Falcon Energy

Falcon Energy: making new 52 wk highs this morning. Voyage Research reiterates Overweight with TP $0.55. Notes Falcon recently carried out some share buy back activities and absorbed back ~2m shares (avg daily px of $0.348 – 0.372) from the open mkt this month. This seems to be a signal from mgt that Falcon’s current share price is undervalued. This may be partially explained by the recent sale of its two 45.5% owned jack up rigs at an est px of US$225m each last month. These two rigs have a cost of ~US$196m each, and could result in an attributable profit of US$26m for Falcon, which it would probably recognize in the upcoming 2Q results. Voyage also continues to have a positive outlook on Falcon’s marine division, underpinned by healthy charters rates due to current high energy prices and active drilling programmes. As at end Jun ’13, Falcon has 163m outstanding warrants with an exercise px of $0.40 per share, with last conversion date due 1 Nov ’13.