Scope for new oil and gas discoveries in Sub-Saharan Africa is being underestimated and that they are undervalued, according to a new report by RFC Ambrian, an investment and advisory business.
The report titled "Sub-Saharan Oil and Gas" points out the equity markets can build a portfolio of undervalued, high-risk (and thus cheap) frontier exploration stocks such as Sub-Saharan African Explorers.
WHL Energy is an emerging oil and gas exploration company focused on the East African region.
Equity markets have underestimated the potential for new petroleum discoveries in Sub-Sahara Africa and a good proportion of the regional, geologic and/or political risk can be hedged by owning a portfolio of these stocks.
Estimate of Sub-Saharan Africa mean undiscovered conventional petroleum resources was 2.2x larger (or 146Bboe) than its 2000 Assessment, according to a April 2012 USGS World Petroleum Assessment.
RFC Ambrian said this is the largest increase of its eight main assessment regions, in both absolute and percentage terms.
New technology has de-risked the exploration of certain play types which were earlier considered too risky as well as influence of the region’s (current) relatively low levels of proven reserves and production
Political risk, regulatory risk, graft and security issues have caused the region to be less explored than its geologic potential warrants citing reasons for undervaluing Sub-Saharan African explorers.
RFC Ambrian said the average upside to its current fair values for the ten companies covered in this report is >80%.
The report states that USGS estimate of the undiscovered resource potential of Sub-Saharan Africa is equal that of the Middle East and North Africa, North America and South America.
Ophir Energy, Africa Oil Corp, African Petroleum, Pancontinental, Chariot Oil and Gas, Rialto Energy, FAR, Fastnet Oil & Gas, WHL Energy and Tangiers Petroleum are ten of the most exciting exploration companies operating in Sub-Saharan Africa.
RFC Ambrian has also identified four Sub-Sahara African play types which had recent petroleum discoveries and have further scope for exploration activity.