San Leon Energy (SLE) made undeniable operational progress during the first half - culminating in the successful drilling of the Siciny-2 tight gas prospect in Poland. But the need to find farm-in partners has grown due to cost overruns, which has severely depleted San Leon's cash reserves. That won't help sentiment and we are therefore exiting our buy tip.
Admittedly, since the period-end San Leon has negotiated cost-carrying arrangements with partners at its offshore Sidi Moussa and Foum Draa blocks in Morocco. But San Leon's first-half cash-burn - net cash stood at €18.3m (£14.6m) at the year-end - meant it will probably need to finalise a farm-in partner for the Duressi block in Albania. Still, the group may have good news to report from forthcoming flow tests at the Czaslaw exploration well.
Operationally, costs rose from €1.74m last year to €4.67m - helped by cost overruns, principally at Siciny-2. So half-year operating profit fell 45 per cent to €1.09m - despite robust revenue growth and a €5.34m gain linked to the disposal of its royalty interest in the Amstel Field production licence.
Macquarie Equities has trimmed its core NAV estimate by 5p to 58p a share - which includes a 55p risked element.
| SAN LEON ENERGY (SLE) | ||||
|---|---|---|---|---|
| ORD PRICE: | 10.5p | MARKET VALUE: | £120m | |
| TOUCH: | 10.25-10.5p | 12-MONTH HIGH: | 18p | Low: 7p |
| DIVIDEND YIELD: | NIL | PE RATIO: | 8 | |
| NET ASSET VALUE: | 17¢* | NET CASH: | €1.16m** | |
| Half-year to 30 June | Turnover (€m) | Pre-tax profit (€m) | Earnings per share (¢) | Dividend per share (¢) |
|---|---|---|---|---|
| 2011 | 0.52 | 1.48 | 0.19 | nil |
| 2012 | 1.16 | 0.79 | 0.07 | nil |
| % change | +123 | -47 | -63 | - |
*Includes intangible assets of €151m, or 13¢ a share **Excludes restricted cash and the €9.9m proceeds from selling the Amstel royalty (received subsequent to the period-end) £1 = €1.25 | ||||
