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Monday, February 11, 2008

Canaccord Puts Verenex Energy on its Best Ideas List


VNX : TSX : C$9.76 | SPECULATIVE BUY, C$12.75 target

We are adding Verenex (VNX: TSX)to the Canaccord Adams Best Ideas List. Verenex is an oil and gas exploration and production company that has exploration acreage in the Ghadames Basin in Libya and in the Paris Basin and Aquitaine Maritime in France.

Verenex has had remarkable exploration success in Libya with 100% success on six exploration wells in Area 47. In addition, the company recently released test results from an appraisal well in Area 47 that provides increasing confidence that there is a significant stratigraphic component to the oil deposit.

Stratigraphic traps provide the potential for very large accumulations of oil, in the range of hundreds of millions to billions of barrels of oil (as opposed to more modest individual accumulations of 25 to 40 million barrels in structural traps typical of the Ghadames basin).

Our SPECULATIVE BUY recommendation and 12-month target price of C$12.75 per share are based on our contingent asset valuation of the company. Our estimate of contingent asset value for Verenex is based on recoverable reserve potential of about 2 billion barrels (gross). Verenex currently trades at about 77% of our target price of C$12.75 and is down about 45% from its 52 week high of $17.63.

In the interest of full disclosure I own 5,000 shares of Verenex.

If you want a safer way to play Verenex (VNX-T) you could by Vermillion Energy Trust (VET.UN-T). It has a substantial interest in Verenex. Vermillion pays $0.19 per month per unit anf is trading around $35 per unit.

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