Tangiers Petroleum - A Third Opportunity

http://www.tangierspetroleum.com/

Tangiers Petroleum Logo

Tangiers Petroleum (LSE:TPET) has been a volatile share over the past 6 months, and I have covered the company twice before. On the prior two occasions gains of ~ 32% and ~ 30% were netted with trading points picked up on. Yet again the share price has dropped back down and currently lies at 19.25p/share having made an intra-day low today at 18.63p/share. With farm-outs completed earlier in the year (see previous article) and Tangiers netting top-notch partners, it is not justifiable as to why the company is only capitalised at £25m, but the share looks to have potentially completed another double bottom - it certainly looks like a good opportunity again.
This article is a follow-on from the below posts. For full context and information, read these articles first:
http://www.theel1tetrader.com/2012/10/tangiers-petroleum-world-class-assets.html
http://www.theel1tetrader.com/2013/01/tangiers-petroleum-farmouts-done-share.html

The chart below is the situation for the London-listed stock - the swift move upward during today's afternoon trading period increases the chances of a double-bottom indicating short-term upward movement is likely.


As Tangiers is also traded on the Australian stock exchange, the chart for that stock is below - it is very interesting that the Australian stock could also potentially make a double bottom. If the ASX stock finishes up tonight, then it would lead to a rise tomorrow perhaps cementing the strong chart position.


Several news statements have been released by the company since January 6 (the date of the last review) which have done little to change the outlook of the stock, which is seemingly bright. With well-weighted working interests in potentially multi-TCF developments with very strong partners including Galp Energia, the company looks very well poised for advancing on speculation let alone any potential discoveries - the only recognisable downside is inherent with the industry; a dry well. Funding is also sorted excluding any expensive farm-in agreements that Tangiers may wish to pursue. In a letter to shareholders in mid-January, Executive Chairman Eve Howell noted:

"With the farm-out agreements relieving Tangiers of most of its financial obligations on its existing assets, the Company is now ideally placed to pursue the next leg of its growth strategy. This will involve identifying "farm-in" and acquisition opportunities in Africa to grow our portfolio of exploration and production assets. The experience of the people within Tangiers, along with the
Company's ability to fund suitable farm-ins and acquisitions, will enable us to capitalise on the opportunities in our chosen region of growth."


The only other significant news release was that outlining the results of the 3D seismic interpretation of the Tarfaya block. The data confirmed 750 million barrel potential at a mean level for the Trident prospect and secondary objectives at Assaka and TMA (all of which can be targeted through one well) of which Tangiers has a 25% working interest. The geological chance of success is around the standard level for a wildcat well at 23% having increased significantly from the prior estimate of just 14% - why the share price has failed to sustain higher levels is inexplicable. "The Trident prospect alone is a potential company-maker and we have already identified several other Jurassic prospects in the block. With Galp carrying the cost of the first well, Tangiers has a significant exposure to this upside while also being free to pursue our strategy of acquiring other growth assets in Africa".

The market capitalisation of £25m appears to completely undervalue the company considering the almost 'risk-free' wells that Tangiers is receiving on the back of the farm-out agreements. With the COS of the prospects increasing, cash not being an issue, a favourable chart position and moreover a lower starting share price compared to the last two articles the company looks good for upward movement. Whilst farm-in agreements elsewhere in Africa will take time, diversification will only help the company and with a relatively small number of shares in issue, any dilution in the future would not create long-term downward pressure on the share price if it is what is required to complete a lucrative farm-in/acquisition. With respectable 30% and 32% gains already banked, both short and long-term potential for success exists.

04/04/13 - Tangiers has broken through the recent support and consequently looks relatively bearish despite the good fundamentals. Back to neutral after an 11% decline as it could drift further

10 comments:

  1. tpet tpet upppp

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  2. You make a great deal of sense, wise words in an irrational market.

    Have taken nice profits on Oilex & Range - thank you.

    tt.

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  3. Hi Elite, any further views on TPET? A lot of upwards movement lately(about time). I've been invested since your first review, think my average is about 18p atm. I know you've always said there's medium-long term potential here. Personally I love the prospects and thanks for your reviews on TPET, may have missed this gem otherwise.

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    1. I still like the company and importantly the shares have broken out of their medium-term downtrend which is good. The preferable movement would be for the creation of a shallow uptrend near the highs of the recent spike up. I would be very surprised if the shares don't gain once they receive the cash from the deals and move closer to the drills. Speculation at that point should drive the shares higher considering the resources at stake.

      El1te

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    2. Thanks for your view, completely agree.

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  4. El1te, I know you're pretty good with charts, was hoping to get your opinion. What do you think of TPET's chart at the moment? with the rise up from 11p to 15p then strait back down to 12p now heading back up at 14.50p.

    Is this a good sign? obviously no real important news has been released to trigger this movement however like the above poster I do think TPET is massively undervalued.

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    Replies
    1. Hi there, Do you use any bulletin boards? I can't post a chart here as it won't show up but if you use one let me know. Alternatively, send me an email through the contact page and I'll reply with one. El1te

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    2. I'll send you an e-mail soon, off to work now but will send later tonight. Thanks! Love the website btw.

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  5. Hi Elite,

    Any further thoughts on TPET? They are about to drill. Any comments on COS?

    Thanks.

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