GMP Raises Target on TGL

TOBY PIERCE, GMP Securities (04/08/2010)
"TGL completed its first successful fracture stimulation in the Nukhul formation on the Arta 9 well, resulting in a stabilized production rate of ~210 b/d.

We are maintaining our BUY rating and are raising our price target from C$6.40 to C$7.90/sh on an increased sum of the parts value. With the addition of the Nukhul play on the Arta block and scope for expansion of this play following the successful fracturing of 4 vertical wells, we are putting a value on what we think the ultimate resource potential of the Nukhul play might be. We feel our 8 mmboe of risked resources worth C$1.02/sh risked (5.70/sh unrisked) attributed to this play will prove conservative over the near term.

We like the company based on its high level of activity and continue to feel that the stock is a buy given that its current share price is adequately supported by its core NAV of C$5.47/sh. With an accelerated 2010 exploration program, we believe that TransGlobe is a growth-oriented international story with a share price that is undervalued relative to its exploration prospectivity. We see exploration activity continue to build and potential upside from the fracing program at Atra as key drivers of the story. Further, management is slowly transforming the firm into a more balanced exploration, production and development story with a bigger focus on Egypt, and should be one of several more attractive takeout candidates for mid-tier producers in the region looking for high-quality acquisition candidates."

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