$2.59 per share | Market Cap $1.2 billion
The rumor mill is working overtime, but we love it because Africa Oil (AOI, TSX) has been 1 of our anchor Oil stock recommendations going back to when it was trading below $1 a share.
Will this turn into a “sell the news” situation?
AOI gapped higher by 50 cents yesterday morning, seemingly due to articles and tweets suggesting this Venus discovery (a deepwater find off the coast of Namibia) could rank among the largest Oil finds ever.
What are the odds?
Be it onshore Kenya, offshore Nigeria, and now Namibia, Africa Oil seems to find itself involved with more than its fair share of major discoveries across Africa. I guess you chock that up to a bit of luck and a really smart management team – Africa Oil is under the Lundin umbrella of companies.
In this piece, Venus is touted to possibly surpass Brazil’s 11 billion barrel Buzios field.
Apparently Wood Mackenzie has put its name behind an estimate of at least 3 billion barrels, but “sources familiar with the Venus situation”, whom are still interpreting information from the 1st wildcat well, say another 10 billion barrels could be recoverable. The potential for Gas is also said to be vast.
From what was reported as 84 m of pay, 2 months ago, Upstream is now reporting (rumoring from its “well-placed” source) Venus will prove to be more like 200 to 250 m of pay.
“There’s a lot more sand there than they ever thought possible,” one veteran exploration source said, “and they are very, very good from a producibility perspective”.
This bigger resource estimate is also understood to derive from a view that Venus West – originally thought to be an independent prospect on Block 2912 – is now considered to be part of the main Venus structure.
“They now almost 100% believe it’s one structure,” another well watcher said.
Another source said: “It’s impossible to separate Venus West from Venus. The whole thing is absolutely vast and becomes a super giant.”
Sounds amazing, perhaps even world-beating (as Upstream is saying), but please keep in mind these are all statements coming from unnamed sources.
Rumors circulating above the press released discovery in February have been substantial enough to push AOI higher by 40+ cents, or $150 million worth of market cap.
Africa Oil has an indirect interest in this block through a 30.9% shareholding in its investee company Impact Oil & Gas Limited with a 20% working interest in the block (which equates to about 6.2% ownership to AOI).
Time and again Africa Oil’s management team has been hitting it out the park. This new interest, via Impact, in the Venus discovery, adds to the $500 million (96% of their original investment) they’ve recouped from buying equity in Prime Oil only several years ago.
Debts assumed, hundreds of millions, to make Africa Oil a producer have been paid down to $0. Net interest in production is scheduled to be 23,000+ barrels per day this year. And they’ve even decided to start paying a base rate quarterly dividend, wow!