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Portland Gas's results shed little light on progress at its key Dorset gas storage project, although the company did say it is in discussions with a range of partners over a possible joint-venture agreement.
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Portland needs to find a farm-in partner who will provide 100 per cent capital expenditure (capex) for around a 50 per cent share in the project. The company said that, so far, it is in the process of standardising the terms of a joint-venture agreement and presenting them to potential partners, which it says include major utilities and integrated oil and gas companies. It is confident of making progress in the discussions in the fourth quarter of this year.
However, some analysts have doubts over whether the company can raise the full £500m cost of the Portland project, due for completion in 2011, and predict that it could be left with a funding shortfall in current markets. Daniel Stewart analyst Tim Heeley believes 100 per cent capex funding with a 50 per cent share (100/50) is now impossible and that the best Portland could hope for would be a 70/50 split, which would leave the company needing to find £165m to finish construction.
PORTLAND GAS (PTG) |
||||
|---|---|---|---|---|
| ORD PRICE: | 228p | MARKET VALUE: | £158m | |
| TOUCH: | 225-228p | 12-MONTH HIGH: | 260p | LOW: 219p |
| DIVIDEND YIELD: | nil | PE RATIO: | nil | |
| NET ASSET VALUE: | 32p | NET CASH: | £7.3m | |
| Full-year to 31 Jul |
Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2007 | nil | -0.28 | -0.33 | nil |
| 2008 | nil | -1.57 | -2.33 | nil |
| % change | - | - | - | - |
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The risks for the Dorset project are clearer now that capital-raising on the credit markets has suddenly become almost impossible, and this is reflected in the decline in the share price. A trade sale would be the best way to realise any value in the company. High enough.
Last IC View: Fairly priced, 412p, 19 May 2008.
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-IC-2.1.3g-prod - 17/03/2010 18:13:09 - ben.wheeler
