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TICKERS: EOG; ECAOF; ECO

Energy Company 'Still Surfing on the Guyana Wave' with New Oil Discovery
Research Report

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A Pareto Securities report addresses how the various joint venture wells of the firm derisk potential upside to its share price.

In a Sept. 17 research note, analyst Tom Erik Kristiansen reported that Pareto Securities raised its target price on Eco Atlantic Oil & Gas Ltd. (EOG:TSX.V; ECAOF:OTCMKTS; ECO:LSE) after the energy company and its partners discovered oil at the Joe prospect on offshore Guyana's Orinduik block. The new target price is GBp235, up from GBp200, and compares to Eco Atlantic's current share price of GBp156.

Kristiansen highlighted that this new oil discovery, and the second consecutive discovery in the Tertiary fairway, helps derisk these same-play prospects and thus, potential upside to the company's share price. The new Joe discovery boosts the total discovered resources on the block to more than 370 million barrels gross. The second discovery at Tertiary helps derisk further upside potential of another roughly 430 million barrels of oil equivalent.

"If proven up by further drilling success (next wells to be drilled toward the end of 2020), this would lift our valuation of Eco Atlantic to about GBp250 per share before attaching any value on the deeper potential at the block," commented Kristiansen.

The analyst added that Carapa-1, a neighboring well that Eco Atlantic does not have an interest in, slated for drilling by year-end, also could have a similar effect. "If successful, this would help derisk the shallow water Cretaceous fairway on Eco Atlantic's acreage that is yet to be tested."

Generally, regarding all of Eco Atlantic's joint Guyana assets, Kristiansen wrote that "while several milestones remain and the uncertainty is high, we estimate greater than five times' upside potential to the current share price if the deeper potential is proven up by future drilling success. We see downside to about GBp120 per share if all future exploration wells are unsuccessful."

As for funding, Eco Atlantic has the necessary capital for at least five more wells.

Overall, Kristiansen pointed out that "with its recent discoveries and exposure to the hottest exploration region in the world," Eco Atlantic makes an attractive acquisition target, most likely for the other large oil companies in the area, including its partners Total and Qatar Petroleum.

Pareto has a Buy rating on Eco Atlantic.

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Disclosures from Pareto Securities AS, Eco Atlantic Oil & Gas, September 17, 2019

This publication or report has been prepared solely by Pareto Securities Research.

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This material has been prepared following the Pareto Securities Conflict of Interest Policy. The guidelines in the policy include rules and measures aimed at achieving a sufficient degree of independence between various departments, business areas and sub-business areas within the Pareto Securities Group in order to, as far as possible, avoid conflicts of interest from arising between such departments, business areas and sub-business areas as well as their customers. One purpose of such measures is to restrict the flow of information between certain business areas and sub-business areas within the Pareto Securities Group, where conflicts of interest may arise and to safeguard the impartialness of the employees. For example, the Corporate Finance departments and certain other departments included in the Pareto Securities Group are surrounded by arrangements, so-called Chinese Walls, to restrict the flows of sensitive information from such departments. The internal guidelines also include, without limitation, rules aimed at securing the impartialness of, e.g., analysts working in the Pareto Securities Research departments, restrictions with regard to the remuneration paid to such analysts, requirements with respect to the independence of analysts from other departments within the Pareto Securities Group rules concerning contacts with covered companies and rules concerning personal account trading carried out by analysts.

Pareto Securities AS may have prepared or distributed investment recommendation, where Pareto Securities AS has been lead manager/co-lead manager or have rendered publicly known not immaterial investment banking services over the previous 12 months: Eco Atlantic Oil & Gas.

Pareto Securities AS may hold financial instruments in companies where a recommendation has been produced or distributed by Pareto Securities AS in connection with rendering investment services, including Market Making.




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