Raymond James Likes Kosmos Energy's Non-Ghana Assets

Kosmos Energy Ltd KOS declined 13 percent on Monday, after the company announced the discovery of gas, but no oil, at its Teranga-1 well.

Raymond James’ Pavel Molchanov upgraded the rating on the company from Outperform to Strong Buy, with a price target of $7.

Assets Outside Ghana

Given the absence of a run up in the shares prior to this catalyst, Molchanov explained that the sell-off was unjustified and based on multiple compression alone.

The analyst stated, “the entire Mauritania/Senegal resource base – that is to say, everything outside Kosmos’ operations in Ghana – looks like a free option.”

Molchanov mentioned that at the current share price, the Mauritania/Senegal gas was being valued below $0.05 per Mcf, while noting that the resource base discovered was 25 percent higher than expected.

Given the current share price, the analyst said, “the market is treating Mauritania/Senegal as a negative asset,” while adding, “In a selldown, every $0.10/Mcf could add close to $5/share.”