Analysts at JP Morgan Cazenove’s London office today highlighted the untapped value of the world class Santos Basin, in Brazil.
London listed BG Group (LON:BG.) is one of the ‘most exposed’ firms to the ‘world class’ play, analyst Fred Lucas said in a note.
And he says the Santos interests are the firm’s ‘single most important value centre’.
“In less than six years since its first discovery, the pre-salt Santos play has already yielded c.35 billion boe of discovered resources - unmatched by any other exploration play in the world,” he said.
He says that, as it is prone to do in complex execution phases, the stock market is lagging the industry value creation curve and as such there is ‘meaningful upside’ for BG.
The analyst repeated an ‘overweight’ rating though changes to the analysts overall, relating to commodity prices and cost estimates, he reduces his valuation of BG’s stake in the venture by 15 per cent to US$44 billion.
In turn the price target reduces to £17.00 a share from £19.00, but the analyst points out that this offers around 30 per cent upside to the current price of £12.98 a share.