New production from its Bulgarian wells, and rising gas prices auger well for Edinburgh-based oil & gas explorer Melrose Resources, but natural decline at the company's mature Egyptian wells will continue to hamper production and hold back the shares.
Last year's revenue growth was driven by production from the Kaliakra and Kavarna gas fields in the Black Sea, which helped Melrose report a 30 per cent rise in underlying operating profit to $131m. Moreover, improving cash-flows enabled Melrose to reduce gearing to 89 per cent (2010: 133 per cent) and the company is targeting a further cut to 60 per cent by the year-end.
Melrose's working interest share of daily production decreased by 16 per cent on last year to 34,330 barrels of oil equivalent (boe), although its net entitlement (ex-production taxes) actually rose by 4.5 per cent to 18,683 boe due to a greater proportion of Bulgarian production. Bulgarian gas prices are linked to crude oil, and are expected to rise by 16 per cent this year to $8.50 per million cubic feet.
On the exploration front, Melrose will drill the first well in the Mesaha block in Egypt during the first-half of this year, but future attention is likely to focus on the offshore prospects in Romania.
N+1 Brewin expects 2012 EPS of 18.7p (2011: 29.9p).
| MELROSE RESOURCES (MRS) | ||||
|---|---|---|---|---|
| ORD PRICE: | 125p | MARKET VALUE: | £143m | |
| TOUCH: | 120-125p | 12-MONTH HIGH: | 297p | LOW: 95p |
| DIVIDEND YIELD: | 1.8% | PE RATIO: | 4 | |
| NET ASSET VALUE: | 316¢* | NET DEBT: | 89% | |
| Year to 31 dec | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (¢) | Dividend per share (p) |
|---|---|---|---|---|
| 2007 | 158 | -55 | -58.2 | 2.1 |
| 2008 | 373 | 143 | 62.1 | 2.8 |
| 2009 | 224 | 31 | -21.3 | 3.1 |
| 2010 | 240 | 30 | -10.2 | 3.4 |
| 2011 | 291 | 97 | 45.0 | 3.6 |
| % change | +21 | +226 | - | +6 |
Ex-div:06 Jun Payment:20 Jul £1:$1.59 *Includes intangible assets of $111m, or 97¢ a share | ||||
