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Chariot Oil and Gas spreads its risk with Lixus acquisition

It is a switch from high-risk wildcat drilling to a lower risk appraise-and-explore approach.

 

  • Junior oiler with acreage in Morocco, Brazil and Namibia

  • Traditionally specialised in Frontier or wildcat exploration for huge targets

  • Just added some production assets in Morocco with Lixus acquisition

 

How is it doing

Chariot Oil & Gas Ltd (LON:CHAR) has long had an impressive record of getting things done operationally.

But, some of the exploration operations failed to deliver the blue-sky discoveries hoped for by investors.

In many ways, the latest asset acquisition is something of a game-changer as breaking from the past, the company has picked up new acreage that already has a discovery.

It is a switch from high-risk wildcat drilling to a lower risk appraise-and-explore approach.

There’s still the requisite upside potential and blue-sky to keep Chariot’s stock market following engaged, though this time it is grounded in more certainty than the big-hit-or-big-miss type projects that have been pursued in the past.

The Lixus licence is host to the Anchois-1 gas discovery well, which already has some 307bn cubic feet contingent resources, some 116bn cubic feet of deeper un-tested upside, and, nearby satellite exploration prospects presently amounting to some 527bn cubic feet.

Altogether, the already known parts of the Lixus licence could quite quickly add up to a near 1 trillion cubic feet gas field development.

This is Chariot, so naturally there’s other big-number exploration opportunities elsewhere in the broader licence area too, including around 300bn cubic feet in Anchois-like targets and the potential for ‘giant scale prospective resources’ in the wider area.

 

What the boss says: Larry Bottomley

“Lixus allows lows us to ally elephant hunting with low risk product and exploration targets.”

“It  is just to the north of our existing assets in Morocco and has a low work commitment: A processing campaign, feasibility study, appraisal of gas market and a decision on how to finish the programme."

 

Video

 

Blue Sky

In a note to clients, analysts at ‘house’ broker finnCap commented: “This award diversifies and reduces the overall risk profile of Chariot’s high impact portfolio while maintaining its transformational potential.

“Chariot’s rating has been heavily depressed by the two dry holes last year in Morocco and Namibia and the need to secure funding for additional drilling.

“However,” they added, “with data rooms open in three regions – Brazil, Morocco and Namibia – and now a range of risk/reward opportunities within Morocco, the prospects for a successful farm-out must have been improved by this latest licence award.

“With such low expectation in the price, today’s announcement should start to rekindle interest in this exciting exploration, and now appraisal/development, company.”

FinnCap trimmed its free cashflow-based target price for Chariot to 155p from 183p. In late morning trading, the shares were at 2.60p, up 15.8% on Tuesday's close.

 

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