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Yesterday Pryme BV, a Dutch based plastic recycling company announced its partnership with Shell. The share price jumped by 100% in two days. It now trades at 44 NOK. Pareto has price target of 150 NOK. Plenty upside potential.

Pryme is currently building its first plant announced its partnership with Shell. The importance of the agreement could be illustrated by Shell press release stating:

SHELL AND PRYME SIGN STRATEGIC PLASTIC WASTE TO CHEMICALS COOPERATION AGREEMENT

You can read the press release below:

https://www.shell.com/business-customers/chemicals/media-releases/2021-media-releases/shell-and-pryme-sign-cooperation-agreement.html

Pryme jumped by 74% yesterday and is up further 13% today. It is still well below its IPO price. I am long Pryme and I expect further re-rating as the newsflow on construction progress would be comming in Q4 and Q1.

Below is Pareto Securities comment on the partnership:

The partnership with Shell is the perfect catalyst to revive Pryme’s investment case as it provides comfort on the promise of the technology, scale of upside potential and derisk offtake of produced products. With a market cap of EUR 60m post today’s 74% share price increase and a value potential of >EUR 100m from the initial plant alone, we continue to find the upside potential appealing. Upon success at the first plant next year, we think the market also will attach value to future growth that likely can be turbocharged by Shell. While the share price has traded down on weak peer performance and lack of news flow, we keep BUY/TP NOK 150 unchanged as Pryme continues to deliver on its promises

Fusion Fuel

Last week I wrote here about Fusion Fuel, that has a unique technology for hydrogen production through its sun powered technology. The company now trades at 57% of its cash balance.

Madrid project of big strategic importance
Fusion Fuel (Ticker HTOO) announced a new project with Exolum (leading European fuel logistics and storage provider) yesterday to develop a turnkey solar-to-hydrogen plant to supply green hydrogen to Madrid. Fusion Fuel will install 21 of its HEVO-SOLAR units along with a co-located refueling station. In addition to producing hydrogen from solar radiation during the daytime, the facility is expected to double its output by leveraging other sources of renewable energy to produce emissions-free hydrogen at night. We spoke with management yesterday, they are ‘extremely excited’ about the project since Exolum has announced a consortium with Enagas and Naturgy to make a H2 refueling station network in Spain and they have not yet chosen a H2 technology provider. In other words, this is a strategic project for HTOO as they want to grab the H2 technology provider position and the initial project may be viewed as a demonstrator project. Exolum is massive and manages Europe’s largest network of refined products and are ranked second in Europe in terms of storage capacity and 7^th in the world. Management says the relationship overshadows nearly all other announcement HTOO has made.

I expected a strong move on the announcement. Surprisingly, the share price did not move.

I am long Fusion Fuel, because it trades at 50% of its cash, it has a unique technology that is certified to work and it has real contracts. Attractive risk reward opportunity.

Fearnley published research on HAV Group this morning.

I am long HAV since its IPO. I think this is very good summary of the investment case. Considering buying more after reading this.

Fearnley front page summary:

Maritime Sectors are Screaming for a Greener Future

HAV stands out as one of few companies within the energy transition sphere with solid cash flow generation (FSest adj. FCF yield for 2021/’22/’23 at 13/9/11%, respectively). ‘21 is looking to be an extraordinary year, mainly due to delivery of the Kystruten contracts and we expect normalized design revenues for ‘22/’23 (FSest NOK 100-150m annually excl. trading). That said, we estimate high growth for both NES and NGT and see triggers from i) contract awards, ii) potential international expansion for NES, iii) ballast water convention for 2024 getting closer, and iv) additional upside from hydrogen, leaving strong support in the share. Longer-term, we continue to see HAV as one of the best ways to play the greener future within the maritime industry.  We maintain our NOK 25/sh TP and Buy recommendation (NOK 25/sh 25.03.2021).  2021 has been extraordinary and 2022/’23 will come down2021 is looking to become an extraordinary year (HAV delivered annualized FCF yield of c. 28% last quarter). The company has guided revenue for 2021 of NOK 850-950m with EBIT margins in-line with 2020 levels (c. 7%). We expect overall revenues to come down in 2022/’23 due to more normalized design revenues between NOK 100-150m excl. trading. However, NES and NGT is expected to grow significantly. We lower our Design revenues by 40-35% for ’22-’23 and increase NES sales by 40-33% whilst NGT sales are more than doubled. This leaves FSest total revenues of c. NOK 744/795m in ‘22/’23, which is up 0/3% from our previous estimate.  The long-term story remains intact Longer-term, we believe HAV is a solid investment case on the ever-tightening regulations within the maritime industry. As a case in point, shipping accounts for c. 2.5-3-0% of global emissions and seaborne trade is set to nearly triple by 2050. Further, organizations have implemented ambitious targets and restrictions with more expected to come. One example is the ballast water convention requirement for sailing vessels by 2024. Another is zero carbon tenders for the offshore wind installation space, with both adding demand prospects for HAV.  Valuation – Buy, TP NOK 25/sh We derive a cash flow-based value of NOK 25/sh using a DCF approach (11% WACC), with EBIT margins of c. 8.0-12.5% for HAV Design (NOK 10/sh), 5.0-10.0% for NES (NOK 9/sh), 5.0-10.0% for NGT (NOK 4/sh) and 5% margins for Hydrogen (NOK 1/sh). Adjusting for NIBD and NWC leaves us with a NOK 25/sh target price.

Pareto released last week report Nordic Healthcare Triggers for October.

I select the most interesting ideas from the report and copy the main statements plus my comments.

Biovica

Biovica is my top pick in the Nordic Healthcare. Who follow this blog saw how we doubled money on Xbrane. Biovica is very similar case and it has the same potential to double during the next quarter as Xbrane did.

The investment thesis is similar to Xbrane:

• Biovica has 12 studies, including the most prominent US HOspitals ( Mayo, Cleveland ), that show their cancer detection product works
• FDA is due to approve the product in Q4.
• The company announced that it would start selling the product in Q4, shortly after the approval
• Pharma companies that have a major milestone in a near future achieve significantly share price appreciation. Xbrane doubled in two months on positive Phase 3 data study expectation. Biovica is the same situation
• The 12 study from best hospitals reduces risks for FDA approval. Pareto believes that there is 95% likelihood of FDA approvment.
• Biovica is a perfect candidate to double in the next 2-3 months.

Detailed investment thesis:

https://seekingalpha.com/article/4437698-biovica-international-should-double-on-novel-breast-cancer-test-launch-in-q3

ABG and Redeye research are available at Biovica website:

Introduce.se – Biovica – Take-aways from Capital Markets Day

Biovica: Q4 confirms that the FDA approval is on track (redeye.se)

Biovica: DiviTum to Stir Some Blood (redeye.se)

Pareto Nordic Healthcare triggers comment:

Biovica – PAS rating: Buy, TP SEK 103

FDA’s handling delayed, call with CEO
Biovica today announced that there has been a delay in response from the FDA. In a call with the CEO this morning, it was confirmed that nothing new came up but that it is just an FDA-related delay. After
the last meeting with the FDA, the company received the meeting minutes and prepared an answer based on all requests with minor questions surrounding the intended use to be discussed interactively (a
point where a company usually aims for wider claims and the regulators wanting everything backed by data / keep the intended use narrow). These are detailed questions/negotiations surrounding the
broadness of the intended use and there have been no questions anymore regarding predicate device, this has been solved early on. The FDA however has not come back yet on these intended use details, so
the company is still waiting for them to ensure the best possible outcome of the submission/widest possible intended use for DiviTum. Based on these insights, we see no increased risk of a rejection of Biovica’s submission. As previously communicated, we expect approval before end of October, with
additional delays depending on COVID-19 related regulatory workload for the FDA. We reiterate our
rating on BIOVIC with a target price of SEK 103.

Vicore Pharma – PAS rating: Buy, TP SEK 97

VIcore is a new position for me. I will write about the thesis in next days. I recommend everybody to start a research on this. Below is Pareto comment:

• On 17 September, the company announced that the first Covid-19 patient had been dosed in the phase lll study ATTRACT-3. The pivotal phase lll trial is currently approved in the US, Ukraine, South Africa, Brazil, Czechia, the Philippines and India. The study will include 600 adult patients hospitalised with Covid-19 requiring oxygen support but not mechanical ventilation. The primary objective is to evaluate the effect of C21 on recovery from Covid-19. Patients will be randomised to receive 100 mg C21 or placebo twice daily on top of standard of care for 14 days and be followed for 60 days. Trial start-up activities are ongoing at more than 40 clinical sites globally. Topline results are expected during the first half of 2022. Read the PR here. Read our comment here.
• On 22 September, the company announced that it had obtained a SARS coronavirus patent for C21 in the USA. This new patent gives Vicore patent protection in the US market until December 2040. Read the PR here and our comment here.

Bioinvent

BioInvent – PAS rating: Buy, TP SEK 115

Bioinvent is a new position for me. I will write about the thesis in next days. I recommend everybody to start a research on this. Below is Pareto comment:

Awaiting 4 catalysts with a sp dragged down by peers

We see a unique and short-lived discount to BioInvent’s share price. The share price has been impacted by the expectations for BI-1206+Rituximab dose expansion data in Non-hodgkins lymphoma (NHL) in late summer (delayed to December) and by issues of three close Swedish oncology peers Isofol (down -60% YTD), Cantargia (down -60% YTD) and Oncopeptides (down -80% YTD). We see large differences between these companies and BioInvent. Without going into too many details, both Oncopeptides and Isofol are based on an old chemotherapy and each have only one drug candidate in clinics, which is also true for
Cantargia, which develops one novel antibody that is facing issues with side effects. BioInvent in contrast, has 3 novel antibodies in 4 clinical programs and is expected to have 5 antibodies in at least 6
programs by end of 2022. Further, BioInvent established strong clinical proof of concept (PoC) for its lead drug BI-1206 in NHL in January 2021 – showing good safety and efficacy. Based on insights from
Tislelizumab, an anti-PD-1 checkpoint inhibitor with Fcγ interaction-minimizing properties, we are confident that BI-1206+Pembrolizumab (Keytruda) will have an effect in the much bigger area of solid
tumours. BioInvent is expected to deliver 4 catalysts over the coming 7 months. These include clinical data from BI-1206 in NHL and in solid tumours (the biggest near-term catalyst due to larger market size)
in December. Further, data from BI-1808 (first TNFR-2 antibody in clinics) and BT-001 in solid tumours are expected in Q1 2022. The current low valuation renders it enough that BioInvent succeeds with only one of the four programs to increase the share price. While the market seems to be unable to value the company, global biotech specialist funds head up the shareholder list and funded the company with SEK 1.5 bn in the bank as of end of Q2 (mcap SEK 2.3bn). For more information, please consult our latest update. We believe that the company will leave these lows latest in December and thereafter not re-visit them and thus re-iterate our Buy rating with a target price of SEK 115.

Ascelia Pharma

Ascelia is a new position for me. I will write about the thesis in next days. I recommend everybody to start a research on this. Below is Pareto comment:

• On 21 September, the company announced that it had signed a clinical collaboration agreement with Taiho Oncology Inc., a subsidiary of Taiho Pharmaceutical Co. Ltd. The collaboration concerns an upcoming global phase ll clinical study in gastric cancer. In this study, Ascelia´s Oncoral will be evaluated in combination with Taiho Oncology´s Lonsurf®, i.e., this will be an all-oral combination study. As part of the agreement, Taiho will supply Lonsurf® as well as scientific expertise for the study. Depending on the results, the collaboration may be extended for further development of the two agents. The phase ll study is planned to start in H2 2021 and will include approximately 100 patients with metastatic gastric cancer. The initial portion of the study will be conducted at hospitals and clinics in Europe. Read the PR here.

Summary of the Pareto Research is below:

Structural and cyclical earnings uptick ahead

The European publication paper market has responded well to the
strengthening of the economy and better than originally anticipated.
Limited supply of recycled paper and capacity closures have tightened
markets further, seeing additional price hikes into 2022. NSKOG’s legacy assets are thus set for a structural and cyclical earnings uptick, and we see potential for 6-7x quarters with consecutive earnings growth. Also, recycled containerboard is leaving ample upside where current market prices now imply ~2-3x higher EBITDA potential than initially estimated. Along with fibre/renewable energy projects running according to plan, we find the upside potential encouraging. We reiterate Buy and lift TP to NOK 60 (50).

NSKOG due to report Q3’21 results on 22 October at 7:00 CET
We expect Q3 EBITDA adj. of NOK 155m, up from NOK 17m in Q2. This driven by increased contract prices (raised 15-20% across all grades) as well as improved utilization. Though, partly offset by recent raw material cost hike.

EBITDA’22-23E up on improved market outlook
While we lower our EBITDA’21E due to soaring energy prices, we lift 2022-23E by 8-10% amid improving market outlook. Newsprint is short of supply, partly due to limited availability of recycled papers but also due better than expected demand. Along with capacity closures, the market has tightened further, and hence additional price uplifts are expected for 2022. And current energy and CO2 prices indicate an EBITDA effect of EUR ~30m from the WtE boiler, commencing in Q2’22 (vs. initial est. of EUR ~19m). We also raise price assumptions for recycled containerboard, as current market prices imply ~2-3x higher EBITDA potential than initially expected (first prod. in Q4’22).

Buy reiterated, TP up to NOK 60 (50)
We find a significant revaluation potential, as the market moves out of the trough and profitability for NSKOG’s legacy business improves. Valuation is undemanding, trading at 3.4x EV/EBITDA’22E (PAS est. adj. for CIRCA). With latest market development, we increase our SOTP valuation to NOK 76/sh.

Brokers are very bullish on NSKOG:

1. Two weeks ago NSKOG was put Top Idea list for September by Pareto
2. Sparebank put NSKOG on its top idea list last week. The analyst believes the Norske Skog share price should be three times higher. 
3. Last week , Carnegie joined the NSKOG bulls with doubling its price target.

See my posts from last two weeks on the above events with details from each analyst report.

NSKOG Investment thesis summary:

• it is very cheap vs its peers –  Sparebank research stated : “if valued in line with peers, we argue that a fair price is closer to NOK 100” that is 250% above its current share price.
• its renewable asset portfolio has a higher value than NSKOG current market capitalization
• Newsprint plant closures are pushing prices higher that should multiply NSKOG profitability
• Renewable assets come into production next year (mainly renewable packaging), that should significantly improve profitability further
• Doubling income from selling CO2 permits from 2022 to EURO 60 mln per year should improve profitability materially.

If interested, last week posts on this blog for summaries of Pareto and Sparebank research on Norske Skog

DENMARK’S LINKFIRE: A UNIQUE PLAY ON MUSIC STREAMING THROUGH MARKET LEADER GROWING AT CAGR 50%+

I am long LInkfire and I increased out position by 25% this week.

Five bullet point summary on Linkfire opportunity:

• There are many streaming companies. But there is just one dominating service company that serves most of them with 70% market share. Its name is Linkfire.
• Linkfire connects consumers on social platforms who wanted to download a song to music streaming companies that provide the content. Linkfire collects revenues from both.
• Linkfire revenues have grown at 40%-60% CAGR with a stable 76% gross margin. The growth is accelerating further in 2021.
• Linkfire was a victim of a difficult IPO timing. If it was placed in January or February, its share price would’ve doubled on debut.
• Very strong catalysts in the next six months should cause the share price to double.

Full investment thesis is in the article below:

Linkfire: A Unique Play On Music Streaming Through Market Leader Growing At 50%+ CAGR | Seeking Alpha

Pareto Securities bullish on Linkfire

Link to Pareto research summary is below:

The most interesting IPO this year from Sweden – Pareto intiated coverage on Linkfire

Minutes of my call with the Linkfire management

I spoke to the management in late August. The minutes of the call are below:

M&A transaction could happen very soon

During the IPO the management mentioned that they are in negotiations with one of their major competitor. On the call today they mentioned that the transaction is progressing and could be concluded “this year most certainly”. In the below article is speculated that they are about to acquire SmartURL. They should be able to buy it cheaply, because the SmartURL underinvested into its technology and are struggling to compete. Linkfire would be able to materially increase its reach through the acquisition. This transaction is the next major catalyst, that should increase the share price significantly.

“More M&A opportunities than expected“

Linkfire management mentioned, that they see more M&A opportunities than they expected during the IPO. These include both:

• industry consolidation opportunities
• new areas
• revenue enhancing opportunities

New product pipeline

At the moment, Linkfire focuses on Music. They are already started to provide smart links for webcast. The major new area are smart links for Movies. The management mentioned that they already have all the technology build up and they are now signing contracts with studios and preparing the go to market strategy. This will be another major catalysts, that could easily double the share price.

Strong growth expected in H2

The company share price sold off today, because the company did grow 52%, while in the Q1 the growth was 56%. People view that as a sign of slowing growth. I discussed this with the management. The difference is not material.

Last year the company was growing at 43%. In H1 the growth has accelerated to 52%. The company estimates the growth will continue further in H2. They stressed that the best is the Q4, due to the holiday season, when people have more time to listen…

New contract with Apple – more important than reported

On 5 August Linkfire reported a new contract with Apple music. The market viewed it as a contract extension. That does not seem a right interpretation. The press release was very dry, probably due to some legal issues. The contract includes additional services that Linkfire will provide to Apple, they will provide to Apple additional data points and additional services. As a result Linkfire’s revenues from Apple should increase. This is not appreciated by the market.

New Publisher Toolkit – new service announced only on the Q2 call

This new feature was not captured by the market. Based on this smaller music publishers would get a faster access to the service. This should accelerate new client acquisition into revenues.

Higher focus on shareholder communication

The company was listed only one quarter ago. The management appreciates the importance of shareholder communications and is in process of hiring an Investment Relation representative. They said: “We have a lot of stories to tell” and they are working on bringing those to the market.

I copy below a part of the note by my favorite broker at Fearnleys:

Fusion Fuel (HTOO US) – Trading at 57% of net cash
The HTOO stock has fallen back recently despite its first solar-to-hydrogen plant Evora now being onstream and producing hydrogen. Evora 2 is now in full swing. Speaking with management/founders earlier this week, they expect to have signed orders before year end for technology sales in addition to their own in-house projects. HTOO continues to built out their team in order to capture the many growth opportunities they have. Evora, which will be the most expensive plant, has a production cost of hydrogen above €3.5 per kilo and a selling price around $4/kg (without account for the grant the company will get which partly covers the costs incurred). For Sines Phase I, cost of production will be around €2.5/kg and a sales price around €3/kg which includes some of the subsidies (however, if this delays into the start of 2023 the cost will be closer to €2/kg). Subtracting net cash, HTOO’s market cap is a mere $54m.

I bought the stock- through the warrants ticker WHTOO US

There is a US company PureCycle Technologies (ticker PCT) that aims to recycle plastic. They are at least two years behind Quantafuel, they are building their plant. Despite that PCT trades at mkt cap of USD1.5 billion. Quantafuel trades at USD 0.4 bln. That is an indication what US investor interest could mean for Quantafuel stock.

Quantafuel just announced that they are presenting today in Bank of America investor call. I think this could be a more significant information than people think.

I have been an investment banker for 17 years. In my experience Bank of America would not organize a call for QFUEL, unless there is a relationship building and promise of investment banking business from Quantafuel. Relationship building could mean:

• QFUEL undertaking to BoA to give them a mandate for the next round of capital funding. There will be large funding needed when QFUEL starts building big plants. As a part of the funding BoA would introduce QFUEL to US investors. That would be very significant as it would multipy QFUEL investor base.
• BoA may start research coverage of QFUEL prior to the funding round. This would be a major event for the company, as it would globalize the QFUEL stock – it wold introduce the opportunity to US investors.

The above would be very major event for Quantafuel. I believe its impact on the share price could be as significant as reaching Proof of Concept.

Quantafuel announcement from today:

Quantafuel’s Chief Commercial Officer Dr. Christian Lach is presenting at an investor group call hosted by Bank of America Securities at 16:00 CET today. Please see the full presentation attached.

To see the announcement follow this link: https://newsweb.oslobors.no/message/543064

SpareBank: Norske Skog should triple if it would trade with peers. Brokers are pointing out to the opportunity:

1. Two weeks ago NSKOG was put Top Idea list for September by Pareto
2. Sparebank put NSKOG on its top idea list last week. The analyst believes the Norske Skog share price should be three times higher. 
3. Last week , Carnegie joined the NSKOG bulls with doubling its price target.

See my posts from last two weeks on the above events with details from each analyst report.

NSKOG Investment thesis summary:

• it is very cheap vs its peers –  Sparebank research stated : “if valued in line with peers, we argue that a fair price is closer to NOK 100” that is 250% above its current share price.
• its renewable asset portfolio has a higher value than NSKOG current market capitalization
• Newsprint plant closures are pushing prices higher that should multiply NSKOG profitability
• Renewable assets come into production next year (mainly renewable packaging), that should significantly improve profitability further
• Doubling income from selling CO2 permits from 2022 to EURO 60 mln per year should improve profitability materially.

NSKOG will be presenting on Monday its restructuring – dial in details below:

Norske Skog is converting significant parts of its production capacity to
establish one of Europe’s largest producers of recycled packaging, a growing market driven by increased e-commerce. On Monday 27 September at 10:00 am CEST, CEO Sven Ombudstvedt and Senior Vice President Strategic Projects Tore Hansesætre will participate in a presentation at the Xtrainvestor community to give an update on the project and answer questions.

Link to the event:
https://inqrate.com/xtravideos/norske-skog-nskog-presentasjon-med-qa-september-2
021/

If interested, last week posts on this blog for summaries of Pareto and Sparebank research on Norske Skog

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: https://www.africaenergycorp.com/investors/videos/

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

Garrett Soden delivered excellent performance at the Pareto Energy conference in Oslo yesterday.

AEC is my top oil company position. I believe it has a potential to triple over the next 12 months.

There is one big difference between AEC and other oil plays. There are many oil companies that have great portfolios and are buying cheaply oil assets from the majors. Where AEC differs is – it has one of the top gas condensate assets that it is intends to sell. Pareto believes the sale chould happen within 12 months. The sales price is most likely a multiple of its current market capitalization. If there is a low risk high return play, it is AEC.

Do watch the presentation, it is only 17 minutes – link is below.

Selected quotes by Garrett Soden, AEC’s CEO:

“Both 11B/12B discoveries are among the top five global discoveries in the last few years”

“…in Block 2B Azinam recently completed a well site survey and identified a semi-submersiblerig to drill a high-impact oil exploration well later this year. We expect to be fully carried on this. … It is a very exciting exploration well – according to IHS, it is one of the top high–impact wells for 2021. It has over 300 million barrels of prospective resource. The prospect is relatively low–risk…and it is very material to AEC shareholders… We retained 27.5% interest and this alone could be a company–maker. We know there is oil in the basin, and, because of the good commercial terms, we know that discovered oil in South Africa is very valuable and potentially there is a lot here. Across the block, there is up to a billion barrels of prospective resource .”. 

“We focus on South Africa for good reasons….. good commercial terms and very little production of gas right now. South Africa generates 90% of electricity from coal. It signed theParis protocol and wants to diversify its electricity production away from coal to gas. Except for expensive imports, it has few alternatives to do so. Block 11B/12B is the best domestic solution.”

“11B/12B is the best place to have a gas discovery, because you have an existing infrastructure nearby. There is a pipe only 70 km from our discovery, that goes to existing demand with a power generating facility in Mossel bay, that is currently burning expensive diesel…”

“Also, there is a gas-to-liquids facility that was previously buying gas at USD 6-7 per Mcf. That production has now been depleted, and the facility is desperate for additional feedstock…”

“…11B/12B originally had five giant prospects, textbook examples of what you want to see on seismic. It is the best thing our exploration team has ever seen… Both Brulpadda and Luiperd drilling results were better than expected… Total is now moving to development”

“Total is working on the development concept and negotiating the gas off-take agreement with the government.”

“Pre-drill estimates were above 500 million barrels for each of these prospects. The economics of this are very compelling. Using conservative assumptions of 6 USD per Mcf and 60 USD per barrel… The net present value of this is more than 5 USD per discovered barrel. Just this asset alone is worth a big premium to our current market capitalization.”

“Luiperd drilling results were better than expected. … It is very high-yielding gas condensate. We have excellent reservoir quality… with higher than expected productivity and higher than expected reservoir connectivity we expect to drill fewer drills to produce the resource. That is very positive for the development costs”

“We have de-risked the deposit, the next step is above ground. Total is finalizing the development concept and the gas price negotiations for the off-take agreement.”

“In summary we have net exposure to hundreds of millions of barrels of prospective resource. We have world class assets… we have probably the best exploration team in Africa … I believe we are undervalued. We have a floor value in the development and we have blue–sky upside from the exploration.”

“I believe we can more than double our net asset value over the next 12 months and we have plenty of newsflow coming. It is a great time to be watching the stock.”

Video link: https://www.africaenergycorp.com/investors/videos/

Implications from the call

Let’s do simple math:

• Garrett mentioned that pre-drill expectations were at least 500 million barrels for each of the five original prospects on block 11B/12B. He says that net present value of a discovery is about USD 5 per barrel. This means that each of the five deposits in 11B/12B could have a value of five times USD 500 million which equals USD 2.5 billion. Africa Energy owns 10%, so the value of each of the five deposits is USD 250 million.

• Garrett mentioned that these were pre-drill estimates and the two discoveries were better than expected. 

• The current market capitalization of AEC is USD 330 million. AEC’s stake in Brulpadda and Luiperd together represents at least USD 500 Million – 50% above its current share price. That is what Garrett meant when he stated that the current discoveries represent a floor for AEC share price. 

• After the discovery, it was announced that the Brulpadda deposit was potentially 1 billion barrels. AEC estimated that Luiperd is 50% bigger than Brulpadda. Together the deposits could represent 2.5 billion barrels. Using the USD 5 per barrel net present value, AEC’s stake in those two deposits could be USD 1.25 billion, which is almost 4 times its current market capitalization.

• The above is the valuation for only the two deposits. The above neglects the value of three additional prospects at 11B/12B and also excludes the value of 2B, which Garrett indicated could have a higher valuation per barrel value if oil.

• As Garrett indicated, the share price is undervalued and the value of its prospects has a blue sky limit. It is certainly several times its current market cap.

The Pareto analyst estimates that Total could finalize the gas off-take agreement with SA Government by October. Pareto also estimates that, with the off-take in hand, AEC could easily sell its stake in 11B/12B. Based on this, I assume this could all happen in the next 12 months. I believe AEC is the most attractive opportunity in the oil space.

DO WATCH THE PRESENTATION!