Premier Oil missed its earlier production targets in part because of an outage at a North Sea asset. Its record for exploration there was not much better than that of the sector as a whole - that is, poor. This year the company will drill at least 14 exploration and appraisal wells, to what effect we shall see. However, production from two North Sea assets, Huntington and Rochelle, will come on stream soon, bringing daily production to about 75,000 barrels a day, against last year's average of 57,700. Two more fields there, Solan and Catcher, will be closer to producing, in 2014 and 2016 respectively. The company will also pay its first dividend in its near-80 year history.
The shares' rating has tended to lag behind the rest of the explorers because of uncertainty over the Falklands and the slowness in getting some other projects to fruition. If the company can demonstrate that those production targets can be met, and get a few lucky breaks on the exploration side, that discount will narrow. A speculative punt, but not a bad one says The Times' Tempus (Last IC rating: Hold, 23 Aug).
Shares in SDL, the software company being managed again by the founder Mark Lancaster, were off a few pence as it undershot market estimates for last year by a touch. But as Panmure Gordon said, uncharitably, in a note, "the good news is that this isn't another [profit] warning." In the autumn there were two such, the second after Mr Lancaster returned, and as he said at the time, these things have a nasty habit of coming around in threes, Tempus wrote in his column on Thursday night (Last IC rating: Buy, 14 Aug).
Wood Group announced a small contract win yesterday, worth $50m (£31.2m). After investors had grown concerned about the rate of growth in 2013, the new business is most welcome. Fears of a slower 2013 caused the shares to slide in the last few months of 2012. This is against a backdrop of relatively flat oil prices, but also increasingly challenging developments and delays to some major projects. But the outlook for the oil industry is sound, with long-term growth assured by the fact that global demand for power is surging. As well, the energy industry is increasingly moving offshore - an area in which Wood has specialist expertise.
Given its dominant position in this high growth business the company is expected to see a significant increase in its free cash flow over the next few years. Wood shares are trading on a 2013 earnings multiple of 12.9, falling to 11.3. The prospective yield is just 1.6 per cent, so this investment is not one for income seekers. The Telegraph's Questor tipped the shares on December 16 at 734p and they have risen 10 per cent in a month. They remain a buy it says (Last IC rating: Hold, 21 Aug).
Business press headlines:
China's economy slid to its slowest growth in more than a decade last year, dragged down by global woes and a domestic campaign to deflate a property bubble. But the country finished 2012 on a higher note with a rebound that analysts believe will filter into a stronger performance this year. China's gross domestic product expanded 7.8 per cent last year, the lowest since 1999. In the fourth quarter, growth was 7.9 per cent year-on-year, breaking a streak of seven consecutive weaker quarters. "Overall the economy has been stabilising," the national statistics bureau said in a statement on Friday. [Financial Times]
Philip Clarke, the chief executive of Tesco, has taken to his Talking Shop blog to hammer home the message that the supermarket chain is taking the horsemeat scandal head on. "If some of our customers are angry, so are we," he wrote. "We expect our suppliers to deliver to a standard, and to meet basic food traceability rules. But our customers shop with Tesco, not our suppliers, so you won't find us hiding behind suppliers." Clarke's reaction, according to retail analysts, was part of a textbook response to the scandal that could yet see the company avoid long-term damage to its reputation following the discovery of horsemeat in some of its beefburgers. [The Guardian]
Germany's finance minister Wolfgang Schaeuble has said that the problem of high indebtedness is not limited to the crisis-hit eurozone and that the situation in Britain and the US is worse. Speaking in Parliament, Mr Schaeuble also said he was worried by the policies pledged by the recently elected government in Japan, which has vowed a big increase in spending to bolster the economy, AFP reported. "Britain has a higher state debt than the eurozone average and I don't even want to mention the United States of America," Schaeuble said. [The Telegraph]
The first competition investigation into pensions in 17 years began yesterday as the Office of Fair Trading expressed concern that savers in workplace retirement plans may be unfairly treated. The OFT said that it was conducting a market study into defined-contribution schemes, now run by the majority of private-sector employers, to see if they were giving value for money. The watchdog is expected to examine hidden charges in schemes as well as controversial arrangements such as active-member discounts, which discriminate against deferred members. [The Times]
High oil prices and the introduction of North Sea tax breaks led to bumper investment in UK waters last year, fuelling hopes of a strong 2013 for the industry. An annual review published today by Deloitte's petroleum services group shows 65 exploration and appraisal wells were drilled on the UK Continental Shelf (UKCS) in 2012, a 33 per cent hike on the previous year's total of 49. The UK government also granted 21 field development approvals, the highest for ten years. A further eight "incremental projects" - investment in older fields for redevelopment - were given the green light. The report said an increasing number of purchasers buying fields outright was also a sign of confidence. [The Scotsman]
