Political turbulence in North Africa and the Middle East has left Circle Oil's shares among the most cheaply rated of the sector's exploration and production players. They now trade at a 31 per cent discount to broker Peel Hunt's 29p a share core net asset value (NAV) estimate and, as Circle continues to make operational progress, that discount could close.
Most importantly, the Egyptian government has stepped up payments - albeit only slightly - to Circle for oil production from the group's NW Gemsa block. Management says government receivables have reduced since the year-end, despite higher revenue on the back of rising oil prices - which should help address concerns over Egyptian instability. Circle also successfully completed two new production wells and one new water injector well in Egypt during the period - improving cash flow and earnings confirm the field is producing strongly.
In Morocco, meanwhile, the completion of a new gas pipeline has allowed the company to nearly double daily gas sales to 4.3m-4.5m cubic feet per day. A 3D seismic survey has firmed up several prospects for a third drilling campaign, scheduled to begin later this year.
Peel Hunt estimates full-year EPS of 6.1¢ (4.6¢ in 2011).
CIRCLE OIL (COP) | ||||
|---|---|---|---|---|
| ORD PRICE: | 20p | MARKET VALUE: | £112.7m | |
| TOUCH: | 19.8-20.3p | 12-MONTH HIGH: | 29.5p | LOW: 15.9p |
| DIVIDEND YIELD: | nil | PE RATIO: | 6 | |
| NET ASSET VALUE: | 36¢ | NET DEBT: | 5% | |
| Half-year to 30 Jun | Turnover ($m) | Pre-tax profit ($m) | Earnings per share (¢) | Dividend per share (p) |
|---|---|---|---|---|
| 2011 | 28.7 | 8.70 | 1.54 | nil |
| 2012 | 35.4 | 13.3 | 2.37 | nil |
| % change | +23 | +53 | +54 | - |
£1=$1.58 | ||||
