Oil and Gas
Regal Petroleum possesses an efficient funding and resource base to support its further development, with 31.6 MMboe in 2P reserves and a USD 26.8mn cash balance as of 30 Jun 2013. The company intends to complete the drilling of a new well, SV-59, by the end of this year, and natural gas should start flowing in 1Q14. We see the completion of the new well as a turnaround point for the long decline in the company’s output. We expect Regal to double its output in 2014 to near 2,800 boepd, helping it to post EBITDA of USD 31mn. We retain our BUY recommendation for the RPT stock, but since the company’s development has been slower than promised, we lower our target price for the issue to GBp 42.0 per share, which implies an upside of 172%. Our previous target price, set in 2011, was GBp 94.0.
