One to Watch: Competent operator

Published on Thursday 12 November 2009 19:46

Gulfsands Petroleum 231.5p -2.5p Scotsman says BUY

GULFSANDS is an Aim-listed oil exploration and production company that has been transformed by the fast-track development of the 60 mmbbl+ Khurbet East oil field on Block 26, in north-east Syria.

This development generated a marked increase in the company's reserves, production and cash flow; it also established Gulfsands as a competent operator, a role that should enable the company to access new opportunities.

The management team may gain traction with new ventures – in Syria, Gulfsands is a potential bidder for PetroCanada's gas assets and, in Iraq, the company is pursing the Maysan gas project.

Gulfsands' Block 26 in Syria covers an area of 8,250sq km (the equivalent of 38 North Sea blocks) and encompasses numerous exploration leads that are being firmed up as drillable prospects with the benefit of new 3D seismic. On 26 November, management is due to unveil this new prospect inventory and its late 2009-10 exploration drilling schedule.

The inclusion of a series of new prospects will be accretive to our 279p sum-of-the-parts valuation, and the commencement of a multi-well exploration drilling campaign that will generate regular and potentially material newsflow, which should keep the stock in the spotlight through 2010.

The publication of the prospect inventory could also provide an insight into why Sinochem bought into Block 26 earlier this year, through its acquisition of Emerald Energy. We believe the Chinese national oil company sees substantial new opportunity on the block.

&#149 Al Stanton is an equity analyst at RBC Capital Markets. Investment markets and conditions can change rapidly and as such the views expressed should not be taken as statements of fact, nor should reliance be placed on these views when making investment decisions. Past performance is not a guide to the future.

HSBC

732.3p +6.2p

Broker says ACCUMULATE

HSBC remains one of Charles Stanley's "two favoured UK banks", with Standard Chartered, after HSBC's Q3 report.

"HSBC's strong presence in emerging markets will not only be an advantage in the next few years but is also a position others will find very hard to replicate," the broker said.

Dairy Crest

391.8p -16.2p

Broker says HOLD

INTERIM results from Dairy Crest were "in line with expectations" KBC Peel Hunt said.

The broker – which increased its target price on the diary from 360p to 400p – added: "However, we are retaining our 'Hold' recommendation as we believe the shares to be high enough versus the sector."