Alba Min Res PLC (AIM:ALBA) Broker Notes 5th Oct 2018

Horse Hill-1 (“HH-1”) Portland and Kimmeridge Oil Discovery, Weald Basin, UK

 
George Frangeskides, Alba’s Executive Chairman, commented:

“These ambitious plans revealed by the Operator to drill up to a further four wells at the Horse Hill site, on top of the already planned HH-1z side-track well and HH-2 new well, supports our belief in the potential for Horse Hill to provide material production and cash flow returns to Alba in the medium to long-term. In the short-term, meanwhile, we await the results of the current Kimmeridge EWT, which we hope will further underpin the plans to submit a planning application for the commencement of full-scale production.”

“On the corporate front, the recently announced disposals by a number of the participants of their stakes in Horse Hill means that Alba is now the sole AIM-quoted participant in the Horse Hill venture aside from UKOG, and the third largest participant in the Project overall, after UKOG and Tellurian Inc (NASDAQ: TELL). Alba remains a committed participant in Horse Hill and we look forward to reporting further news in this fast-developing project as it arises.”

  • Price: 0.42p
  • MCp: £12.6m
  • Tk: ALBA.L
  • Sector: Resources
  • Recommendation: BUY
  • Target Price: 6.0p
Horse Hill EWT Update

Alba Mineral Resources (ALBA.L) has this morning updated investors with activities on its major onshore oil project at Horse Hill.  

From the update, we learnt that a detailed long-term production scoping report has been submitted to the local council authority (Surrey County Council), which includes a total of six production wells being drilled over a period of two years, with an assumed maximum daily rate of 3,500 barrels of oil per day. Once feedback on the 25-page report is obtained, a full-scale production planning application will be submitted, before the 2018 EWT programme is completed.   

Operator HHDL, in which Alba holds a 18.1% stake, confirmed that extended well tests on the Kimmeridge Limestone 4 (KL4) have already commenced. Further updates from these tests will “follow in due course”.  Today’s announcement also indicated that other near-term news-flow is likely to be an internal declaration of commerciality from the Portland layer, which will be “made shortly” by the operator. The competent persons report published in July by independent oil and gas consultants Xodus outlined that the single HH-1 well “sees” a connected Portland ‘oil in place’ of around 7 to 11 million barrels of oil gross to the project partners.  

Comment & Recommendation 

We are encouraged by the continued advancement of the Horse Hill project and potential it provides to shareholders with near-term high impact news-flow for what could become a significant onshore oil project and asset to the UK resources economy. The comments by the operator on the shallower Portland oil HH-1 well are very upbeat. But of course, the larger potential prize lies below in the Kimmeridge, from which potential high-impact results we await in the coming weeks. 

Alba’s project positioning at Horse Hill has been strengthened recently, following the consolidation of its listed project partners. Alba is now just one of only two AIM listed participants at Horse Hill and third largest stakeholder overall. AIM listed UKOG plc and NASDAQ listed Tellurian Inc are the other listed HHDL partners. 

It must be remembered that Alba is more than a one-project company, with a diversified portfolio of interests, that encompass several projects in Greenland, including its Thule Black Sands ilmenite project and the Clogau gold project in Wales, which offers substantial exploration upside, potential production opportunities and ability to produce premium priced ‘Welsh’ branded gold. 

First Equity continues to rate the shares as a ‘Buy’ with a 6.0p price target, of which 4.0p is currently attributed to the Horse Hill project. The target price is much higher than the prevailing share price, which underlies that the market continues to substantially discount the likelihood of a significant commercial discovery and near-term production. As further news and project validation is revealed, this gap in valuation may narrow very quickly, providing today’s investment opportunity for the astute speculative investor.   

Jason Robertson

D: +44 (0)20 7330 1883
M: +44 (0)7418 998769

E: jasonrobertson@firstequitylimited.com

*First Equity Limited acts as Broker to Alba Mineral Resources plc

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