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Caza's undervalued US Shale opportunity

Caza Oil & Gas offers investors cheap exposure to one of the hottest onshore shale oil and gas plays in the US.
July 17, 2014

London-listed oil and gas equities may be stuck in the doldrums - the Aim energy sector retreated 17 per cent in the first quarter of 2014 alone - but it's a completely different story across the pond. The North American oil and gas industry is booming thanks to soaring shale oil and gas production, helping share prices there ratchet upward. We suggest gaining exposure to one hot American onshore play in particular, Caza Oil & Gas (CAZA), a small Texas-based company whose shares are dual-listed on Aim and the Toronto Stock Exchange.

IC TIP: Buy at 19p
Tip style
Speculative
Risk rating
High
Timescale
Long Term
Bull points
  • Rising production
  • Funding secured for drilling programme
  • Substantial oil and gas reserves
  • Discount to NAV
Bear points
  • Growing debt pile
  • Pace of future drilling uncertain

What differentiates Caza from some of its riskier peers is that Caza has already proven it can extract shale oil and gas in commercial volumes from its licences in New Mexico and Texas. It has been enjoying huge success lately drilling in the 'Bone Spring' play, a series of pay zones in the Permian basin that are mostly oil- and liquids-rich. It typically partners up with other operators to reduce financial risk and is left with about a 50 per cent working interest in each well.

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