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Profit from the European energy crisis

An African-focused energy group has announced a major resource upgrade to its Moroccan flagship gas development, and one that has materially improved the chances of it being commercialised.
Profit from the European energy crisis
  • Major resource upgrade at Anchois Gas development
  • Analysts upgrade target prices from 51p to 63p, or three times current share price 

Chariot (CHAR:19.25p), an African-focused energy group, has announced a major resource upgrade to its low-cost flagship Anchois Gas development, offshore of Morocco.

Following the successful drilling of the Anchois-2 appraisal well, the group has released an independent resource report that indicates 82 per cent higher 1C contingent resources of 365bn cubic feet (Bcf), 2C contingent resources of 637Bcf (76 per cent upgrade) and a near 50 per cent increase in 2U prospective resources to 754Bcf (49-61 per cent geological chance of success). The validation by a third-party is a significant step forward at Anchois, ahead of first gas in 2025.

It has prompted house broker Cenkos to increase its target price from 51p to 63p based on a value of $507mn (44p a share) for Chariot’s 75 per cent working interest in Anchois’ 2C resources (using a 50 per cent risk weighting). The valuation doubles to $1bn (87p) on an unrisked basis. There was positive news on two undrilled prospects, Macquereau and Anchois West, which could provide anchor prospects for additional production hubs, too. The resource report also highlighted the potential prospectivity that exists across Chariot’s Rissana Offshore license, which could attract larger players.

With Europe trying to wean itself off Russian imports, and 99 per cent of Spain’s gas demand met by imports, there is a compelling case to develop Anchois and export surplus gas to Europe through the Maghreb-Europe pipeline. Gas prices in Spain are six times higher than in Morocco. Furthermore, soaring European gas prices have substantially improved the odds of the prospect being commercialised, a factor that is simply not reflected in Chariot's share price which has moved sideways since my last update (‘Backing an energy transition winner’, 15 May 2022), albeit the holding has delivered a 527 per cent return in my 2017 Bargain Shares Portfolio. Buy.

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