Two major recent developments overshadow these half-year results from oil and gas explorer Petroceltic International. First, the company and its joint venture partners made a declaration of commerciality for the major Ain Tsila gas field onshore Algeria, where a field development plan will now be submitted to the authorities for approval.
Second, and perhaps more transformational for the company, Petroceltic has made a recommended bid for Melrose Resources - a profitable independent with producing oil and gas assets in Egypt and Bulgaria. While billed as a merger - Petroceltic will offer 17.6 of its shares for each Melrose share, as well as a 4.7p special dividend - the deal will give Petroceltic much-needed, immediate cash flow and reduce its risk profile, valuing Melrose at around £165m.
True, Melrose’s assets aren’t exactly the most desirable properties on the market - total production has been declining steadily for the past three years - but they are reliably profitable and helped Melrose book £97m of pre-tax profits last year. That said, the company also comes with $263m (£166m) of net debt and some extra risk from the changing political scene in Egypt.
Prior to the Melrose transaction, broker Peel Hunt had a risked a sum-of-the-parts valuation for Petroceltic of 17.8p a share.
PETROCELTIC (PCI) | ||||
|---|---|---|---|---|
| ORD PRICE: | 7.5p | MARKET VALUE: | £178m | |
| TOUCH: | 7.5-7.6p | 12-MONTH HIGH: | 10.3p | LOW: 3.8p |
| DIVIDEND YIELD: | nil | PE RATIO: | na | |
| NET ASSET VALUE: | 13.3¢* | NET CASH: | $54.5m | |
| Half-year to 30 Jun | Turnover ($m) | Pre-tax profit ($m) | Earnings per share (¢) | Dividend per share (p) |
|---|---|---|---|---|
| 2011 | 0.16 | -4.10 | -0.20 | nil |
| 2012 | 0.29 | -3.25 | -0.14 | nil |
| % change | +81 | - | - | - |
£1 = $1.58 *Includes intangible assets of $269m, or 11¢ a share | ||||
