Subsequent to the release of its half-year results, the share price of Ophir Energy surged after the East Africa-focused explorer nearly doubled the existing resource estimate for its Mzia offshore discovery in Tanzania. Ophir's market value has more than doubled since the start of the year, buoyed in part by the high rate of exploration success that companies such as Cove Energy have enjoyed in the region. Although Ophir has a highly prospective drilling programme over the next 12 months, investors should not ignore the execution risk, nor the substantial scale of development costs.
Obviously, Ophir is still in the exploration/appraisal phase and the proceeds of a $242m (£152m) placing in June will enable the company to fund its drilling programme through to the end of 2013. Given the size and quality of its East African acreage, Ophir should have no trouble attracting farm-in partners. In fact, Ophir's chairman, Nicholas Smith, now reckons that the reserves in the company's three blocks in the region amount to 13.5-21 tcf (trillion cubic feet) which is enough to justify two liquefied gas treatment facilities rather than one.
Prior to the Mzia upgrade, JPMorgan Cazenove had a risked NAV of 574p a share.
| OPHIR ENERGY (OPHR) | ||||
|---|---|---|---|---|
| ORD PRICE: | 605p | MARKET VALUE: | £2.4bn | |
| TOUCH: | 604-606p | 12-MONTH HIGH: | 655p | LOW: 215p |
| DIVIDEND YIELD: | nil | PE RATIO: | na | |
| NET ASSET VALUE: | 279¢ | NET CASH: | $454m | |
| Half-year to 30 Jun | Turnover ($m) | Pre-tax profit ($m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2011 | 14.0 | -6.1 | 1.7 | nil |
| 2012 | 0.8 | -24.4 | -4.2 | nil |
| % change | -94 | - | - | - |
£1=$1.59 | ||||
