Odd Lots #4; Sintana Energy

A Canadian potential multi-bagger, on massive oil discoveries offshore Namibia.

Introduction

If you have followed the oil & gas industry you’ll probably be familiar with the exploration and development activity in the new and upcoming oil provinces, offshore Guyana and Namibia.

Map #1: Offshore licenses Namibia

Through an investment in one of the oil majors, such as Shell, Total or Chevron, you can build up some exposure. Naturally, that exposure will be quite limited, simply due to the massive overall size of their global operations.

There are other companies that provide much more exposure on the massive potential of these new oil provinces. AlmostMongolian did an extensive write-up on one such company; Africa Oil. Africa Oil $AOI.to / $AOI.st has an effective c3% interest in the Venus oil discovery. Total is the operator of that license and has said that it's at least a 1-2 billion barrels discovery, and it will be developed. Africa Oil is a USD 710m (CAD 958m) market cap company. Just by doing a rough back-of-the-enveloppe calculation, it is not hard to see that only 3% ownership interest can create substantial shareholder value. There is potential for hundreds of millions of USD’s of value, accounting for several tens of percentage points of AOI’s market cap.

Be mindful that the development of these new oil fields will still take many years, and massive sums of capital expenditures. Putting a value on the discoveries is highly speculative at this stage, and unlocking any such value may be years away.

Sintana Energy

Sintana Energy $SEI.v 🏷️ seems to offer the most leverage to offshore Namibia. It is a 100% exploration company. It does not generate any revenue, let alone cash flow from poducing assets. Its fate is (almost) completely tied to the succes or failure to find oil offshore Namibia.