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Eco (Atlantic) Oil & Gas Ltd (LSE:ECO) has recently had its undervalued potential brought into the spotlight by European investment bank Berenberg, which identifies several "transformational" catalysts in the company's future.
In the current market environment of 2024, where undervalued opportunities are not uncommon on AIM, Berenberg highlights Eco's significant upside potential compared to its present share price. The bank has assigned a 'buy' rating to the stock with a target price of 125p, indicating substantial growth potential from the current 11p per share level on London's AIM.
This positive outlook is supported by Eco’s strengthened financial position following a recent farm-out deal in South Africa. Berenberg’s analysts are also optimistic about additional opportunities within Eco’s broader portfolio. The recent deal has provided Eco with a $20 million funding inflow, which bolsters its financial stability for the medium term and ensures full funding for the initial two wells in the South African project.
Berenberg analyst James Carmichael noted the progress Eco has made, particularly with the completion of the farm-out of Block 3B/4B to TotalEnergies and Qatar Energy. This agreement has enhanced Eco's balance sheet and moves the company closer to exploring the significant potential of the block. Carmichael also highlighted the ongoing farm-out of the Orinduik block offshore Guyana as another potential catalyst, with high interest expected due to the region’s promising prospects.
Carmichael further commented that Eco's success in securing strong partners and funded drilling opportunities demonstrates its ability to attract significant investment. The potential for transformational drilling catalysts in Eco’s high-quality exploration portfolio could be realized over the next 12 to 18 months.
Particularly in Guyana, there is notable interest due to the potential to explore light oil in Cretaceous reservoirs similar to those in Exxon’s contiguous Stabroek block, which has yielded over 11 billion barrels of oil equivalent. Carmichael anticipates that a new deal in this region could emerge as a key driver for the company before the end of 2024.
Additionally, Eco’s 85% stake in four blocks north of Namibia, covering 28,600 square kilometers, is expected to attract strong interest given recent exploration successes in the region. This further underscores the significant growth potential that Berenberg sees in Eco’s future endeavors.
