With a drill programme in the calendar, slated through late 2018 and early 2019, the analyst suggested the share could be seen as cheap, relative to other oil stocks, with different emphasis.
“Over the past year underweight SMID investors have focused on leveraged oil producers, while seeing little or no reason to evaluate the explorers; given these tendencies, gas-exploration-focused Sound Energy has drifted towards a two-year low,” Stanton said.
In terms of valuation, the analyst said the Sound Energy share price is ‘in line’ with RBC’s net asset value (NAV) model - which is pitched at 38p per share - whilst pointing out the significance of upcoming triggers.
RBC also highlighted the group’s commercialization strategy.
“Concurrent with its exploration campaign, Sound is looking to commercialise its existing, ~380Bcf, TE-5 discovery, and during the summer we anticipate an update on a potential gas sales agreement for the P90 resource of ~140Bcf, to help underpin the development,” the analyst added.
“In addition, management is negotiating vendor financing through a Build Operate Transfer (BOT) arrangement for the central processing facility and export pipeline.”