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Oil discovery turns Corbett on to Dana Petroleum

by Tom Sieber

A major discovery in the northern part of the North Sea has sparked Phil Corbett of ABN Amro to hike his target price for oil group Dana Petroleum from £14.05 to £17.55.

Corbett reiterated his ‘buy’ take on the stock explaining that the oil discovery on the West Rinnes structure, close to both the company’s Hudson oil field and existing Melville discovery, is significant both due to its individual potential and the impact it could have on exploration in the area in the future.

He says: ‘We believe West Rinnes could contain around 40 million barrels of reserves, material in the context of Dana’s current booked reserves of 166 million barrels of oil or equivalent, end 2007, and with neighbouring exploration prospects also derisked by the result, the Hudson/Melville/Rinnes area is likely to be a significant area of focus going forward.’

Corbett explains that he has increased his risked NAV for Dana from 953p to 972p on a number of minor adjustments to asset models, but adds more significantly that his assessment of the exploration upside has risen from 358p to 665p – accounting for much of the increase in the target price.

He also adds that the results could have a positive read through to the the group’s other assets. He notes that: ‘Furthermore, the result could prompt greater scrutiny and optimism over the remainder of Dana’s portfolio, in particular the West El Burullus well in the Nile Delta, results should be due shortly, and some of the company’s more speculative West African acreage.’