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Tangiers Petroleum Announces Spice up Your Life

Source: www.gulfoilandgas.com 6/16/2014, Location: Africa

Tangiers Petroleum is a junior oil and gas explorer focused on Africa. It has a 25% stake in the Tarfaya licence, offshore Morocco, where the TAO-1 well is due to spud within a month.

We believe that the main catalyst for the stock will be the TAO-1 exploration well. The farm-in to the Tarfaya licence by Galp was recently completed and we expect the TAO-1 well (in which Tangiers has a free-carried 25% interest up to a US$33m cap) to spud around mid- June. This well is targeting three large, stacked Jurassic reservoirs with a combined gross P50 prospective resource of some 750MMbbl of oil.

According to operator Galp, the main prospect — Trident — has gross prospective resource of 450MMbbl of oil and a 21% chance of success.

The Moroccan fiscal regime is extremely favourable, and we believe that the market does not fully understand just how benign it is.

We estimate that for a 400MMbbl oil field development the NAV/bbl is USS20/bbl, considerably above the rule-of-thumb US$10/bbl valuation that seems to be put on oil discoveries by the market. Additionally, Tangiers’ main prospects are in 100m of water, meaning that in the case of a commercial discovery any development project would be far less costly than a similarly sized deepwater discovery. The combination of large prospect size, shallow water location and the Moroccan fiscal regime means that we estimate that the Trident prospect is worth US$156m (A¢65/share) risked and US$2,245m (A¢940/share) unrisked.

We estimate that the current fair value of Tangiers’ shares is A$0.87 (48.2p), which is about 3x above its A$0.28 (14.8p) price on 5 June 2014. Tangiers Petroleum is a high-risk, speculative investment. In our ‘success’ scenario we estimate Tangiers’ shares could be worth A$3.31 (182p) by end-2014, while in our ‘failure’ scenario we estimate they could be worth just A$0.01 (0.7p) over the same timeframe.

For more information about related Opportunities and Key Players visit North Africa Projects

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