The Oil Man: Ophir Energy, Premier Oil

Ophir Energy

I spotted Ophir (OPHR)’s figs from my hotel yesterday and am looking stone wrong on this one after a reasonable set of figures were hijacked again.

So, reserves up (13%), funds flow from production up (46%), reduced G&A (17%), increased liquidity (57%) and delivered net asset value (NAV) growth (6.4%).

But, and it’s a big but, no delivery of Fortuna which is ‘a priority’ I bet it is….. Otherwise it all looks ok as they are well enough funded, subject to no Fortuna nightmares and Bualuang and Kerendan fields are set to do the job and despite a much reduced exploration budget opportunities still exist in Equatorial Guinea (Yes!) and Mexico.

I met with Nick Cooper a couple of months ago and came to the conclusion that my long held bearish stance should be reversed. How wrong I was, but I still believe that I did it for all the right reasons and am now in no man’s land.

Premier Oil

Results today from Premier Oil (PMO) who have confirmed all that we already know which is what finals are all about, the day that something new or unexpected turns up it’s time to worry.

Production wise it’s 75,000 barrels of oil equivalent per day (71,4) and Catcher came on stream on time and under budget at Christmas and will deliver a small present by eventually producing 60,000 barrels of oil equivalent per day.

Thus, guidance is a very conservative 80-85,000 barrels of oil equivalent per day, but then these are promises made to be broken.

Elsewhere, Tolmount funding has been secured in an innovative way as befits a company with $2.7 billion of debt, and the impressive Zama discovery in Mexico (600 million barrels gross) is still on the books and will see appraisal drilling in the second half of this year.

In South East Asia demand for gas has been strong especially in Indonesia from Singapore buyers and Vietnam also saw impressive operational performance. Prices remain solid if flat but the days of big highs and low lows appear to be over.

Sea Lion – I knew you would ask about that – but nothing has noticeably changed, although much must be going on behind the scenes. Discussions are still continuing with senior debt providers and supply chain contractors to “secure suitable funding and commercial terms”.

All this adds up to a FID by the end of 2018 which smacks of further dawdling in the hope that the fairy godmother pitches up with a wad of cash.

The scenario, however, remains the same, on the one hand the ‘senior debt providers’ they mention are unlikely to have their hands out proffering cheap moolah but on the other, as Prems point out, SL is the company’s largest pre-development project and by, say, 2023 if sanctioned would be a meaningful part of the business.

With a decent combination of senior debt and a host of lower debt and supply chain contributions it should go.

Rocks and hard places come to mind but to me the bottom line is clear, the economics of the project have got significantly better and at $60-ish it must be a runner, also whilst not really wanting to lend any more PMO is in my view dependent on the Falklands and the sooner they get on with it the better.

Financially, the company report disposals of $300 million (£216 million) in the year which is a tiny step, but of course is how all journeys start.

Reserves and resources are 902 million barrels of oil equivalent (835) with opex of $16.4/barrels of oil equivalent being an impressive show of work in the last three years.

So, where does that leave us? In my view in a surprisingly good position, looking forward over the next five years or so. Cash flow at say, $65 could finance and even reduce debt substantially, deliver the key projects and have a company with 100,000 barrels per day of production to feed those hungry mouths.

Premier, therefore, stays in the bucket list and I have Tony Durrant back in my CEO interview slot in a few days time, we shall see what he can add to today’s numbers.

Malcolm Graham-Wood is an independent oil industry expert and freelance contributor, not a direct employee of Interactive Investor.

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