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Caza barrels on

RESULTS: New Mexico-focused energy group Caza has increased production four-fold over the past year, but the upside remains substantial

Rampant drilling in Texas and particularly in New Mexico increased oil and gas production four-fold at Caza Oil & Gas (CAZA) in the first six months. Output averaged 807 barrels of oil-equivalent per day (boepd), compared to 225 boepd over the same period last year. Moreover, 78 per cent of second-quarter output was premium-priced oil and natural gas liquids, up from just 54 per cent. And the average prices received for oil and gas rose 8 and 29 per cent respectively.

IC TIP: Buy at 17p

The increase in production is starting to filter down to Caza’s bottom line. Adjusted cash profits climbed to $3.3m (£2m) in the second quarter, compared with $2.1m in the first quarter and losses in the corresponding periods last year.

However, financing costs of $3.1m, as well as $3.4m of non-cash depreciation and depletion charges, swung the group into a loss on a reported basis. Caza has borrowed heavily to get this far. Yet following a $10m placing in July the company is fully funded for at least its remaining drill programme in 2014.

Production has risen further since the period-end - to 1,315 boepd in July. Broker Cenkos does not publish earnings forecasts but estimates Caza’s core net asset value to be 32p a share.

CAZA OIL & GAS (CAZA)

ORD PRICE:17pMARKET VALUE:£40m
TOUCH:17-17.5p12-MONTH HIGH:26pLOW: 7p
DIVIDEND YIELD:nilPE RATIO:na
NET ASSET VALUE:12¢NET DEBT:145%

Half-year to 30 JunTurnover ($m)Pre-tax profit ($m)Earnings per share (¢)Dividend per share (¢)
20132.3-4.4-3nil
201410.9-2.2-1nil
% change+363---

£1=$1.67