Simba Energy: Africa Oil's potential success is positive for firm, says OPL

Africa Oil's (CVE:AOI) reports of potentially commercial flow rates in Africa is positive for oil explorer Simba Energy(CVE:SMB), says City broker Old Park Lane, which rates the stock a 'buy'

Africa Oil is carrying out flow tests on its Twiga South-1 discovery well and a total of 2,351 bopd was recorded from two separate horizons, notes analyst Barney Gray.

He says Africa Oil’s acreage is adjacent and to the west of Simba’s onshore block 2A in Kenya although this is a separate hydrocarbon basin.

"Nevertheless, we believe that the likelihood of another onshore success story in Kenya represents very positive sentiment for Simba."

Of greater interest to Simba is the prospect of increased activity on Block 1 directly to the north of the company's acreage where operator Afren plans to spud an exploration well in 2014, while Taipen Resources is currently in farm-out negotiations for block 2B, south of Simba's acreage, points out the analyst.

Simba recently completed a passive seismic survey on Block 2A and following this it opened a data room for potential farminees and has employed Ernst & Young to oversee the process of finding a partner to fund a drilling an initial programme. 

Gray added: "Excitement over the exploration potential of onshore Kenya continues to accelerate with every success. 

"We are particularly encouraged by recent drilling success in Kenya and although Simba’s acreage is predominantly located in the Mandera Basin, the western extremity of Simba’s block extends into the Anza Basin where Africa Oil’s success is located, potentially elevating the farm-out potential of Simba’s acreage."