Salamander looks to the Gulf of Thailand

Though Salamander Energy trades at a 30 per cent discount to analysts' estimated net asset value (NAV), a near-term decline in production volumes means that share price impetus this year is primarily dependent on exploration success at its Bualuang licences.

Salamander has placed itself on a firmer operational footing through the disposal of non-core assets in 2011. The company also transformed last year's $106m (£67m) operating loss into a profit of $137m, partially due to a 43 per cent rise in the average realised price for a barrel of oil equivalent (boe) to $104.45. There was a one-third fall in sales costs, as the comparative 2010 figure included an extra $77.4m in impairments and amortisation, but in 2011 Salamander took a net $90m hit from deferred and 'special remuneratory' tax charges.

The high oil price compensated for an 8 per cent decline in daily production to 18,600 boe. Following the sale of the ONWJ and SES production sharing contracts, production is forecast to slip further to an average of 12,000-13,000 boe, but Salamander insists that these disposals were of low-margin non-core assets. Salamander increased its proven & probable reserves by 13.6 per cent to 75.3m boe, representing a reserve replacement ratio of 235 per cent.

Oriel Securities raised its risked NAV by 24p to 325p a share.

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