Eco Atlantic Oil & Gas (LSE:ECO) has been included among the 50 best-performing stocks on Canada’s TSX Venture Exchange over the last 12 months for the third consecutive year.
The TSX Venture 50 is made up of the top ten listed firms on the Canadian exchange in each of the five major industry sectors – mining, oil & gas, clean technology & life science, diversified industries, and technology. Companies are rated on metrics such as return on investment, market capitalisation growth, trading volume, and analyst coverage.
Eco’s selection as a leader amongst its peers, which was announced on Friday, serves as a potent reminder of the upside potential that the firm could currently present.
The company took a considerable last November when it was revealed that two discoveries on its 15%-owned Orinduik block off the shore of Guyana contained heavy crudes with high sulphur content. Shares in the company fell sharply from more than 130p to below 60p and have since struggled to recover. Eco’s share price currently sits at 36p, giving it a market cap of £66.1 million.
However, as we have argued before, the market’s reaction to the news at Orinduik – also owned by Tullow Oil (60%) and Total E&P (25%) – could be something of an overreaction given the block’s long-term potential.
First, while heavy crudes with high sulphur content are more difficult to recover than lighter oil, there remains a considerable market in place for their use. Heavy crudes remain pivotal for many oil refineries and numerous fields continue to produce such petroleum profitably such as Enquest’s Kraken field and Equinor’s Mariner fields in the North Sea.
Second, of Orinduik’s 5,141 million barrels of oil equivalent (“MMboe”) worth of gross prospective resources, just a portion is thought to sit in the Tertiary-aged horizons where the heavy crudes were found. The majority (3,936MMboe) is expected to lie in the block’s Cretaceous section, which has been considerably de-risked by huge nearby discoveries in the same play. Specifically, light oil was discovered in the Cretaceous part of the Kanuku block to the south of Orinduik earlier this year and ExxonMobil has found eight billion barrels of oil in the play to the east of the block.
As Eco’s chief executive Gil Holzman highlighted to us recently, the upshot of this is that “the Cretaceous horizon is where the real opportunity lies” at Orinduik.
With Eco, Tullow, and Total priming themselves to drill the play at Orinduik this year, time will tell if they will be able to replicate the success of their neighbours, but all the indications to date are strong. Against this backdrop, the disproportionate decline in Eco’s share price could provide an exciting buying opportunity – a strong Cretaceous drilling result seems likely to capture the market’s attention.