Proactive Investors UK
by Jamie Ashcroft
Mimouna prospect in Morocco can put Circle Oil (LON:COP) on the path to a re-rating.
The Lalla Mimouna project follows the oil and gas junior’s achievements at the Sebou field, where it successfully discovered and tested discrete gas pockets.
Lalla Mimouna is similar to Sebou, and Circle’s plan is broadly the same; success here will give confidence to investors and can help unlock currently unrecognised value.
Job Langbroek, analyst at Davy Securities, currently ascribes just 2p of a 15.9p per share valuation to Circle’s Morocco assets, but the analyst believes success at Lalla Mimouna can boost production volumes and can add valuable reserves.
“Six wells are scheduled for Lalla Mimouna; success will not only add to sales and increase the borrowing base but will also provide value comfort that more of the prospective gas targets in Morocco can be included in valuations,” he said in a note.
Langbroek highlights that the Circle constructed pipeline is no more than one-third full, and as such any could be tied in.
He also points out that gas is in demand in the region as such production achieves high value sales, which is further boosted by a ten-year tax holiday and a supportive overall fiscal regime.
Circle announced the spudding of the first Lalla Mimouna on Tuesday afternoon, the well is expected to take 14-20 days to drill. It is planned to be 1,521 metres deep, with the main target anticipated at a depth of 1,231 metres.
The well is within an area that’s been assessed with 3D seismic and it is targeting Miocene gas-bearing sands, similar to Sebou which is to the south.
Circle has a 75% stake in the permit, and it is partnered with Morocco’s national oil organisation ONHYM which has the other 25%.
