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Falcon Oil & Gas is “well worth following” - RBC Capital

“We see Falcon as a near pure option on what could prove to be a very large, economic gas resource with long-dated strategic appeal"

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Falcon has a 25p price target for Falcon

Falcon Oil & Gas Plc (LON:FOG) presents a “story that’s well worth following”, according to RBC Capital, in a new write up following the release of a draft final report in the ongoing review of fracking in Australia’s Northern Territory.

Falcon is sitting on a major shale discovery in the Beetaloo basin though its recent progress has been halted by a moratorium on fracking. A government-commissioned report is being produced in order to inform the government ahead of a decision to either allow or deny the controversial well stimulation technique.

READ: Falcon Oil & Gas boosted as draft scientific report says Australian fracking risks are manageable

The draft, released on Tuesday, contains many points and recommendations but its overall conclusion stated the belief that “the challenges and risks associated with any onshore shale gas industry in the NT are manageable”.

“We see Falcon as a near pure option on what could prove to be a very large, economic gas resource with long-dated strategic appeal,” RBC analyst Ben Wilson said in a note.

“The nascent nature of the target Beetaloo Basin and the near-term activity hiatus temper our enthusiasm; however, we acknowledge it is an asset appraisal story that is well worth following. “

Wilson added: “Resumption of drilling in the Beetaloo is contingent on lifting NT's frac moratorium. Strong East Coast gas pricing (US$5-7/mcf), a rapidly improving Asian Basin LNG market (spot ~US$10/mcf), forecast NT deficits and an encouraging draft inquiry report provide support for lifting of the moratorium.

READ: Falcon Oil & Gas highlights strong financial position as it awaits Australia fracking verdict

“We note uncertainty around political processes presents risks of delays to Beetaloo appraisal which factors into our recommendation.”

RBC holds a ‘sector perform’ recommendation, with a price target of 25p which sees some upside to the current price of 23.5p.

Quick facts: Falcon Oil & Gas Ltd

Price: 12.4 GBX

AIM:FOG
Market: AIM
Market Cap: £121.75 m
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