City broker finnCap predicts exploration off Ireland’s west coast could prove to be transformational for AIM quoted Europa Oil & Gas (LON:EOG).
Europa is carried in a high profile exploration programme in Ireland’s Atlantic margin.
The operator Kosmos Energy, an expert in Atlantic margin plays, has shot 3D seismic across the acreage and the results are due in July.
Analysis of the 3D seismic is expected to yield ‘drill ready’ prospects, according to finnCap analyst Dr Dougie Youngson, and a drill programme is possible next year.
“Joint venture partner Kosmos Energy Ireland has committed to drilling two wells as early as 2015,” the analyst said in a note.
“Given the prospect inventory and size of the prospective resource base, success in Ireland would prove to be transformational.”
Youngson highlights that following a share placing earlier this year Europa is fully funded for its ongoing work programme. He also reckons the successful fundraise was an endorsement.
“Given the lack of appetite to fund junior oil companies, the oversubscription for the open offer shows the strength of both the strategy and the portfolio.”
finnCap today initiated its coverage of Europa with a 12-month price target of 10p, which implies upside of around 25% from the current price of 7.75p.
Beyond Ireland, Youngson also highlights the potential for two onshore wells in the UK, which he says could “add substantially” to the company’s resource base and production. He also points out that existing onshore production covers overheads and partially offset Europa’s need to seek more funding.
In France, he highlights that a joint venture partner will be needed before Europa can pursue drill programmes.