Join our community of smart investors

Egypt’s political crisis comes full Circle

RESULTS: Instability in North Africa continues to undermine Circle Oil's operational progress
June 23, 2014

Rising oil and gas prices and higher production both contributed to a marked improvement in these financial results from North Africa-focused oil and gas producer Circle Oil (COP) for the 2013 calendar year. It is now nearly six months since the period-end, however. Such late reporting is a red flag, as it could be a sign of sloppy financial controls.

IC TIP: Hold at 22p

Nevertheless, Circle Oil continues to make progress at its operations in Egypt, Morocco, Tunisia and Oman. Cash receipts from the Egyptian state-controlled oil company were up 20 per cent, increasing profitability in the country. And further drilling in Morocco and Tunisia this year could unlock substantial oil and gas reserves.

Unfortunately, Circle Oil's progress remains overshadowed by persistent political instability in Egypt and Tunisia, stemming from the events of the Arab Spring in 2011. A popular revolution may have toppled Egypt's former authoritarian ruler Hosni Mubarak, but a military coup last year replaced it with an arguably equally repressive regime; this week three Al Jazeera journalists were sentenced to seven years in jail on terrorism-related charges.

Broker Investec expects earnings to be largely flat in the current year, but to increase slightly the year after.

CIRCLE OIL (COP)

ORD PRICE:22pMARKET VALUE:£124m
TOUCH:21-22p12-MONTH HIGH:26pLOW: 16p
DIVIDEND YIELD:nilPE RATIO:7
NET ASSET VALUE:43¢NET DEBT:<1.0%

Year to 31 DecTurnover ($m)Pre-tax profit ($m)Earnings per share (¢)Dividend per share (¢)
200915.1-13.5-3.7nil
201044.410.42.2nil
201158.025.64.6nil
201273.325.34.5nil
201393.328.95.1nil
% change+27+14+14-

£1=$1.70