Ophir Energy rallies on Canaccord upgrade

Ophir Energy’s shares gushed higher after Canaccord Genuity upgraded the stock to ‘buy’ from ‘hold’ and lifted the target price to 105p from 80p.

Canaccord cited Ophir’s newly formed joint operating company (JOC) with OneLNG to develop the Fotuna gasfield offshore Equatorial Guinea via a floating liquefied natural gas (FLNG) facility.

Ophir will own 33.8% of the JOC which is expected to commercialise the 2.6trn cubic feet project.

Canaccord said the Fortuna framework “provides the basis for a project which would be a step change for the company” in terms of booked reserves and production.

“As a result, in the absence of clarity on development/value of the offshore Tanzania gas, Fortuna is set to become Ophir's most important asset once the key milestones above are completed,” the broker said.

“However, while the project now has substance and the unrisked valuation is substantial, we anticipate the market will only gradually derisk Fortuna as these milestones are checked off. “

Canaccord raised its target price in line with other similar profile exploration and production companies based on net present value of 12.5, compared to NPV15 previously, given the Kerenden field is now producing and Fortuna is more firmly established.

Shares rose 4.01% to 79.31p at 1233 GMT.