Gas powers First Calgary's rise

By STEVE HAWKES
Updated:

 

SUPERMAJORS Shell and BP have been dominating the headlines with their multi-billion-pound profits but, quietly, a Canadian oil and gas explorer is starting to make waves in the City.

First Calgary last Wednesday pushed out encouraging test results from an Algerian oil well that led analysts at Canaccord to put a fair value of 528p on the AIM-listed stock, which traded at 130p just a year ago.

A listing on the main London market is now just around the corner, given the company's £780m value.

The reason for the group's Cairnlike rise is gas - lots of it. First Calgary is sitting on seven trillion cubic feet of gas and believes it could ultimately have as much as 20 trillion, equivalent to 3.3bn barrels of oil.

After its initial find at the Ledjmet field two years ago, it has struck a $700m (£385m) deal with Algerian State oil company Sonatrach to develop it, firmed up reserves and gradually won over the sceptics.

It is now thrashing out terms of a £720m debt finance deal with two Japanese backers that would allow the group to press ahead and develop the project on its own.

But the option exciting the City is the prospect of a takeover auction between the heavyweights. Shell and Total are believed to be just two of the big guns asking to be kept abreast of developments. Oil finds since the start of the year that are just a few kilometres away from Ledjmet and could hold as many as 200m barrels of crude have added to the group's potential asking price.

One analyst said: 'Early next year all sorts of companies may be looking at First Calgary.'

Chief executive Rick Anderson, who claims he was attracted to Algeria 'by the size of the prize', secured funding to drill the group's first well through a $14m cash-raising four years ago.

More money was poured in by Yuri Shafranik, the former Russianoil minister, and the group's shareholder register now has more of a blue-chip look, with fund managers Artemis and Lansdowne holding stakes.

Between now and Christmas, First Calgary plans to drill a host of wells to add as much gas as it can to its portfolio before deciding whether to go it alone or sell out.

One cloud on the horizon could be the battle to get the gas out of the country, given capacity constraints in the export infrastructure. There are only rumours of a new liquefied natural gas plant and progress on new pipelines is slow.

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