Analyst Actions: Credit Suisse On Niko Resources - Says "Cash Infusion Coming Soon"; Shares Gain 10% Today, But Near Yr Lows
Proposed Non-Core Asset Sales: "Niko has announced that the company is in advanced negotiations with two separate third parties to dispose of non-core assets by April 30, 2013, for a total of US$157 million. This amount is slightly higher than the initial objective of US$135 million and is a positive development. Should Niko be successful in this endeavor, we believe the proceeds would bring much needed financial flexibility ahead of a potential higher gas price in India. In addition to these asset sales, the company continues to progress on other farm-out and non-core dispositions."
What is Considered Non-Core? "We believe Pakistan and Madagascar are certainly non-core assets, while Trinidad may be debated since the company does have a relatively large land base there. We also wonder if block NEC-25 in India and Block 5c in Trinidad could be in the mix as these two blocks could garner relatively greater proceeds, as there are existing discoveries."
Catalysts: "After the suspension of the Cikar-1 well at West Papua, Niko has mobilized its rig to the North Makassar block and expects to spud a well in early April 2013. Drilling time is expected to be in the vicinity of 70-80 days. In India, Niko and its partners are drilling the MJ-1 exploration well and results are expected in the April to May 2013 timeframe. Best estimate propsective resources are estimated at 82 bcf and 5.6 mmbbls, net to Niko."
Recommendation: "We currently maintain our Neutral rating and target price of C$10. We may reconsider our position when future gas prices in India are defined and a clearer framework for Niko's future financial position emerges. With the depressed share price, this conservative stance could leave profits on the table, but also could protect against downside risk from uncertainty."