INR843/share. BPCL remains our favourite among the three OMCs.
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Anadarko sees upside risk to reserves approaching 100 tcf
As per Mr. Al Walker, President and CEO, Anadarko, “the total estimated recoverable natural gas resource in Mozambique’s Offshore Area 1 is between 30 and 60 Tcf, and the current upside for total gas in place for the discovered reservoirs on the block is approaching 100 Tcf”. The consortium is yet to drill certain prospects (Orca, BlackPearl) in the block. Continued drilling of drill stem tests will provide the consortium confidence to gradually increase the lower band of recoverable reserves. We maintain the base (30 tcf & 200 mn bbls of oil) and bull (50 tcf & 500 mn bbls of oil) case values of BPCL’s Mozambique assets at INR130/share and INR298/share, respectively.
Outlook and 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 believe our thesis on BPCL’s E&P assets of gradual but large increase in reserves is playing out (refer our report Large upsides from E&P investments, dated March 05, 2012). We peg its E&P assets at INR166/share (base case) and bull case at INR389/ share.Triggers: News flows every month from Mozambique and Brazilian blocks. Maintain ‘BUY/Sector Outperformer’ with a target price of INR843/ share.
Regards,
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