Alba Min Res PLC (AIM:ALBA) Horse Hill – Broker Notes

This morning we learnt from Alba Mineral Resources (ALBA.L) that the Portland oil field at Horse Hill is now considered “to be commercially viable”. Alba holds a net 11.765% interest in the Horse Hill Oil Discovery project, which consists of both the shallow Portland and deeper Kimmeridge oil discoveries.

The start-up of long-term oil production at Portland is now being targeted for 2019, subject to securing the appropriate regulatory consents. Planning permission is already in place to produce from the horizontal well HH-2, which is expected to be drilled in early 2019. In total the field development plan for the Portland includes production from three wells and up to two support wells.

This is a landmark news event for Alba, which moves the company nearer to joining the small club of resource producing companies listed on AIM. From the information known to date, First Equity estimate oil production from the Portland could amount to a gross 1,000 to 1,400 barrels of oil per day (bopd), resulting in a sizeable 117 to 165 bopd net to Alba. We will need to see the published findings of Xodus’ Competent Persons Report to get a more accurate estimate of the Portland’s oil production numbers, cash flow and net present values.

The bigger production and resource size prize lies beneath the Portland in the Kimmeridge, upon which the KL3 extended well test programme is currently in progress. Further results and potential high-impact news-flow from KL3 are anticipated in the coming weeks, along with KL4 afterwards.

Alba’s project positioning at Horse Hill has been recently strengthened following consolidation of its listed peers, with Alba now just one of only two AIM listed participants at Horse Hill and third largest stakeholder overall. Alba also provide investors with multi-commodity exposure, with a diversified portfolio of interests, that encompass projects in Greenland, including the Thule Black Sands ilmenite project and also the Clogau gold project in Wales, providing substantial exploration upside and ability to produce premium priced ‘Welsh’ branded gold.

For a Company on the cusp of cash flow generation at Horse Hill from a sizeable and potentially valuable asset, the shares still trade below where they should lie. Our price target remains at 6.0p, of which 4.0p is attributed to the Horse Hill oil project. This may need updating when the Xodus report is announced. With the all these above factors in mind and prospect of further substantial news-flow events, we rate the shares as a ‘Buy’.

DISCLAIMER
This is a non-independent marketing communication under the FCA Conduct of Business Rules. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of dissemination of the investment research. First Equity Limited (FEL) has procedures in place to manage any conflicts which might arise in the production of investment research, including Chinese Wall procedures. The views expressed in this marketing communication are those of FEL’s Analyst. They are based on information believed to be reliable but no warranty or representation, express or implied, is made about the accuracy or completenesws of this information, which may be subject to change without notice. Any opinion given reflects the analyst’s judgement as at the date of this document’s publication. Any or all statements about the future may turn out to be incorrect. This marketing communication is designed for information purposes only and does not constitute a personal recommendation, offer or invitation to buy or sell any investment referred to within it. Investors should form their own conclusions and/or seek their own advice to determine whether any particular transaction is suitable for them in the light of their investment objectives, the benefits and risks associated with the transaction and all other relevant circumstances.FEL’s investment research products are paid by corporate clients as part of their broker retainer fee. Therefore, this document comes under the scope of Article 123(b) of the European Commission’s Delegated Directive of 7 April 2016 and thus qualifies as an ‘acceptable minor non-monetary benefit’ and does not qualify as ‘chargeable research’. FEL can therefore send this document to investors without the requirement for any compensation to be paid to FEL from the recipients – it is hence available without charge. .This document is not for distribution into the United States, Japan, Canada or Australia
Neither this document nor any copy of it may be taken or transmitted into the United States of American, or distributed, directly or indirectly, in the United States of America or to any US person as defined in Regulation S under the United States Securities Act of 1933. Any failure to comply with this restriction may constitute a violation of United States securities laws. Neither this document nor any copy of it may be taken or transmitted into or distributed in Japan or to any resident thereof for the purpose of solicitation or subscription or offer for sale of any securities. Any failure to comply with this restriction may constitute a violation of Japanese securities laws.
Neither this document nor any copy of it may be taken or transmitted into Canada or distributed in Canada or to any individual outside Canada who is a resident of Canada, except in compliance with applicable Canadian securities laws. Neither this document nor any copy of it may be taken or transmitted into or distributed in Australia or to any resident thereof except in compliance with Australian securities laws. Any failure to comply with this restriction may constitute a violation of Australian securities laws.