Shale gas permitting moving closer in South Africa

DAVY VIEW

Regulatory progress

Press reports indicate that the Minister of Energy indicated that the licence permits will be issued in the first quarter of 2014. Given the difficulties experienced elsewhere in establishing a regulatory framework to allow exploration of shale gas to proceed, the Minister's comments suggest that the political will exists to at least allow the fraccing industry an opportunity to explore. This is positive.

Falcon well-positioned

Falcon has a technical co-operation permit covering 7.5m acres in the Karoo Basin. In late December 2012, it entered into a technical co-operation agreement with Chevron. The working assumption is that both Falcon and Chevron will be involved when the technical co-operation agreement is converted to a full permit. The commercial terms associated with Chevron's investment in the venture will form an important benchmark for the acreage held by Falcon.

With only 4.8p of our 17.4p per share valuation of Falcon allocated to the South African venture, crystallisation of value in that project should see improved share price performance.

http://www.davy.ie/davy/article.htm?id=Davy_Morning_Equity_Briefing_25102013_moneBLinkS0016C0001Cmp.htm