Reiterate 'buy' on BPCL – TP Rs.735 - Geojit BNP Paribas Financial Services

- Buy rating on BPCL is reiterated with a higher target price of Rs.735.

- The company has announced a new gas / oil reserve discovery, Golfinho in Mozambique.

- The new discovery is geologically distinct from the earlier discoveries announced in the Prosperidade basin and opening up a new area for potential gas finds.

- The new discovery is expected to add 7- 20 tcf of recoverable reserves. This is in addition to the earlier announced 17-30 tcf.

- Barquentine well tested at 100 mcf of gas per day and this is another positive.

- The current find reinforces the faith in BPCL's portfolio of E&P (exploration & production) assets. Mozambique continues to look very attractive. In addition, there is increasing prospects within the Sergipe basin along with potential development in the already proven Wahoo discovery.

- Near term focus may be on the subsidy issue but long term E&P story is intact.

- On the subsidy front, the government is expected to announce its contribution before oil markting companies announce their results.

- Meaningful price hike of petrol and diesel is also expected shortly.

- Cove Energy deal is expected to be signed by 23 May 2012 and this may be another catalyst on the stock.

- The new discovery is expected to add at least Rs.50 to the stock price and the buy call is reiterated with a target price of Rs.735.

Source : Equity Bulls

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