Investment Focus: M&G Equity Fund adds HCI

The M&G Equity Fund recently added exposure to Hosken Consolidated Investments (HCI) as a new idea to the fund thanks to its exciting potential related to Namibia’s rapidly developing oil industry. HCI is a JSE-listed black empowerment investment holding company that has investments in various listed and unlisted assets. Currently, it derives the largest share of its value from its holding in Tsogo Gaming, and it also owns stakes in Tsogo Hotels and eTV. However, it is the company’s stake in Impact Oil and Gas that is the primary reason for its addition to the fund.

Impact Oil and Gas is an unlisted oil and gas company which is currently in a consortium with TotalEnergies, Qatar Energy and Namcor, undertaking exploration drilling offshore Namibia. HCI holds 49.9% of Impact Oil and Gas, which in turn has a 20% participation in the Venus exploration block off the coast of Luderitz. There has been some early success in the drilling programme for the block, with initial estimates indicating a potential sizeable oil resource of more than 5 billion barrels of oil.

However, Impact does not have the means to be able to fund its share of the development of the oil field going forward alongside its much larger partners, and is consequently looking to sell its participating interest. We anticipate that this sale could happen later this year, following the completion of further drilling and stem flow tests. As a result, we see significant upside for the HCI share price resulting from a successful monetization of its stake in Impact Oil and Gas. This is on top of the 41% increase in HCI shares so far this year to 19 September.