Citi reckons it is time to buy shares in Ophir Energy (LON:OPHR), as it initiates its coverage of the oil stock with a a 280p price target
Analyst Michael Alsford says the Ophir price has “deteriorated dramatically” in the past two years, down some 60%, due to a run of poor exploration results and as investors realise that core assets in Tanzania and Equatorial Guinea will take time to commercialise.
Now, at current levels Alsford now sees upside in the Ophir share price.
“Positive progress has been made with both the Tanzania and EG projects.
“In Equatorial Guinea, there is potential for resource expansion in 2H14 and to de-risk via a partial sell-down and/or sanctioning of a FLNG development. We believe this is under-appreciated by the market.”
“In Tanzania, greater confidence in the commerciality of this development should see further changes to the equity holders in the project.”
Alsford expects larger industry players will look to consolidate the Tanzania project, and given there is also interest from major gas buyers, he believes this process would be competitive.
At the same time the analyst also points to Ophir’s recent interest in Premier Oil as a sign that the company itself is looking at corporate opportunities of its own.
“One possibility could be using the current buyer’s market for international producing assets to provide cashflow visibility for debt financing and to help fund both ongoing exploration activity and the early spend on future development projects.”