CAMAC Energy Initiated With a Buy at CSL

LONDON, UNITED KINGDOM--(Marketwired - Sep 9, 2014) - CSL initiates coverage on CAMAC (NYSE MKT: CAK) (JSE: CME) with a BUY recommendation and target price of US$0.98/share using a RENAV based valuation methodology which includes a core value (2P) of US$0.45/share, and exploration value for one prospect of US$0.54/share. CSL's core valuation is supported by historic acquisition prices for CAMAC's core acreage offshore Nigeria in OML 120/121.

CAMAC is set to increase production from its flagship Oyo field in deepwater Nigeria with an exit production rate of 14,000bpd by the end of 2014. Further production increases beyond this are forecast with a peak production rate of 25,000bpd by 2016 based on 3P estimates. This ramp up will provide the necessary cashflows to increase exploration drilling activity across CAMAC's portfolio which encompasses deepwater Nigeria, Kenya (onshore and offshore), Gambia offshore, and Ghana offshore.

As a further catalyst for the share price, the probability of a reserves and/or resources upgrade appears high. This is due to the fact that management has previously stated in an April 2014 update that they have high graded three prospects with over 200mmboe unrisked potential each. CSL estimates this is worth US$0.54/share risked.

A successful listing on the Johannesburg Stock Exchange earlier this year provided US$270m to acquire the remaining 70% economic interests from Allied Energy Plc of OML 120/121, thus securing 100% of this producing asset. CAMAC is currently increasing their sources of finance through a US$100m senior credit facility, which was announced today. CAMAC is now fully funded to bring to production the Oyo-7 and Oyo-8 development wells. This should provide the catalyst for further upside in the share price, in CSL's view.