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Capital focus at Ophir

Ophir is changing its business priorities to take account of reduced assumptions on the oil price.
August 14, 2015

Ophir Energy (OPHR) increased its full-year production guidance and has taken an axe to costs, but revenue at the half-year mark came in below consensus and the driller swung to an $111m (£71m) operating loss. Ophir is a very different beast from a year ago, following the acquisition of Salamander Energy. It's a shame the enlarged group has to focus on re-jigging its business model to take account of reduced assumptions on the oil price.

IC TIP: Buy at 111p

Year-on-year comparables are largely meaningless as 2014 half-year earnings were buoyed by $673m in proceeds from the sale of Ophir's interest in Tanzanian offshore assets. The latest half-year numbers were also hit by $74m in impairments on exploration blocks in Kenya and Gabon.

The all-share deal to acquire Salamander was completed in March. Management said the group had already achieved substantial cost synergies through the deal, which allowed Ophir to gain access to a highly promising exploration platform in Indonesia. But the slump in crude oil prices has forced a rethink of capital commitments; the total spend for this year has been reduced by over 50 per cent to a forecast $250m-$300m. The group also paid down just over a third of the $503m of debt it inherited as part of the Salamander transaction.

Prior to these figures, broker Investec Securities gave an adjusted full-year EPS forecast of 14.6¢, against 18.7¢ in 2014.

OPHIR ENERGY (OPHR)
ORD PRICE:111pMARKET VALUE:£864m
TOUCH:110-111p12-MONTH HIGH:256pLOW: 104p
DIVIDEND YIELD:nilPE RATIO:na
NET ASSET VALUE:235¢NET CASH:$392m

Half-year to 30 JunTurnover ($m)Pre-tax profit ($m)Earnings per share (¢)Dividend per share (¢)
2014nil58933.70nil
201586.5-123-12.70nil
% change----

£1=$1.56