Climate change and this year’s turmoil in Eastern Europe have reinforced the reality that energy security and sustainability remain at the forefront of global agendas, factors that add further weight to the investment case for Chariot (CHAR:19.35p), a £185mn market capitalisation African-focused energy group focused on developing and delivering transitional energy projects.
During the summer, the group announced a major resource upgrade to its low-cost flagship Anchois Gas development, offshore of Morocco (‘Profit from the European energy crisis’, 26 July 2022). An independent resource report indicated 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.
With investment bank Societe Generale leading the project financing, a tie-in agreement signed earlier this month to provide access to the major Maghreb Europe Gas pipeline, offtake and strategic partnering discussions ongoing, and environmental and social impact assessments under way, Chariot’s board are looking to reach final investment decision as soon as possible and start generating material cash flows thereafter. An oversubscribed placing and open offer raised $29.5mn at the end of the first half, so with net funds of $23.4mnn Chariot is well capitalised to extract the best deal possible.
An African Adventure
- Significant resource upgrade at Anchois-2 well offshore Morocco
- Rissana Offshore exploration license awarded
- Pre-feasibility study completed at Project Nour
- Two renewable energy projects in development in South Africa
Chariot’s exploration and appraisal drilling has served to de-risk a range of targets, both in the Lixus licence where Anchois is located and in surrounding acreage in the 8,489 square kilometres Rissana licence, which the group was awarded in February 2022.
Early assessment of the areas in Rissana covered by 3D seismic data indicate a total 2U prospective gas resource of over seven trillion cubic feet, combining a high-graded prospect 'Emissole' within the lower risk Anchois Tertiary gas play and multi-trillion cubic feet prospects in a higher-risk Mesozoic play. Importantly, there is huge domestic demand for new gas resources both domestically in Morocco as the country transitions to greener energy, as well as in Europe as the region tries to find reliable alternative sources of energy.
In addition, Chariot has added two major projects to its renewable power pipeline in Southern Africa and delivered on the objective of securing a world class partner in Total Eren, a leading renewable energy independent power producer based in France, to co-develop a large-scale green hydrogen asset in Mauritania. Working alongside Total Eren, Chariot’s team has leveraged their expertise and network to win a contract to construct, operate and maintain a 40MW solar plant for the supply of electricity to Tharisa's (THS) platinum, group metal and chrome mine in South Africa. The partners are also working on a 430 MW solar and wind partnership at First Quantum's (CA:FM) Kansanshi copper gold mine in Zambia.
| Simon Thompson's 2017 Bargain shares portfolio performance | |||||
| Company name | TIDM | Opening offer price on 03.02.17 (p) | Bid price on 14.09.22 (p) or exit price (see notes) | Dividends | Total return (%) |
| Chariot Oil & Gas (see note one) | CHAR | 8.29 | 19.25 | 0 | 535.3 |
| Kape Technologies (formerly Crossrider) | KAPE | 47.9 | 270 | 3.55 | 471.1 |
| Avingtrans | AVG | 200 | 420 | 15.2 | 117.6 |
| H&T | HAT | 289.75 | 464 | 64 | 82.2 |
| BATM Advanced Communications (see note seven) | BVC | 19.25 | 27 | 0 | 50.6 |
| Cenkos Securities (see note two - sold) | CNKS | 88.425 | 106 | 9.5 | 30.6 |
| Manchester & London Investment Trust (see note three - sold) | MNL | 291.65 | 377 | 3.0 | 28.4 |
| Management Consulting Group (see note five - sold) | MMC | 6.183 | 6 | 0 | -3.0 |
| Bowleven (see note four - sold) | BLVN | 28.9 | 5.5 | 15 | -6.1 |
| Tiso Blackstar Group (see note six - sold) | TBG | 55 | 20.4 | 0.54 | -61.8 |
| Average | 124.5 | ||||
| FTSE All-Share Total Return | 6485 | 8166 | 25.9 | ||
| FTSE AIM All-Share Total Return | 977 | 1014 | 3.8 | ||
1. Simon Thompson advised selling two-thirds of the Chariot Oil & Gas holding at 17.5p on 3 April 2017 ('Bargain shares on a tear', 3 April 2017). Simon subsequently advised participating in the one-for-eight open offer at 13p a share ('On the earnings beat', 5 Mar 2018) and buying back the shares sold at 4p ('Chariot's North African adventure', 17 April 2019). Simon then advised taking up the one-for-six open offer at 5.5p ('Exploiting margins of safety', 1 June 2021). Total return reflects these transactions.
2. Simon Thompson advised selling the Cenkos Securities holding at 106p on 3 April 2017 and the 106p price quoted in the above table is the exit price on the holding ('A profitable earnings beat', 3 Apr 2017). Please note that Simon included the shares in his 2020 Bargain Shares Portfolio and subsequently advised taking profits on those shares ('On the financial beat', 8 September 2022).
3. Manchester and London Investment Trust paid total dividends of 3p a share on 2 May 2017. Simon Thompson then advised selling half of the holding at 366.25p on 26 June 2017 ('Top slicing and running profits', 26 June 2017), and selling the remaining half at 377p ('Bargain shares second chance', 17 August 2017). The 377p price quoted in the table is the final exit price.
4. Simon Thompson advised banking profits on half your holdings in Bowleven at 33.75p (‘Hitting pay dirt', 9 Apr 2018). The company subsequently paid out a special dividend of 15p a share on 8 February 2019 and the balance of the holding was sold at 5.5p ('Taking stock and profits', 9 December 2019).
5. Simon Thompson advised to sell Management Consulting's shares at 6p in February 2018 (‘How the 2017 Bargain share portfolio fared’, 2 February 2018). The price quoted in the table is the 6p exit price.
6. Tiso Blackstar transferred its UK listing to the Johanesburg Stock Exchange. The shares were delisted on 23 November 2020 when shareholders received an exit cash payment of R415 per share on cancellation of their shares.
7. Simon Thompson advised banking profits on half your holdings in BATM shares at 49.9p ('Bargain Shares: Exploiting pricing anomalies and top-slicing', 3 December 2018) and subsequently bought back the shares at 43.5p ('BATM armed for a re-rating', 11 July 2019).
Source: London Stock Exchange
Both projects are flagship initiatives within these countries and are following a similar development path to that of IAMGold's (CA:IMG) operational 15GW solar project at the Essakane gold mine in Burkina Faso, Chariot’s first renewable project in which it holds a 10 per cent stake. In Mauritania, Chariot and Total Eren are co-developing Project Nour, which could become one of the most significant green hydrogen projects in Africa.
In the short-term, news flow from the group’s Moroccan flagship project will be the key share price driver given that Chariot’s 75 per cent working interest in Anchois’ 2C resources accounts for 44p a share of Cenkos Securities target price of 63p (using a 50 per cent risk weighting and based on a risked value of $507mn). The turmoil in the European gas market has materially improved the odds of the prospect being commercialised.
The shares have delivered a 535 per cent return in my 2017 Bargain Shares Portfolio, but the price has moved sideways since my last update, offering a decent opportunity to buy in ahead of likely positive news flow. Buy.
Simon Thompson was named Journalist of the Year at the 2022 Small Cap Awards.
■ Simon Thompson's latest book Successful Stock Picking Strategies and his previous book Stock Picking for Profit can be purchased online at www.ypdbooks.com at £16.95 each plus postage and packaging. Details of the content can be viewed on www.ypdbooks.com.
Promotion: Subject to stock availability, the books can be purchased for £10 each plus £3.95 postage and packaging, or £20 for both books plus £5.75 postage and packaging.
