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Wentworth Resources

UPDATE - Wentworth Resources to convert Mnazi Bay resources to reserves in near future

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Wentworth Resources (LON:WRL) shares advanced 9% as the company told investors it expects in the near future to significantly increase its gas reserves in Tanzania.

A government pipeline project is now due to be commissioned in the second quarter, and once operational it will provide a route to market and unlock the gas within Wentworth’s Mnazi Bay field.

It will enable a portion of Mnazi Bay’s 639bn cubic feet of contingent gas resources (P50) to be reclassified as reserves.

Wentworth owns some 31% of Mnazi Bay.

Mnazi Bay will generate free cash flow for Wentworth in 2015, with gas sold under contract at just over US$3 per thousand cubic feet.

Geoff Bury, Wentworth’s chief executive, anticipates these upcoming catalysts will add substantial value to the company.

"With the government pipeline project on track for a Q2 2015 commissioning, Wentworth now has a defined market for its Mnazi Bay gas and is within a few months of commencing first production into the pipeline,” he said in today’s quarterly results statement.

“As a result, the company expects to reclassify the majority of its contingent gas resources in Mnazi Bay into reserves in the near future.  As the company ramps up production it expects to generate substantial free cash flow to fund future growth.”

Wentworth, in the three months to December 31, had net income of US$15.28mln versus a US$9.99mln loss in the same period in the prior year. It comes as a prior US$23.8mln impairment was reversed due to the signing of a gas sales agreement with the Tanzanian authorities.

Revenue in the period totalled US$1.06mln, up 11% on the prior year, as local gas sales increased.

The company, at December 31, had US$15.84mln of working capital and had US$5.49mln of cash, which was down from US$38mln and US$37mln respectively at the end of 2013.

Sam Wahab, analyst at Cantor Fitzgerald, repeated a buy recommendation following today’s results statement.

With a price target of 62p, the analyst sees more than 100% upside to Wentworth’s current share price of 29.5p.

“We believe investors can benefit from buying on sector weakness where downside risk is mitigated through a robust cash position, existing/growing production base, or a financed and committed work programme.

“In our view, Wentworth ticks all of these boxes with upside potential across its portfolio.”

On AIM this morning, Wentworth shares advanced 2.5p, 9.26%, to trade at 29.5p each.

Quick facts: Wentworth Resources

Price: 20.25 GBX

Market: AIM
Market Cap: £37.76 m
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