Investors needn't focus much on these full-year results from Heritage Oil (HOIL) - which were hit by several exceptional items. Instead, attention should be focused on recent production problems at the company's new flagship asset, the OML30 licence onshore Nigeria, which Heritage picked up from Shell (RDSA) in a bargain-priced, transformational deal that concluded last November.
Gross production from OML30 averaged around 35,000 barrels of oil per day (bopd) prior to the sale. But, since then, production has averaged just 20,350 bopd due to a gas-lift manifold failure and a strike by local workers. Management says both issues are being addressed and expects the infrastructure to be repaired by end-May. Nevertheless, these early issues don't bode well - Heritage only owns a minority stake in OML30 and, as non-operator of the licence, there's a limit to the influence it can exert on the project. Still, gross production had been as high as 42,825 bopd prior to these problems - suggesting that the subsurface performance of the licence remains strong. Management highlights that surface-related issues are likely to be the main difficulties going forward for the operator - Nigeria's state-run oil company.
Broker RBC Capital no longer expects Heritage to meet its in-house average production target of around 43,000 bopd for the year.
HERITAGE OIL (HOIL) | ||||
|---|---|---|---|---|
| ORD PRICE: | 166p | MARKET VALUE: | £424m | |
| TOUCH: | 166-167p | 12-MONTH HIGH: | 225p | LOW: 115p |
| DIVIDEND YIELD: | nil | PE RATIO: | na | |
| NET ASSET VALUE: | 378¢* | NET DEBT: | 49%*** | |
| Year to 31 Dec | Turnover ($m) | Pre-tax profit ($m) | Earnings per share (¢) | Dividend per share (p) |
|---|---|---|---|---|
| 2008 | 3.84 | -43.3 | -17.0 | nil |
| 2009 | 2.70 | -36.8 | -13.0 | nil |
| 2010 | 5.02 | -44.0 | -15.0 | nil** |
| 2011 | 9.03 | -62.8 | -23.0 | nil |
| 2012 | 8.83 | -182 | -71.0 | nil |
| % change | -2 | - | - | - |
*Includes intangible assets of $423m, or 165¢ a share **Excludes 100p special dividend paid in August 2010 ***Excludes $509m of restricted cash and deposits relating to a tax dispute with the government of Uganda £1=$1.52 | ||||
