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magazineNew dawn for Caspian Sunrise
Now is an opportune time to invest in the newly-renamed Caspian Sunrise (CASP:AIM). An imminent deal will give it full control of the highly-prospective BNG asset in Kazakhstan.
Don’t be put off by the new corporate name sounding like a garishly-coloured cocktail. The company previously known as Roxi Petroleum looks really interesting if you have an appetite for higher-risk stocks.
It has already found oil. The challenge is to get the black stuff to the surface and flowing smoothly, having previously encountered problems in this area.
Chairman Clive Carver says if it can get independent auditor Gaffney Cline to sign off on 730m barrels of reserves at BNG by June 2018 it will have a shot at getting a 49-year production licence.
Under its current appraisal licence, the company can only sell oil at a domestic price of $16 but under a full production licence it could sell 80% of its output at international prices.
Waiting for the final signature
Private business Baverstock is swapping its stake in BNG in exchange for shares in Caspian. The latter’s shareholders have approved the deal, although it is still to be signed off by the Kazakh authorities.
The transaction will lift Caspian Sunrise’s stake in BNG from 58% to 99% and by converting outstanding borrowings of $10m into shares, it will also be debt free.
Located near the Caspian Sea and covering acreage comparable to the area bounded by the M25 in the UK, BNG has potential in both deep and shallow reservoirs.
In July 2014 when it was called Roxi Petroleum, the company sparked considerable excitement as it struck oil with its A5 well, the first to test this deeper potential.
Subsequent drilling was beset by problems created by high pressures and temperatures in the sub-surface.
It is working to address these issues and hopes to be in a position this year to run full production tests on these wells. That would be a first step towards booking reserves.
Imminent catalysts
Results from the latest shallow well, 808, are imminent. Carver says the company plans to drill up to four more shallow wells in 2017 at a cost of around $5m as well as between one and three deeper wells.
Carver says the plan is to ‘prove up reserves with as little dilution as possible’ but a share placing seems likely as Caspian wants to add institutions to its shareholder base which could be done via a fundraise.
House broker WH Ireland has a price target of 23.3p, implying upside of 145% at the current share price. (TS)
Caspian Sunrise (CASP:AIM) 9.5p
Stop loss: 6.6p
Market value: £86m
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