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Near-term catalysts in short supply for Faroe

After an excellent year for discoveries and acquisitions, Faroe will need some drilling success for a repeat in 2017.
March 22, 2017

Shares in Faroe Petroleum (FPM) might have nudged up on the publication of full-year results, but the profit-and-loss account will have disappointed some investors. Much was already baked in following a February trading update, but a £61.5m pre-tax loss and a steep decline in operational cash flow were further dampened by higher than expected administrative and net interest charges.

IC TIP: Buy at 94p

Even with hedges in place, 2016 was never going to be a glittering year for Faroe's bottom line. And while the company benefits from Norway's tax rebate policy - which pays back 78p for every £1 spent on exploration - a delay in the timing of receivables meant that the reported tax credit slipped to £28.7m, quite a bit below market predictions. Still, there was additional compensation in the form of 24.7m new barrels of contingent resources from the Brasse discovery. Even better, proven and probable reserves were up 42 per cent at the end of the year.

Prior to these results, analysts at Jefferies had anticipated a pre-tax loss of £4m and EPS of 8.4p this year, against losses of £61m and 6.8p in 2016.

FAROE PETROLEUM (FPM)

ORD PRICE:94pMARKET VALUE:£341m
TOUCH:93-94p12-MONTH HIGH:115pLOW: 59p
DIVIDEND YIELD:nilPE RATIO:na
NET ASSET VALUE:68p*NET CASH:£96.8m

Year to 31 DecTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
2012159-29.0-2.4nil
201312910.06.6nil
2014129-166-22.6nil
2015113-122-19.7nil
201694.8-61.5-10.5nil
% change-16---

Ex-div: -

Payment: -

*Includes intangible assets of £115m, or 32p a share.