Buccaneer Energy (LSE:BUCE) is broadening its horizons beyond its existing US oil production, with a new European strategy focused on conventional onshore natural gas opportunities — and SP Angel believes the changing European energy market could create a compelling backdrop for the company.
In a research note published on 15 September, SP Angel maintained its Buy rating on Buccaneer Energy and a 0.05p 12-month target price, while highlighting the company’s move into European onshore gas development as an important new growth opportunity.
A changing European gas market
The backdrop to Buccaneer’s European expansion is significant.
SP Angel points to major changes in Europe’s energy market, including the cessation of Russian gas flows and disruption to global LNG supply, which have contributed to significantly higher gas prices.
The broker notes that gas prices are currently above $27/mmBtu, equivalent to approximately $160/boe, while energy security has become an increasingly important strategic priority across Europe.
That changing environment has also contributed to an improving regulatory backdrop for indigenous natural gas development in several European jurisdictions, alongside increased licensing, drilling and M&A activity.
For Buccaneer, this potentially opens a new avenue for growth at a time when the European market is placing a greater emphasis on domestic energy supply.
Building a portfolio across Europe
Buccaneer has established a technical partnership with Orion Resources, led by Roberto Bencini, to identify and evaluate conventional onshore gas opportunities.
The initial focus is on Italy, the Czech Republic and Turkey, with three low-cost entry projects currently being progressed.
According to SP Angel, these opportunities have combined P50 potential of approximately 250 Bcf, with an estimated NPV10 of around $500 million based on development success.
That gives the European strategy potentially meaningful scale relative to Buccaneer’s current market capitalisation.
The broker’s stock data puts Buccaneer’s market capitalisation at approximately £2.8 million, while highlighting the company’s initial European portfolio of up to three projects and the 250 Bcf combined potential.
Technology could help unlock overlooked opportunities
SP Angel also highlights how advances in technology could change the economics and risk profile of previously overlooked European gas assets.
According to the note, seismic reprocessing capabilities have advanced significantly over the past decade, potentially allowing operators to extract more information from existing datasets and reduce subsurface geological risk.
At the same time, high-angle drilling techniques could provide opportunities to minimise the surface footprint associated with new developments.
This is particularly relevant to Buccaneer’s strategy, which is not simply about pursuing frontier exploration.
The company is expected to target existing gas discoveries that have previously been overlooked, together with lower-risk exploration and appraisal assets that could potentially be advanced towards drilling through relatively low-cost seismic reprocessing.
A potential farm-down model
One of the potentially important elements of Buccaneer’s European strategy is the intention to derisk projects before bringing in funding partners.
SP Angel says the next stage involves negotiating with host governments to secure attractive entry terms for high-graded European acreage.
Once opportunities have been identified and technically derisked, Buccaneer could look to introduce a funding partner to carry the capital costs associated with drilling or development, subject to further commercial evaluation.
This could allow the company to gain exposure to potentially substantial gas resources without necessarily having to fund the entire development programme itself.
Texas remains an important part of the story
While Europe represents a new strategic direction, Buccaneer’s existing Texas operations remain central to the company’s near-term cash-flow ambitions.
SP Angel says current production is approximately 135 barrels of oil per day, with Buccaneer targeting growth towards approximately 200 barrels per day by the end of 2026.
The main driver is expected to be the proposed Fouke waterflood programme, which is targeted to come on stream in the fourth quarter of 2026, subject to approvals.
Higher oil production could provide the company with additional free cash flow to reduce debt and potentially redeploy capital into the European gas portfolio, while also leaving scope for potential inorganic growth opportunities in the US.
Two markets, two potential growth drivers
The SP Angel note therefore presents Buccaneer as a company with two potentially complementary growth engines.
In Texas, the focus is on increasing production and generating cash flow.
In Europe, the strategy is to identify low-cost conventional gas opportunities, use modern technology to help derisk them and potentially bring in funding partners as projects progress.
SP Angel argues that while higher oil prices have increased competition for producing assets in Texas, the higher European gas-price environment has created a different set of opportunities for Buccaneer.
With a European portfolio currently being assembled around 250 Bcf of combined P50 potential, alongside an existing US production base and a target of approximately 200 barrels per day by year-end, Buccaneer is positioning itself around the broader theme of energy security and domestic supply.
For investors, the key milestones to watch will now include the company’s progress in securing European acreage, further technical evaluation of the initial projects, the development of the Fouke waterflood programme and the potential introduction of funding partners as European opportunities are derisked.
SP Angel retains its Buy rating and 0.05p 12-month target price on Buccaneer Energy.
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