City broker finnCap has lifted its price target for Europa Oil & Gas (LON:EOG) after the explorer secured a five year permit renewal for the Béarn des Gaves permit, onshore France.
The permit, which includes the Berenx Deep prospect, has been renewed for five years until March 2017.
In July the renewal process stalled, amid a change of minister at the department of Ecology, Sustainable Development and Energy. At the time Europa warned it would’ve had to write off £1.2mln if a renewal was not secured.
In a note finnCap said the renewal is an important milestone for Europa and paves the way for a farm-out process to be initiated ahead of drilling in 2014.
FinnCap's target price is lifted to 28p - more than 200% above the current price of 8.6p.
“Europa has significantly increased its interpretation of the shallow gas resource potential and this is now the primary play on the block,” analyst Will Arnstein said in a note.
Europa said the next steps for the permit is to confirm a well location, begin the permitting process and start planning a drill programme.
Its objective is to drill a well to test the Berenx Shallow in 2014.
"We are delighted with the renewal of Béarn des Gaves, particularly as over the last twelve months we have undertaken a thorough re-evaluation of the shallow structures, reservoir distribution and historic well results which has significantly increased our understanding of the prospectivity in the permit,” said chief executive Hugh Mackay.
“The resulting definition of gross mean un-risked resources of 416bcf for Berenx Shallow, and the already discovered Berenx Deep appraisal project with an estimated gross mean contingent resource of 277 bcf (ERC Equipoise CPR dated 31 May 2012) confirms the transformative potential of this 100% owned permit.
“We look forward to recommencing the farm-out process immediately with a view to drilling in 2014."
Mackay added: “Alongside Berenx we have a 15% interest in two high impact frontier licences in the Irish Atlantic Margin.
“Kosmos Energy, the operator, is currently acquiring 3D seismic over the licence area as it looks to pursue in the South Porcupine basin similar Cretaceous plays to those that it successfully pioneered in the Atlantic Margin basins offshore West Africa.
“Meanwhile, our UK onshore fields continue to produce oil in line with our expectations, and in addition our exploration licences contain several leads and prospects, including Wressle, where we are due to drill a well towards the end of 2013.
“With much activity expected across our licences, I look forward to providing updates on our progress as we continue to steadily de-risk and deliver the value in our assets."