Broker finnCap said Jupiter Energy (LON:JPRL, ASX:JPR) is worth considerably more than its current market value suggests considering its proved and probable (2P) oil reserves of 24.2 million barrels.
These reserves are hosted by the Block 31 in the Mangistau basin of western Kazakhstan, where the company has drilled a series of successful wells in 2011, which finnCap analyst Will Arnstein said could results in a reserve upgrade in the next operational update, currently expected in March this year.
Arnstein said there is further substantial upside to the current reserve base and, with long-term trial production about to start, the company is “well positioned to add substantial shareholder value as it converts reserves into cash flow”.
The trial production will be from two wells and should take the group’s total output to 1,000 barrels of oil per day (bopd), while the year end target set by Jupiter stands at 2,000 bopd.
Full development is expected in 2015 with production projected to peak at 5,000 bopd during the year.
This year, the company plans to drill a total three wells, targeting prospective resources of between 65 and 72 million barrels that Arnstein said were worth 296 pence per share.
The first well in the 2012 campaign, J-53, carries the lowest risk and could convert nearly 10 million barrels of prospective resources into 2P reserves, said Arnstein.
The second well could add between 10 and 15 million barrels, while the final well of the campaign, J-54, will target a prospective resources of 37.4 million barrels in the northern part of the block.
Arnstein values Jupiter’s current 2P reserves at 77.4 pence per share, while further prospective resources of 65 million barrels have a net asset value (NAV) of 53.3 pence. This gives Jupiter a total NAV of 130.7 pence per share compared to Friday’s closing price of 27 pence.
The analyst added that on an unrisked basis, the NAV rises to 367.3 pence per share.