Well here's a brave call. Analysts at the mighty UBS have turned their spotlight on the smaller oil and exploration companies, and started coverage on Chariot Oil & Gas with a buy recommendation.
It's not the buy recommendation, so much as the valuation. Here's UBS analyst Melanie Savage:
Chariot is our top pick among the AIM-listed E&Ps. We see around 1630% upside to the current share price if both of its first two wells offshore Namibia are oil discoveries (drilling in fourth quarter/first quarter).
Yes, that's right. UBS thinks Chariot is undervalued to the tune of 1630%, although its initial price target is a more modest 450p. The bank said:
We believe sub-Saharan Africa has become one of the most exciting exploration regions of the 21st century, having seen 128bn barrel of oil equivalent of discoveries to date according to Wood Mackenzie. Given the rapidly increasing interest, we believe exploration successes will continue over the coming decade.
We have chosen to look down the market cap list at E&Ps that we believe could potentially double in size (or more) through exploration and/or M&A. We have chosen three companies with assets representing different geological basins, all 'frontier ', where we believe companies could make transformative discoveries. Additionally, we believe all three companies have M&A potential.
Apart from Chariot, which is currently p 25p at 216.75p, the other two are Cove Energy, up 1.5p at 88.5p, and Bowleven, 9.25p better at 270.75p.
