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Greenfields Petroleum's target price maintained by Stonecap Securities after Bahar drilling started


Stonecap Securities analyst Aminul Haque kept his target price of $10.00 on Greenfields Petroleum Corp (CVE:GNF) after the junior oil and gas explorer provided an operational update, announcing the start of drilling at the Bahar project in the southern Caspian Sea. 

After a seven month delay at the project, the rigs have finally become available and operational, with preliminary well results expected by the end of January.

With two rigs operational, Greenfields and its partners in the Bahar project plan to drill eight oil wells and four gas wells in the first phase.

Hague noted that the partners are currently finalizing the drilling plan and budget for 2013, and are fully funded for the first phase of the program. 

The parties are also evaluating a number of options to finance the remaining phases, with options including mezzanine debt and reserve-based borrowing, the analyst said. 

The drilling program this year could also include the addition of a third platform rig targeting the oilfield, which Hague said should "expedite the drilling and production targets."

"We maintain our target price of $10.00 for Greenfields for a price return of 100%. Our target price implies a 12% discount to the risked NAV of the company," the Stonecap analyst concluded.

The risked NAV is calculated using the 2P reserve value (discounted at 12.5%) and estimating reserve growth achieved with higher recovery rates. 

Greenfields is focused on the development and production of oil and gas reserves principally in the Republic of Azerbaijan. The Bahar project consists of nearly 76,500 acres of producing oil field and a producing gas field 10 kilometers offshore Azerbaijan in shallow waters. 

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