Bridge Energy 2012 Exploration Programme

After a hiatus of more than two years, Bridge Energy is about to embark on a four-well exploration drilling campaign in the second half of 2012 that will see it target 65mmbbls of unrisked net resources. While most of the focus will be on appraising the already de-risked PL457 targets, three other wells offer additional upside at low cost. Meanwhile further acquisitions of black oil interests continue to make efficient use of Bridge’s substantial UK tax loss pool, generating near-term cashflow and value.

PL457 – more appraisal than exploration
PL457 is the most important of Bridge’s 2012 exploration targets having been substantially de-risked through the previous drilling of neighbouring blocks where reservoirs are thought to continue into PL457. 30mmbbls of unrisked net resources could be confirmed with results due in November 2012.

Cairn farm-out further de-risks Geite
Garantiana and Geite are the two remaining significant targets in the 2012 programme. While Garantiana offers the prospect of stacked reservoir targets the Geite well has been largely derisked for Bridge through a recent farm-out for near two for one terms to Cairn Energy subsidiary Agora. With three of the four wells in Norway, Bridge reduces its capital exposure through Norway’s exploration relief programme.

Acquisitions designed to capitalise on tax structure
Near-term reserves and production growth are coming from acquisitions with the addition of a 1.55% interest in the Boa field the most recent example. Bridge has demonstrated its deal-making ability and could target up to 2,000bopd of additional production from this route to maximise the benefits of its UK tax loss pool.

Lack of liquidity weighs on valuation anomaly
We continue to see a significant disconnect between our fundamental derived core NAV of NOK22.7 and Bridge’s current share price while on a risked basis we see the addition of $120m of risked NAV increasing our RENAV to NOK33.9. With its current facilities and excluding further deal flow, we estimate Bridge is fully funded through to 2014. However, for investors the key to share price gains appears to be increasing liquidity in the stock. To address this and broaden access to capital the company continues to develop plans to float on London’s AIM market before the end of 2012.

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