News: Grand Gulf Energy's shares jump 27% on high volume

Grand Gulf Energy's (ASX:GGE) shares closed 27.3% firmer yesterday at $0.014, with the 6.6 million shares traded being the busiest day for six-months.

The company has been reporting impressive gains from its U.S. based oil and gas operations.

Yesterday Proactive Investors Australia published the research note:


Grand Gulf Energy to earn $3.5M profit as oil output soars


The company has already announced that net profit for 2013/2014 is expected to be around $3.5 million before tax, impairment and amortisation is taken into account.

Working capital has increased to $3 million without incurring debt or raising capital.

This with existing cash flow will allow drilling and development of up to 3 wells to proceed over the coming 12 months without a call for a fresh capital raise


Price target

Proactive Investors assigns this median valuation to Grand Gulf Energy which is currently producing 188 BOEPD for a projected valuation of $15.3 million or $0.023 per share (including cash).

Success at Templet #1 could boost daily output to ~300 BOEPD and potentially boosts our 6-9 month valuation target to $26.2 million or $0.035 per share (including cash).

On a net earnings basis, Grand Gulf Energy can also be valued on an EPS basis. On this metric, the company is as equally under-valued by a factor of three at current share price.

The company has not raised any equity over the last three years and has nil debt. Has Grand Gulf Energy slipped under investor radars?

Our contention is a very big yes.