SpareBank on Africa Energy – “…there should be plenty of weeks ahead with continues positive share price trend”.

I wrote last week about Africa Energy news announced at the Pareto conference. I also updated my valuation based on the information provided. Today, Sparebank produced a note on AEC. See the summary below:

Africa Energy (Buy, tp NOK 4) – History repeats itself, ride on

Gazania exploration well and 11B/12B gas price update key triggers: A key trigger for Africa Energy is drilling of the Gazania exploration well in Namibia. As far as we understand, the partnership is currently working on rig contracting and looking for initiatives to optimize costs (e.g., cost sharing with other licenses). We guess the well may commence drilling around year-end. We have included the prospect SEK 0.22/share in our SOTP valuation, but see upside potential of SEK 0.5-1.5/share in a success case. In addition to the Gazania well, any updated on the gas price negotiation for Block 11B/12B is important. In our valuation we have assumed USD 6.5/mmcf realised price.

Share price pattern repeats itself, ride on: We are strong supporters of fundamental research. However, we also believe some trading patterns are worth looking at when it comes to timing of buying and selling shares. For Africa Energy, a clear share price pattern has been that the price has rallied ahead of commencement of drilling (Brulpadda and Luiperd), while the share price has weak after announcement of well results (even they have been positive). We expect the upcoming Gazania well to spud around year-end, subject to successfully securing a rig. Therefore, is history repeats itself, there should be plenty of weeks ahead with continues positive share price trend.

AEC today posted a video from last week Pareto conference. Do watch:

Do read my post on AEC from last week that includes a valuation update.

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