Cavendish has set 19p price target for 1947 Oil & Gas (1947 ), based on a risked core net asset value appraisal of the company’s assets in the USA.
“1947 Oil & Gas is a new Aim-listed exploration and production company focused on opportunities in the Gulf of America,” wrote Cavendish.
“Its strategy is supported by a high-calibre management team and board, including former Talos CEO, Tim Duncan, and renowned commodities economist and strategist Jeff Currie.”
And its in a highly productive region too.
“1947’s sole focus is on the Gulf of America, which is a major US basin producing around two million barrels of oil equivalent per day, or 15% of US output,” continued Cavendish.
“Its maturity offers extensive data, infrastructure and service capacity, predictable low-decline production and attractive entry prices for specialist operators. With much domestic industry and capital focus on the unconventional onshore, the offshore is relatively uncompetitive, presenting an attractive opportunity for 1947 to become an asset aggregator.”
So what’s the plan?
“The opportunity is clear,” says Cavendish.
“Mature assets can be acquired at attractive valuations and managed more efficiently through late life. By reducing costs, utilising economies of scale, and optimising and growing production, 1947 can extend cessation-of-production dates and unlock material incremental value.”
1947 has already secured a diversified package producing around 3,100 barrels of oil equivalent per day net of royalties, together with an established operating team, at a forward EV/EBITDA multiple of 1x FY27E.
According to Cavendish, “this provides a highly profitable, cash-generative platform from which to grow, with ongoing organic activity providing production growth and share-price catalysts. Further M&A opportunities are being screened continuously and could be delivered over the next 12 months. 1947 offers meaningful exposure to today’s strong oil prices, while the low entry valuation and cash-generative nature of the acquired assets provide resilience at lower prices.”
The broker has initiated with a ‘buy’ recommendation.
“Our 19p target price is based on risked Core NAV (NPV10), offering 102% upside to the prevailing share price,” the broker said.
View from Vox
Cavendish rightly notes that 1947 trades at a significant discount compared to its peers. But that might not last for long. If you’re bullish on oil, like the board of 1947, then it might not come as a surprise if the company starts to gain momentum in the market as it begins to build a track record and looks to get further transactions under its belt.