Africa Oil's third-quarter results demonstrated there is proof of life in Puntland, Somalia - a positive for Range Resources (RRL) and Red Emperor Resources (RMP) - according to analysts at FoxDavies.

In a statement issued on Tuesday, Africa Oil confirmed that it, through its 44.6% ownership interest in Horn Petroleum, completed Shabeel North-1 in Puntland, the second well of a two-well exploration programme. While the first two exploration wells in Puntland did not flow oil, Africa Oil remained "highly encouraged that all of the critical elements exist for oil accumulations".

Based on this encouragement, Africa Oil and its partners, including Range Resources and Red Emperor, have entered into the next exploration period in both the Dharoor Valley and Nugaal Valley production sharing contracts (PSCs), which carry a commitment to drill one exploration well in each block by October 2015.

Analyst view

"Africa Oil's third-quarter results disclosure regarding its interests in Puntland have underlined the continuation of the perceived prospectivity of the play, with drilling results to date encouraging the assets' technical committee to commit to the second stage of exploration," said analysts at FoxDavies.

"We continue to believe that the right ingredients are present in the Almedo basin (Dharoor Block) to give rise to the possibility of finding a commercial accumulation of oil; the risk factors preventing such a find are more likely to be localised [as] opposed to regional, and hence prospectivity remains."

While drilling in the Nogal Valley block by the group is yet to be undertaken, FoxDavies said the drilling and data gleaned from the Dharoor drilling campaign would help "sharpen the pencil" for the subsequent drilling programme in both.

The broker added: "Oil and gas exploration remains a high-risk business, but we remain encouraged over the region's prospectivity."

The broker had a 'buy' recommendation on both Range Resources and Red Emperor.