Empire Oil and Gas (ASX: EGO) has received a Speculative Buy recommendation with a 12 month price target of $0.019 from Perth-based broker Hartleys.
The price target is more than 35% higher than the company's current share price of $0.014.
The following is an extract from the report:
On the Cusp of Production
Empire Oil and Gas is nearing first production from its Red Gully gas and condensate plant in the Perth Basin. Construction is complete and first gas could be as soon as the weekend.
A recent site visit left us impressed with the size of the plant and the planning put into maximising the value of hydrocarbons produced from the wells.
Plenty of exploration upside
Empire is currently acquiring 3D seismic over acreage adjacent to the Red Gully gas plant. The new seismic will allow Empire to better define existing prospects that could easily be tied back to the gas plant.
The seismic area covers the Gingin field that was previously drilled without the benefit of 3D seismic but still had gas shows/flows.
Empire estimates the size of the prospects covered by the seismic at 205 billion cubic feet of gas and 9.3 million barrels of condensate.
The gas plant has been designed so that the 10 million cubic feet of gas per day capacity can be increased to 20MMcf/d by twinning the plant.
Also, the export pipeline has more than enough capacity to take a possible increase in production which means the CAPEX and time to get a discovery to production will be substantially reduced.
Empire intends to drill the Black Arrow-1, Charger-1 and Waugh-1 (Dunnart-2) wells in 2013/14. These wells are subject to approvals so there is nos pecific schedule of drilling.
The wells have a combined prospect size of 18.3MMbbls (net to EGO).
Speculative Buy - plenty of catalysts in the next 12 months
We maintain our Speculative Buy recommendation with a price target of $0.019.
Commissioning of the gas plant, cash flow, prospect definition and exploration will provide multiple catalysts over the next 12 months.
This is an historic turning point in the company's history as investors now own an oil and gas producer.
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